A few months ago, I analyzed the total performance of the three most popular S&P 500 covered call ETFs in 2023: the JPMorgan Equity Premium Income ETF (ARCA: JEPI), the GlobalX S&P500 Covered Call ETF (ARCA: XYLD), and the NEOS S&P 500 High Income ETF (BATS: SPYI).
The covered call ETF that came out on top was the NEOS S&P 500 High Income ETF for three reasons: they had full exposure to the holdings inside of the S&P 500, wrote out-of-the-money covered calls, and used Section 1256 contracts for enhanced tax-efficiency.
The total performance of SPYI in 2023 was 18.1%, capturing nearly 69% of the S&P 500 Index's total return last year. Compared to the JPMorgan Equity Premium Income ETF's total return of 9.8%, and the GlobalX S&P 500 Covered Call ETF's total return of 11.0%.
I share these figures because the team that built SPYI — and all of the category leading performance that came with it — has used the same techniques and strategy to build the NEOS Nasdaq-100 High Income ETF (NASDAQ: QQQI).
What Is QQQI?
The NEOS Nasdaq-100 High Income ETF is an ETF that aims to offer high monthly income in a tax-efficient manner and upside potential when the Nasdaq-100 Index (QQQ) rises.
Let’s break that down simply — as we all know, an ETF is a basket of stocks.
In this case, the basket is constructed to replicate the holdings of the Nasdaq-100 Index. Remember, the Nasdaq-100 Index sits right next to the S&P 500 Index in popularity and portfolio construction. This index tracks the total performance of the 100 largest, most-actively traded stocks listed on the Nasdaq. Think Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Nvidia (NASDAQ: NVDA), Broadcom (NASDAQ: AVGO), Meta Platforms (NASDAQ: META), Tesla (NASDAQ: TSLA)… you get the picture.
The Nasdaq-100 Index delivered +54.9% returns for its investors in 2023, the best year since 1999. Again, this was largely due to the AI craze we saw by companies like Microsoft, Nvidia, and others — but incredibly impressive nonetheless.
So, what's the difference between QQQ and QQQI?
A single letter, I.
And that letter stands for income.
Think about it like this — a 55% return in an investment is awesome. However, to realize that return in your bank account, you’ll need to sell shares of stock. Considering the trailing twelve month dividend yield of the Nasdaq-100 Index is 0.52%, 99.48% of that return was in the form of share price appreciation — not cash dividends paid to you.
But what if there was an ETF that aimed to offer exposure to the Nasdaq-100 Index while also optimizing for tax-efficient income for their shareholders?
Enter QQQI.
The NEOS team has successfully done this with their S&P 500 Index equivalent ETF, SPYI — paying a 12.14% annual distribution yield (as of 3/15/24) to investors while ...Full story available on Benzinga.com
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