When the stock market becomes volatile, investors often look for ways to make their portfolios a little more defensive. Dividend-paying investments can help because they provide income even when share prices are moving sideways or lower.
That being said, take a look at the Amplify CWP Enhanced Dividend Income ETF (DIVO).
DIVO offers investors a combination of dividend stocks and covered-call income. DIVO owns a relatively concentrated portfolio of established, large-cap U.S. companies with histories of earnings and dividend growth. The fund’s managers then selectively sell covered calls on individual holdings to generate additional income.
A covered call involves selling call options against stocks the fund already owns. The premiums collected from those options can support the ETF’s monthly distributions. The tradeoff is that the strategy may limit some of the fund’s upside when one of its stocks rallies sharply.
As of August, DIVO had a 4.84% distribution rate and a 1.35% yield. Its total expense ratio was 0.56%. DIVO may appeal to investors who want monthly cash flow but still want exposure to high-quality blue-chip companies.
Sincerely,
Ian Cooper
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