Most Retirees Choose JEPI for Income But This 4.8 Percent Yield Alternative Is Quietly Outperforming
JEPI dominates retirement income conversations with a nearly 10 percent yield, but a quieter rival with a fraction of that payout has been compounding wealth faster while keeping more money out of the IRS's hands.
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The JPMorgan Equity Premium Income ETF (JEPI) has become the default choice for many retirees. With roughly $45 billion in assets under management and a 9.41% distribution rate, it combines a portfolio of lower-volatility large-cap stocks with equity-linked notes (ELNs) that replicate the payoff of a one-month out-of-the-money covered call strategy on the S&P 500.
The trade-off is twofold. First, the covered call overlay naturally caps a portion of the fund’s upside during strong bull markets. Second, the ELNs generate distributions that are generally taxed as ordinary income, unlike Section 1256 index options, which receive the more favorable 60/40 long-term and short-term capital gains treatment.
If you’d rather leave more upside on the table while potentially improving tax efficiency, one ETF worth considering is the Amplify CWP Enhanced Dividend Income ETF (DIVO). Many income investors dismiss it because its 4.8% distribution rate looks modest beside JEPI’s headline yield. As always, though, yield tells only part of the story. Total return matters too.
What Is DIVO?
Unlike JEPI, DIVO does not rely on equity-linked notes. Instead, the fund actively manages a concentrated portfolio of roughly 20 to 25 high-quality large-cap companies selected for characteristics such as durable earnings growth, free cash flow generation, dividend growth, attractive valuations, and strong management teams.
Income is generated through an actively managed covered call strategy written on individual stocks, not an index. By selectively writing calls only on positions where managers believe upside is more limited, DIVO generally preserves more participation in rising markets than a traditional index covered call strategy while still collecting meaningful option premium.
DIVO also serves as the flagship strategy within a broader family of income ETFs. Amplify applies the same active stock selection philosophy and individual-stock covered call approach to other mandates, including international equities through IDVO and growth-oriented stocks through QDVO.
DIVO vs. JEPI
On paper, DIVO loses the headline comparison. Its 0.56% expense ratio is higher than JEPI’s 0.35%, and its 4.8% distribution rate is roughly half of JEPI’s 9.41%. Where DIVO has historically excelled is in the areas that ultimately drive long-term wealth: total return and tax efficiency.
According to testfolio, over the 6.11-year period from May 21, 2020 through July 2, 2026, DIVO delivered a 14.60% annualized total return, compared with 11.24% for JEPI, assuming all distributions were reinvested. Risk-adjusted performance was stronger as well, with a Sharpe ratio of 0.93 versus 0.77 for JEPI.
Taxes also tilt in DIVO’s favor. According to the fund’s June 19a-1 notice, its most recent estimated distribution consisted of approximately 69% return of capital and 31% net investment income. Return of capital generally is not immediately taxable. Instead, it reduces an investor’s adjusted cost basis, deferring taxes until the shares are eventually sold.
JEPI’s distributions, by contrast, are largely generated through its ELNs and are typically taxed as ordinary income, making them considerably less tax efficient for investors holding the fund in taxable brokerage accounts. Of course, 19a-1 notices are only estimates. The final tax characterization is determined after year-end and reported on Form 1099-DIV.
Ultimately, the better ETF depends on what you’re trying to accomplish in retirement. If your primary goal is maximizing current monthly cash flow and you’re comfortable giving up more upside while accepting less favorable tax treatment, JEPI remains a reasonable choice, especially in something like a Roth IRA.
If, however, your priority is stretching your portfolio over a retirement that could last 20 or 30 years, DIVO makes a compelling case. Its lower distribution rate may require supplementing income by occasionally selling shares, but historically it has paired stronger total returns with greater tax efficiency.
Contact [email protected] for any questions or corrections.
Tony Dong is the founder of ETF Portfolio Blueprint. He also serves as Lead ETF Analyst for ETF Central, a partnership between Trackinsight and the NYSE.
Tony’s work focuses on ETF strategy, portfolio construction, and risk management, with an emphasis on making complex investment concepts accessible to everyday investors. His insights and analysis have also appeared in U.S. News & World Report, Kiplinger, MoneySense, and The Motley Fool.
Tony holds a Master of Science degree in enterprise risk management from Columbia University and the Certified ETF Advisor (CETF) designation from The ETF Institute.
