What is JEPQ, a high-tech stock that pays high dividends? How to invest wisely in the NASDAQ 100 and why we recommend it.

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This is only a record of my personal analysis and the contents may contain errors or information that differs from the actual situation. Please understand in advance when viewing this site.

Introduction.

Previously, the high-dividend ETF "JEPIWhile we have examined JEPI in detail, JEPQ, which uses a similar structure to JEPI, is also worth noting when considering an investment strategy that focuses on high-tech stocks in the Nasdaq 100 and seeks even higher dividend yields.

Therefore, I would like to delve deeper into JEPQ.

Dividends are very important for long-term investments.

If you are looking for high-tech stocks and high dividends, JEPQ is the ETF to hold onto.

In this article, we will explain JEPQ's features, advantages and disadvantages in an easy-to-understand manner and see if JEPQ is right for your investment style.

RELATED:What is JEPI, a high dividend ETF? Why and why it is recommended for long-term investment

What is JEPI, a high dividend ETF? Why and why it is recommended for long-term investment

We look at the appeal of JEPI, a U.S. ETF that combines high dividends and low volatility. The features, advantages, and disadvantages of JEPI that income-oriented investors should know about are explained in detail. Find out if JEPI is right for your investment style in this article.

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What are the characteristics of JEPQ?

JEPQ (JPMorgan Nasdaq Equity Premium Income ETF) is an ETF with the following characteristics

• JEPQ is an actively managed ETF offered by J.P. Morgan.
• Officially named JPMorgan Nasdaq Equity Premium Income ETF (JPMorgan Nasdaq U.S. Equity Premium Income ETF)
• JEPQ seeks monthly distributable income and exposure to the NASDAQ 100, with the goal of seeking consistent premium income while maintaining low volatility.
• JEPQ's equity portfolio applies a data science approach to fundamental research and portfolio construction.
  It also implements a disciplined option overlay strategy to generate monthly distributable income by writing out-of-the-money call options on the Nasdaq 100 Index.
• JEPQ was incorporated on May 3, 2022 and trades on the NASDAQ.

Learn more about ETFs here.

What is the U.S. Continuously Growing Dividend ETF VIG? - What is an ETF?

How does JEPQ operate?

JEPQ's operational structure isJEPIBasically the same as

active management

JEPQ is an actively managed fund,Invest in companies listed on the NASDAQ 100The company is doing so.

covered call strategy

JEPQ is,Indirect covered calls (selling call options on shares held) on the Nasdaq 100 IndexThe company is doing this. This is done through Equity Linked Notes (ELNs).

Major Holdings

JEPQ's major holdings include Apple (AAPL), Microsoft (MSFT)Major technology stocks included.
He also invests in ELNs, which combine the economic characteristics of covered calls with an investment in the Nasdaq 100 Index.

Earnings and Yields

JEPQ has significantly increased its income and yield by investing in ELNs.

By this mechanism of operation,JEPQ invests in Nasdaq 100 companies while using a covered call strategy to achieve high returns and yields.

For more information on covered call strategies, see below.

What is JEPI, a high dividend ETF? - What is a covered call strategy?

What is JEPQ's expense ratio?

JEPQ Net Expense Ratio: 0.35%

This expense ratio represents the costs associated with managing the ETF, expressed as a percentage of the annual assets under management.
Specifically, investors holding JEPQ will pay an annual expense of 0.351 TP3T of the amount of assets under management.

This expense ratio is relatively low for an actively managed ETF.

What is JEPQ's dividend yield?

JEPQ offers an attractive 12-month rolling dividend yield of 12.511 TP3T and a 30-day SEC yield of 11.681 TP3T.

This would be the top decile yield in the derivative income category.

In other words, it is in the top 101 TP3T in a group called the "derivatives income category" in investment funds, which generates particularly high income.

*Rolling dividend yield is the average dividend yield of an investment fund or stock, calculated over a specific time period (usually the past 12 months).
This yield is the dividend paid over the past year divided by the average share price or net asset value (NAV) of the fund over that period. Simply put, the rolling dividend yield represents the average dividend rate of return over the past year and reflects the percentage of dividends received by investors over that period.

*30-Day SEC Yield, as defined by the U.S. Securities and Exchange Commission (SEC), is the annual yield calculated based on the returns earned by an investment fund over the past 30 days.
Simply put, the 30-day SEC yield is an annualized measure of how much income the fund has generated in the last 30 days.

How can JEPQ yield so much?

JEPQ achieves its high yields through the following strategies

• JEPQ generates income primarily through a strategy of selling options on large-cap U.S. growth stocks. By this strategy,Aiming for returns comparable to the Nasdaq 100 Index, but with lower volatilityThe company is doing so.
• The Fund employs a unique data-driven strategy to maximize risk-adjusted expected returns.
• Some of JEPQ's largest holdings are called GAFAM and Magnificent Seven,Apple (AAPL), Microsoft (MSFT), Alphabet (GOOG), Amazon (AMZN), and NVIDIA (NVDA) are among the major tech stocks included.In addition, exposure to the NASDAQ 100 is obtained through equity-linked notes.
• JEPQ has shown stable performance over multiple timeframes while maintaining high correlation with the NASDAQ 100.

By these strategies and features,JEPQ offers a high yield while managing risk and maintaining correlation with the Nasdaq 100 Index.

When are JEPQ distributions (dividends) paid?

JEPQ aims to make monthly distributions from income (stock dividends and option premiums).

However, distributions are not necessarily made monthly, and the existence and amount of distributions may vary.

How has JEPQ's distribution (dividend) changed?

JEPQ distributions are variable, but around $0.35 to $0.45.

It can be said that it is not significantly different from JEPI in terms of amount.

JEPQ's current share price and long-term chart

JEPQ, a new ETF that began operations in May 2022, still has a short investment period.

This ETF aims to manage with less volatility, but due to the large number of high-tech stocks in the NASDAQ 100 that are covered, the volatility is somewhat higher than that of JEPI.

What are the components of JEPQ?

The number of issues comprising JEPI is 91. Includes *Equity Linked Notes.

Diversified investment in many stocks, especially in the NASDAQ 100.

The main components (top 20) of the JEPQ are as follows

The top 20 stocks have a weighting of about 631 TP3T.

See also:JPMorgan Nasdaq Equity Premium Income ETF

What is JEPI's sector ratio?

The sector ratio is relatively unbalanced, with high-tech stocks such as IT and telecommunications accounting for half of the total.

What is the difference between JEPI and JEPQ?

The main differences between JEPI (JPMorgan Equity Premium Income ETF) and JEPQ (JPMorgan Nasdaq Equity Premium Income ETF) are as follows

Should I invest in JEPI or JEPQ?

When choosing which to invest in, it is important to understand and carefully consider the characteristics of each ETF.

Both JEPI and JEPQ have excellent dividend yield performance.
JEPI invests in more stable companies and thus has lower volatility and a sense of stability, while JEPQ invests in high-tech companies and thus has higher volatility.

Comparing performance, JEPQ is superior in terms of stock price growth; JEPQ fell sharply in the declining market in late 2022, but performed well in 2023, outperforming JEPI by a wide margin.

Comparison of JEPQ and JEPI stock performance

What are the advantages of investing in JEPQ?

Investing in JEPQ has the following advantages

• Like JEPI, JEPQ also employs a covered call strategy, which allows it to add to its income earnings. Thereby,It is possible to earn high income gains while following the rise in stock prices to a certain degree.
• JEPQ focuses on high-tech stocks listed on the NASDAQ 100,Allows investment in sectors with high growth potential. Increased opportunities for capital gains (stock price appreciation).
• JEPQ aims to make monthly distributions,Investors receive regular cash flow.This is a significant advantage, especially in income-oriented investment strategies.
• By combining a covered call strategy with investments in high-tech stocks,JEPQ offers a balance between growth potential and income gains.Investors will be able to respond flexibly to market fluctuations.

These advantages, combined with JEPQ's exposure to high-growth high-tech sectors and covered call strategy, make it an attractive option for investors.

What are the possible disadvantages of investing in JEPQ?

Possible disadvantages of investing in JEPQ include

• JEPQ invests primarily in technology stocks, and because these stocks tend to be more volatile than the market average, the value of the fund may be significantly affected by market fluctuations.
• JEPQ employs a covered call strategy, which may make it difficult for the fund to keep up with market performance if the market rallies sharply. In addition, option strategies are complex and may be less effective in certain market conditions.

These disadvantages indicate that investing in JEPQ carries certain risks and should be carefully considered according to one's own investment objectives and risk tolerance.

What are the factors behind the article "JEPQ is not recommended" and the many searches for it?

The following factors may explain why so many articles say "JEPQ is not recommended."

• JEPQ uses a covered call strategy, which means that if the market falls, the options provide some protection, but not complete protection from a large decline.
• With interest rates widely believed to have peaked, investment in risk assets could increase again. In such a market environment, JEPQ could underperform the market average.
• Currently, options volatility is at historically low levels, which is a disadvantage for strategies that sell options.

These factors may have led some investors and analysts to take the position that they do not recommend JEPQ.

Can JEPQ be selected as a Nisa target?

• Although it is possible to trade within the general NISA framework, it is not possible to invest in JEPI using the "Tsumitate NISA (savings NISA)" and thus cannot enjoy the benefits of the "Tatemono NISA" (savings NISA).
• Only domestic investment trusts (and some domestic ETFs) that meet certain requirements can be invested in the Tatemono NISA, and VIG, an overseas ETF, cannot be invested in the Tatemono NISA.

To summarize the features of JEPQ

• JEPQ invests in companies listed on the NASDAQ 100 Index, focusing on growth and technology stocks in this index.
• The fund employs a covered call strategy, generating monthly distributable income by writing out-of-the-money call options on the Nasdaq 100 Index.
• JEPQ offers an attractive yield and pays a monthly dividend.
• The lead portfolio manager has over 30 years of experience in equity and equity derivatives investments.

These characteristics indicate that JEPQ aims to achieve high returns and yields using a covered call strategy while investing in Nasdaq 100 companies.

Tips on Distribution Reinvestment Strategies for JEPQ Investments

This content was previously presented in a JEPI article, but is included as an example when applied to JEPQ.

How do I purchase one share with a monthly distribution?

In order to purchase one share per month using JEPQ's distributions, you must consider JEPQ's stock price and the amount of the distribution.

For example, if JEPQ's stock price is averaging $45-$50, it is theoretically possible to reinvest the monthly distributions to purchase one share if the monthly distribution is $50 or more.

However, the actual amount of the distribution depends on market conditions and the performance of the ETF, so it is not always possible to purchase one share every month.

Possibility of increasing the number of shares in the distribution

Assuming your JEPQ holdings are $6,000 in assets and the annual yield is 101 TP3T, you can expect to earn $600 per year. If you simply divide this by 12 months, you would get a distribution of about $50 per month.
If JEPQ's share price remains stable around $50, it is theoretically possible to purchase one share of JEPQ with monthly distributions.
However, the actual amount of distributions and the share price fluctuate, so the number of shares may not necessarily increase each month.

The Benefits of Compound Interest

Calculating $6,000 at 150 yen to the dollar, this amounts to approximately 900,000 yen.
In other words, building JEPQ assets of about ¥900,000 to ¥1,000,000 will make it easier to enjoy the compounding effect of reinvesting distributions.
However, in order to take full advantage of the compounding effect, distributions must be continuously reinvested and the performance of the investment must be stable.

For foreign exchange considerations, dividends are paid in U.S. dollars.
Therefore, investing in dollars reduces the risk of currency fluctuations. With the yen currently weakening, purchasing foreign stocks in yen makes you more vulnerable to the effects of currency fluctuations. Therefore, currency risk should be treated as an important consideration when considering an investment.

Which brokerage firms can I buy shares of JEPQ?

The following is a list of major brokerages that offer JEPQ shares. At these brokerages, you can choose to invest as a CFD (Contract for Difference) in addition to direct stock trading as a foreign stock.

I myself mainly use SBI Securities, but some stocks they handle may not be available for purchase. In such cases, I sometimes use CFDs at Saxo Bank Securities or IG Securities.

summary

This article details the features of JEPQ, an ETF that allows investors to invest in high-dividend, high-tech stocks, as well as the advantages and disadvantages of investing in JEPQ.

While high-tech stocks generally do not offer high dividend yields, JEPQ is an attractive option for investors who want to combine an income orientation with an investment in NASDAQ for stock price growth.

In addition, monthly distributions provide investors with a steady cash flow

JEPISimilar to JEPQ, JEPQ is also a strong option for those who are considering a long-term investment strategy, as it offers the potential for compounding effects in long-term investments.