4 ETFs That Pay Monthly Like a Paycheck and Yield Over 4 Percent

Technically speaking, retirees should be just as comfortable selling shares to fund withdrawals as they are receiving dividends. From a total return perspective, there’s no real difference.  For example, selling $10,000 worth of shares versus receiving $10,000 in dividends has the same economic impact on your portfolio, aside from potential tax differences.

In practice, though, many retirees don’t see it that way. The first reason is mental accounting. Thanks to this bias, getting paid a dividend feel like income, while selling shares feels like dipping into principal, even if the end result is functionally identical.

The second reason is simplicity. Dividends, especially monthly ones, are predictable. Payment schedules are set in advance, making it easier to plan cash flow. Selling shares, on the other hand, requires more active decision-making, which ties back to that discomfort around touching principal.

To address this, asset managers have rolled out a wide range of monthly income ETFs. There’s no shortage of options (pun intended), and many now offer distribution yields comfortably above the 4% rule, at least before taxes and brokerage commissions.

For those unfamiliar, distribution yield is a forward-looking estimate. It takes the most recent monthly payment, annualizes it, and divides it by the fund’s net asset value. Just keep in mind that these payouts can fluctuate, especially for strategies that rely on options.

JPMorgan Income ETFs

Up first is the highly popular duo: the JPMorgan Equity Premium Income ETF (NYSEARCA: JEPI) and the JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ: JEPQ).

Both are actively managed by Hamilton Reiner and his team. JEPI draws primarily from the S&P 500, while JEPQ pulls from the Nasdaq-100. In both cases, the managers aim to build portfolios that resemble their benchmarks but with a more defensive tilt.

From there, up to 15% of each ETF can be allocated to equity-linked notes. These are structured products designed to replicate the payoff of selling one-month, out-of-the-money covered calls on the respective indexes. JEPI targets the S&P 500, while JEPQ targets the Nasdaq-100.

Like all covered call strategies, the trade-off is straightforward. You give up some upside in exchange for income. As of February 28, JEPI offers a forward distribution yield of about 7.5%, while JEPQ, benefiting from the higher volatility of tech stocks, offers around 10.46%.

One thing to watch is tax treatment. Because of the use of equity-linked notes, a large portion of distributions is classified as ordinary income, which reduces tax efficiency. On the cost side, both ETFs charge 0.35%, which is relatively low given the combination of active management and derivatives.

Amplify Income ETFs

If you want a more hands-on approach to options, the Amplify CWP Enhanced Dividend Income ETF (NYSEARCA: DIVO) and the Amplify CWP International Enhanced Dividend Income ETF (NYSEARCA: IDVO) take a different route. They’re managed by Capital Wealth Planning, led by Kevin Simpson.

Both ETFs start by building a concentrated portfolio of large-cap stocks screened for dividend growth, earnings growth, free cash flow, return on equity, and management quality. Instead of selling index-level calls, Simpson writes covered calls on individual stocks. He adjusts strike prices, expiration dates, and coverage levels based on market conditions.

That flexibility comes with trade-offs. The yields are lower than JEPI and JEPQ, but the potential for total return is higher since less upside is capped. Currently, DIVO offers a distribution yield of about 4.79%, while IDVO is higher at 6.13%.

On performance, DIVO has delivered around 14.15% annualized over the past three years. IDVO  has returned about 21.35% annualized over the same period. Fees are higher, with DEVO at 0.56% and IDVO at 0.65%, reflecting the more active, hands-on strategy.

JEPI vs JEPQ vs DIVO vs IDVO