Investors may shift back to high-yielding dividend stocks and ETFs due to Fed rate cuts.

From Nasdaq: 2025-01-15 10:15:00

In 2022 and 2023, rising interest rates led income investors away from dividend stocks to low-risk investments like CDs and bonds, causing dividend stocks and ETFs to lose appeal. However, the Fed’s rate cuts in 2024 and plans for more in 2025 may shift investors back to higher-yielding dividend stocks and ETFs.

With the 10-year Treasury yield near 4.8%, fixed-income investments still offer richer yields than most dividend stocks. Instead of buying individual stocks, consider an income-oriented ETF like JPMorgan Nasdaq Equity Premium Income ETF (JEPQ), which uses covered calls to boost yield and offers extra income annually.

Covered calls involve writing call options on stocks already owned. JEPQ holds 103 stocks mirroring the Nasdaq-100, writes covered calls monthly, pays monthly distributions, and has a 9.76% 30-day SEC yield at a low expense ratio of 0.35%. It uses equity-linked notes for tax efficiency and offers a diversified investment in volatile stocks.

Investing in JPMorgan Nasdaq Equity Premium Income ETF can provide a near-10% yield in a volatile market. While not ideal for growth-oriented investors, it offers consistent income through covered calls on diversified stocks. Consider the 10 best stocks recommended by the Motley Fool Stock Advisor team for potential high returns in the coming years.

John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, serves on The Motley Fool’s board of directors. Author Leo Sun holds positions in Amazon, Apple, and JPMorgan Nasdaq Equity Premium Income ETF. The Motley Fool has positions in and recommends Amazon, Apple, Microsoft, and Nvidia, and recommends options related to Microsoft.



Read more at Nasdaq: The Ultimate High-Yield Dividend ETF to Buy With $500 Right Now