Should I Buy This COVERED CALL Dividend Stock ETF?

Eventually, I want to add a covered call ETF to my dividend stock portfolio, in order to boost portfolio distribution income (while adding further diversification). In today's video, I analyze DIVO, perhaps the best covered call ETF from the standpoint of offering strong yield and long-term capital appreciation (in my humble opinion). It's rare to find something like this in a world of capital erosion.
#covered #call #etf

Timestamps:
0:00 INTRODUCTION: DIVO COVERED CALL DIVIDEND DISTRIBUTION ETF
1:31 Update: I just made some substantial trades in my dividend stock portfolio.
2:09 SEGMENT 1: DIVO ETF STATISTICS
2:18 Amplify CWP Enhanced Dividend Income ETF
2:27 Dividend stock ETF that writes covered calls against high-quality dividend stocks.
2:57 Criteria for covered call ETFs: I want the benefit of covered calls without capital erosion.
4:01 Approximate starting distribution yield is 4.45% (dividends and covered calls).
4:23 Actively managed ETF with a portfolio manager.
4:35 Smaller ETF with only $3.24 billion market cap.
4:50 Expense ratio of 0.56% (higher due to active management).
4:57 Turnover ratio of 66% (higher than I typically like, but could be due to covered call strategy).
5:22 I own individual dividend stocks to keep my portfolio-wide turnover ratio low.
6:28 SEGMENT 2: DIVO DIVIDEND GROWTH (DISTRIBUTION GROWTH) ANALYSIS
8:01 DIVO pays monthly dividend distributions, which is great.
8:21 DIVO 5-Year Dividend Distribution CAGR is only 2.88%, lower than I'd expect.
9:28 DIVO 1-Year Dividend Distribution Growth Rate is 4.97%, which is much better (and what I would hope to see).
10:20 DIVO 2-Year Dividend Distribution CAGR is only 0.15%, which is really bad. This is a possible red flag/con of this covered call ETF.
11:07 My portfolio comparison: 3.73% dividend yield with 4.82% dividend CAGR, and I'm trying to improve.
12:20 Could the lack of consistent recent CAGR be related to options premiums skewing the equation?
13:15 I'm blending a high-yielder with SCHD, and I'm adding higher yield to my portfolio while simultaneously growing portfolio-wide dividend CAGR.
13:36 SEGMENT 3: DIVO COVERED CALL ETF HOLDINGS ANALYSIS
14:09 Companies I already own sum up to 32.47% (which is not bad).
14:35 I like that this ETF owns Apple (AAPL) and Visa (V).
15:16 I like that it has tech (growth) exposure.
15:22 KEY POINT: This ETF gives an investor exposure to low-yielding tech stocks (like AAPL and V), but offers a high 4.45% distribution yield (due to the covered call strategy).
16:28 The covered call strategy creates a system that would give me exposure to AAPL, but with a higher yield. This overtakes my concern with the CAGR.
17:05 SEGMENT 4: SUMMARY OF FINDINGS ON DIVO COVERED CALL ETF
17:15 What I Like
18:04 What I Don't Like
19:02 WOULD I BUY THIS ETF?
20:00 Check out the pinned comment to join Patreon. I'm having a zoom meet-up next week to discuss "Pour Your Heart Into It" by Howard Schultz.
21:16 If you see me out and about, please make sure to say "hi"!
21:30 Please connect with me on Instagram. (I'm @ianlopuch)
22:05 DISCLOSURE AND DISCLAIMER

DISCLOSURE: I am long SCHD, Starbucks (SBUX), Caterpillar (CAT), The Home Depot (HD), Procter & Gamble (PG), Honeywell (HON), Walmart (WMT), IBM (IBM), Chevron (CVX), McDonalds (MCD), and Duke (DUK). I own this ETF and these stocks in my personal dividend stock portfolio.

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Because the information herein is based on my personal opinion and experience, it should not be considered professional financial investment advice or tax advice. The ideas and strategies that I provide should never be used without first assessing your own personal/financial situation, or without consulting a financial and/or tax professional. My thoughts and opinions may also change from time to time as I acquire more knowledge. These are, as discussed above, solely my thoughts and opinions. I reserve the right to delete any comments for any reason (abusive in nature, contain profanity, etc.). Your continued reading/use of my YouTube Channel, blog, email newsletters, whitepapers, Excel files, and other materials constitutes your agreement with and acceptance of this disclaimer.

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(Disclosure and Disclaimer: I'm long SCHD and BTI. Please see video description for all disclosures and disclaimers.)

[weihuang-uq]

Good video, I love DIVO Im investing a lump sum this week. What would be the best 5 etfs for a foreign beginner

[cz]

2-3% of the DIVO yield is from actual dividends. The other 2-3% is from options income. You could have increasing dividends but falling options premium in a bull market. That can make your "dividend" (distribution) growth rate look flat or even fall. I think the distributions will increase slightly long term, but I would look at it as more of a growth position with enhanced income and lower volatility. It has out performed SCHD over the past few years and has a higher current yield. Personally I own both so it isn't a knock on SCHD.

[jeonacho]

glad you still upload bro. You the goat

[roberttaylor]

A covered call etf that also has growth! Sounds good!!

[etfeasy]

DIVO is still treated as Active managed compared to SPYI which is passive index S&P 500 correlated

[etfeasy]

SPYI will give you much higher yield and less volatility but minimum growth

[mikejmarvin]

I love divo. I've got about 300 shares

[etfeasy]

Buy SPYI instead
It’s the best in total returns along with JEPQ

[MartinD]

DIVO, SCHD, JEPI, JEPQ & QQQM create my core. (A bit of overlap, I get it).
Covers Bull, Bear and stagnant markets. Everything else in my portfolio is just my extra plays.

[thejesus]

Divo is Great! On YouTube, toby Mathis interviews Kevin Simpson the person with Capital Wealth Preservation (CWP). Really opened my eyes to this etf. Great interview and great video here.

[sofakinginsane]

I like DIVO a lot. Also have IDVO for International exposure and has a higher yield(and expense ratio). Thanks for the vid!

[extremecarpetcleaning-wvwi]

Jepq seems to be doing pretty good so far. 12 percent yield monthly.

[j.s.]

i've been in divo for like 4 years. ppl always trash this etf (cause the expense ratio is a little high), but its been a solid performer throughout the recession and downtrends.

[LXBalla]

I've been investing in dividend stocks for a few years now, but as I get older, I'm finding myself being more drawn to low-cost high div yield ETFs. Sadly over here in Europe we don't have all the same ETFs as over there, so I'll invest in Blackrock Ishares ETFs mostly.

[BaldheadMedic]

I've held DIVO for years and I exchanged it for QYLG and XYLG which is so similar to your former holding in XYLD but the global x YLG funds always hold 50% of the underlying index for appreciation and 50% as at the money covered calls I love my experience holding qylg and xylg. QYLG in particular did well in distribution and capital appreciation

[kg]

The options premium is affected by a lot of different factors including volatility like you said but in general it should go up over time as the fund's nav goes up. In the case of DIVO, calls are written out of the money so there is potential for modest capital appreciation. If the underlying stock is performing well and calls are written out of the money then you should see a growing nav even with covered call funds that classify a portion of their distributions as return of capital (which is very much so tax advantageous). CC funds get a bad name because many of them are overly aggressive with their options layer or they pay out big distributions that aren't fully supported by their CC income which can be destructive to nav but the right CC fund can be a great way to add tech exposure while providing a good blend of yield and capital appreciation for a nice healthy total return over time.

[dakkon]

DIVO is a solid fund, but I have not been thrilled that they have been holding about 13% in cash for the longest time now. I can hold cash on my own, without paying the 0.56% exp ratio.

[foodguy]

I personally wouldn’t go into divo due to the expense ratio. That will really eat into your dividend returns over time.

[theyuha]

I have some DIVO, the chart looks good over the long term.