JEPI vs SCHD: Which ETF is Better?!
Both JEPI and SCHD are popular income-generating dividend ETFs.
With pros and cons to both funds.
Let’s dive into both funds and break them down into simple terms!
JEPI (JPMorgan Equity Premium Income ETF) invests primarily in dividend-paying stocks and seeks to offer a consistent income stream with lower volatility than the S&P 500. The fund invests in S&P 500 companies with a long dividend history that has the potential to provide consistent income. JEPI was launched on May 20th, 2020.
SCHD (Schwab US Dividend Equity ETF) is a dow jones 100 US index fund. SCHD is a popular dividend fund that offers a mixture of share growth and consistent dividend income. The Dow Jones 100 index is made up of top-performing companies in different industries. So there is not a lot of overlap between industries in this fund.
JEPI - JPMorgan Equity Premium Income ETF
Goal: Makes money by selling options and investing in large blue-chip U.S. stocks, aiming to get monthly income from option premiums and stock dividends. The fund aims to offer a consistent income stream with lower volatility than the S&P 500. It is ideal for retirees or those ready to live off their investments.
Number of companies held: 128
JEPI dividend yield: 6.28%
JEPI Expense Fee: 0.35%
Pros of JEPI:
JEPI was one of the most popular ETFs of 2022. Attracting all types of investors with its high-yield monthly paying dividend payment. JEPI is structured to deliver a 5% to 8% dividend yield over time, and 6% to 10% annual returns. The fund does this by using covered calls, meaning it writes options against an underlying portfolio of stocks in the fund to generate extra income.
Cons of JEPI:
Beating the stock market isn't the goal of this fund, and JEPI fund managers make it clear that investors shouldn't expect the high dividend yield to continue. Covered call ETFs generally perform best in volatile bear markets, which is likely why this fund was a favorite in 2022.
The Top 10 Stocks Held In $JEPI:
SCHD - Schwab U.S. Dividend ETF
Goal: To track the Dow Jones U.S. Dividend 100 Index.
Number of companies held: 100
SCHD dividend yield: 3.57%
SCHD expense ratio: 0.06%
Pros of SCHD:
SCHD holds the 100 companies in the Dow Jones 100 Index. So the Fund can serve as a great diversified dividend portfolio. The Dow Jones adds top-performing companies in different industries. There is not a lot of overlap between industries in this fund.
It also offers a high dividend and decent stock appreciation as a bonus.
Over the past 10 years, this fund has averaged a return of around 13% per year when including both share growth and dividend payments.
Cons of SCHD:
Although this is my favorite dividend-related ETF, it only holds 100 stocks, and they're a particular set of large US dividend payers.
The Top 10 Stocks Held In $SCHD:
My Thoughts: JEPI vs SCHD
Both JEPI and SCHD are solid funds to add to your portfolio if you want exposure to great U.S. companies that have stood the test of time and generate consistent passive income.
However, JEPI is more suited for those who want to minimize volatility in their portfolio over the long run and still earn consistent income. Therefore, don’t expect this fund to continue to outperform the stock market over the long run.
SCHD is great for those who want a mix of share growth and dividend income. SCHD also has an excellent track record and is great for younger investors who have time to let their investments grow and generate income over the decades to come. But want to concentrate their portfolio in dividend-paying U.S. companies.
Depending on how you want to build out your portfolio, there may even be room to add exposure to both.
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I recently put together a master list of 88 different ETFs designed to support different investment goals. You can grab it here.
As Always: Buy things that pay you to own them.
-Josh
Blog Post: #084
Do you have a suggestion on which ETFs I should compare next? Let me know here.
