Investors looking to build a high-yield portfolio to generate passive income or reinvest dividends to compound returns may want to consider these three choices: JPMorgan Equity Premium Income ETF (NYSEMKT: JEPI)the Global X MLP ETF (NYSEMKT: MLPA) And UPS (NYSE:UPS). This is why.
There is no shortage of high-yield exchange traded funds (ETFs) to invest in, but three things make this ETF particularly attractive. First, there is the strategy of investing up to 80% of assets in US equities and up to 20% in financial instruments that S&P500 out-of-the-money call options are not easy for retail investors to replicate. This last strategy (discussed in more detail here for those interested) will make money if the S&P 500 doesn’t rise sharply this month.
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Second, the options strategy will generate monthly income for investors even if stock prices fall. This will help reduce downside volatility in the ETF’s overall performance.
Third, unlike most stock-focused ETFs, there is an allocation to stocks is not based on dividend yield. As such, the manager is not forced to buy stocks in high-yield sectors such as energy or real estate investment trusts, which could underperform for long periods, just because they are chasing yield.
One of the overarching investment themes of 2024 is the growing recognition that the clean energy revolution will occur at a slower pace than many previously thought. Investors are excited by the idea that energy sources such as natural gas and nuclear energy are playing a more important role than once thought.
You can pick stocks to play with the theme, or buy an ETF like this Global X offering. The “MLP” stands for Master Limited Partnerships. It’s not a secret society; they are limited partnerships that trade publicly like stocks. They do not pay corporate taxes and generally focus on the transport sector.
In this case, the Global The ETF’s top holdings are in natural gas transportation and storage companies Energy transfer, Partners for business productsAnd MPLX.
Natural gas pipeline and storage MLPs offer stable long-term revenues, but investors previously worried about their long-term future given the move toward clean energy. While some doubt remains, natural gas will likely remain an essential part of the energy mix for many decades to come, and the prodigious cash flows and dividends that MLPs will generate in the meantime make them valuable investments for income-seeking investors.
