High-Yield Dividend Stocks Gain Appeal as Fed Lowers Rates

A new report highlights the resurgence of high-yield dividend stocks following recent interest rate cuts by the U.S. Federal Reserve. Investors are encouraged to consider dividend-paying ETFs as safer income options amid declining yields on risk-free assets.

Date: 14-10-2024

AI Rating: 7

The report discusses the impact of recent interest rate cuts by the U.S. Federal Reserve, which have made high-yield dividend stocks more appealing compared to risk-free investment options like CDs and Treasury bills.

With the Fed's decision to cut rates for the first time in four years, a trend of continuous rate cuts is anticipated as inflation cools. This environment is predicted to lower the 10-year Treasury yield further, enhancing the attraction of dividend-paying securities.

As a consequence, the report suggests a favorable outlook for high-yield dividend stocks and exchange-traded funds (ETFs) that utilize covered call strategies. Specifically, two ETFs are highlighted: the JPMorgan Equity Premium Income ETF (JEPI) and JPMorgan Nasdaq Equity Premium Income ETF (JEPQ). Both pay monthly dividends derived from the premiums of covered calls and underlying dividends.

Additionally, low expense ratios make these ETFs even more appealing. The Premium Income ETF offers an 8% yield, while the Nasdaq variant boasts a 12.4% yield. These yields indicate robust potential returns for investors looking for passive income.

Furthermore, the report recommends two municipal-bond ETFs—VanEck High Yield Muni ETF (HYD) and BlackRock High Yield Muni Income Active ETF (HYMU)—for generating tax-free income as rates decline. Both ETFs are trading close to their NAV prices and present a viable option for conservative investors.

Stocks: JEPI JEPQ HYD HYMU