Love this. 60 years old now. Will retire in 2 years. Have now accumulated 4900 shares of SCHD still on drip. Still buying a thousand dollars' worth per month!
Thank you for watching and commenting! That is amazing! SCHD is so good in that role! My parents are retired, and they roll with a big chunk of SCHD (along with just a touch of VOO and VGT). You’ll be happy long-term! You may not get the huge market swings upward like growth ETFs, but you shouldn’t drop much either with the downs. It’s a machine.
@@shiverop8027right now SCHD is $83.36 and the dividend rate is roughly 3.37%. That means the annual dividend payout is $2.81 per share. Multiple that times 4900 shares. ($13,765 annual payouts before taxes, if it’s in a taxable account).
If you just invest in JEPI and/or JEPQ and only use 4% of the dividend yield to live on, while reinvesting the other 4% to 7% (this assumes a total dividend rate of 8% to 11%), you are going to end up with a lot more money!! It seems like a poor comparison to assume if you invest in JEPI or JEPQ you will spend three times as much money on your life than if you invest in SCHD. Am I missing something?
Thank you for your feedback Christine. You are not missing anything. I was showing the power of the isolated dividend CAGR in this video. (So people don’t simply chase yield). I did not include the price appreciation + overflow dividends back into the picture. It was a simple breakdown of dividend growth with no reinvestments. I will make another video with the full picture (actually helps SCHD a lot overall). Thank you!
If you were maxing out Roth IRA, and 30% of investments going to dividend ETF's, at the age of 27 would you put all in SCHD, or include JEPI/JEPQ? This is assuming current 30% dividend ETF, 35% foundational (VOO) and 35% growth (QQQM, SCHG, and VGT)?
Hey Jordan, great question! First of all, awesome investments in each of your allocation groups! Love it. At 27, and assuming you don’t need the extra cash flow now, I wouldn’t have JEPI or JEPQ. If anything, I would make the dividend group a little less overall. SCHD is great, could mix in DGRO if you wanted as well. But I would add more of your growth section if I made any change. If it crashes, even better (assuming you don’t sell, and keep making contributions). The only way I would add one of the JEPs is if you need cash flow now. Otherwise, the underlying indexes (VOO and QQQM) are better long-term holds.
I know this is off topic but would it be best to just focus on growth right now then near retirement sell off a good percentage of my growth and get into income producing funds or dividends like schd or jepi? Or should i consider getting into dividends now to make up for no bonds to reduce the volatility? Thank you for your response.
Hi Mommy Investor, thanks for the great question. This one will depend a lot on you and your goals & risk tolerance. I would say a general answer is a bit of both. It is the path I will take as I get closer and closer. I think it’s good to have some growth and dividend ETFs at all times (even in retirement, if possible). I would focus on dividend ETFs more and more as retirement approaches, depending on your portfolio value. It mostly depends on your portfolio value. To be extreme, if you retire on $100,000, you may have to go 100% JEPQ (and or other high yield assets) to pay the bills. If you had 10 million dollars, you could roll with VOO / VGT / SCHD and keep growing while still paying bills with a 2% yield. Of course, I’m guessing you’re in the middle like most of us, and you’ll likely want to roll into SCHD coming into retirement, while still having some growth ETFs. Then maybe at retirement, roll as much as necessary into high yielding to get by, and focus the rest on dividend growth to crush inflation. It’s a fine balance that will be personal.
Thanks for the comment and the question. SPY, SCHD and JEPQ are all great funds for their roles. I’m actually not familiar with SVOL. At a glance I wouldn’t invest in SVOL personally. An expense ratio of 1.16% will cost thousands of dollars long term when accounting for the compound effect. It has a 16.52% yield. That is pretty wild. It has only been around for a couple years. I don’t know anything more than my quick glance, but it looks scary. If you go for it, I wish you luck (:
SCHD is the clear winner! Great video. It's better to invest in a pot of gold that will free you and your family potentially generationally rather than quick easy returns. SCHD to the moon!
I've been in SCHD for over 4 years now and the growth is essentially flat. The dividends with CAGR are still much lower than JEPI /JEPQ as well. Like most mature funds today, the time to get into SCHD was in the early 2010s. Alas, I believe that ship has sailed. JEPI/JEPQ are the future as they are adapted for the next 10 years of sideways/no growth trading. With just one year in JEPQ, it makes my SCHD position look like a joke.
Hey John, thanks for watching and commenting. The below isn't to argue with you, I think you could do a lot worse than JEPI and JEPQ. They are two of my favorite actively managed ETFs, and they are based on what I think are the best indexes in investing (S&P 500 and Nasdaq-100). But... Congrats on being in SCHD over the past 4 years. It's total return of 50.12% during that time has been amazing. The dividends and dividend growth rate really add up. Past 3 years is 26.73% and the past 5 years is 87.84% (just to show I'm not cherry picking data). It's deceptive because you will not SEE your increases in SCDH in your online broker. Dividends reinvested = 0% unrealized gains (what you see when you look at how your holdings are doing). It is very deceptive and misunderstood in general (growth ETFs usually 'look better' on gains / losses because of the way cost basis with reinvestments work). Now, for the people that just got in recently, you're right, it's been fairly flat on total return. I still think it's methodology will do very well long-term. I love how it screens stocks, personally. It has nice key metrics. Also, the dividend growth rate is still amazing. It was 3.77% in 2023, that is true. But it's 3Y-5Y-10Y dividend annual growth rates (what we compare to inflation or salary increases) are 9.43%/13.05%/11.39%. JEPQ and JEPI will act 'more like' a high yield savings account. Dividends go up and down based on market volatility with the option strategy. Sure, the underlying holdings may increase some, but that is a very small % of the dividend payments. And, the majority are not qualified dividends. Remember, SCDH is screening for the top 100 dividend companies all the time. It is not technically anything but a basket with a set of rules. 'A ship sailing' would apply to a company, like say, maybe someone could think Apple is going to slow down and the ship has sailed 'the ship has sailed'. It's been a growth stock market, and thus SCHD has been recently lagging, but it will always have the potential to grab new companies as things change over the years.
Question, when you do the example of getting 275k per year with Jepq 100%, lets say you choose to live off 200k, if you reinvest the other 75k every year just back into jepq how would that work out would you still be losing purchasing power?
Yessir. Reinvesting the dividends will provide future cash flow. JEPQ is great. I wanted to highlight why SCHD makes a lot of sense, long-term, even though it seems 'weak' as far as current yield. It's a yield on cost beast. In a perfect world, we have both, and reinvest some of those juicy JEPQ dividends (:
Excellent video. Thank you. If I buy small positions of JEPQ and JEPI ($25-50k), after 3 years when my SCHD will take over, do I sell them or just keep them forever?
I think the answer to that is either. You can roll your long-term capital gains from JEPQ and JEPI into SCHD, OR, keep JEPQ and JEPI forever and invest the monthly dividends into SCHD.
Hi there, Thanks for the question! As long as you don’t mind the volatility of a bit more tech exposure, that should be fine long term. I would highly recommend a mix of JEPI (for more cash now) and SCHD (for more growth in the future). But JEPI is indexed to value companies form the S&P 500, and I think it will be fine LONG term. Could be some 20-50% down turns (just like the S&P 500 index in general) along the way, but just keep reinvesting and watch those dividends pile up! If you don’t sell when it’s down, you’ll very likely be fine. Thanks for watching!
Hey Mike. I'm not a huge fan of SPYI and QQQI because of the high expense ratios. I'm not saying they are bad, but they are not my cup of tea. Thanks for watching and for the question.
Great video Jeff. One question: wouldn't it make sense to hold JEPI/JEPQ until SCHD "catches up" to the 10% +/- that they offer? I don't see why one would own SCHD until it surpasses JEPI/JEPQ in yield. What am I missing?
Hey Jan! I featured this comment in a video I recorded today (coming out 9/15) because it is a great question. Dividend growth will help your compound returns because the per share dividend will increase. For example, if a dividend ETF like SCHD has a 10 year dividend CAGR (compound annual growth rate) of 10%, which it actually has 11%, the dividend will double every 7 years. For example, SCHD paid $1.05 per share in 2014, and $2.66 in 2023. But the 'yield' stayed the same because the price also increased by about 3x. Price is in the denominator of 'dividend yield', making it a vanity metric outside of the the day you buy the holding.
Hi Jeff. Really enjoying your videos. Congrats on believing in yourself with your recent move. You note you use JEPQ/I for cash flow. Does that mean you’ll move out of JEPQ/I eventually? If so, what would be your next move? I’m looking to retire next year or two. Creating cash flow could make it a year! Appreciate your thoughts
Thank for for watching & for the kind words. My plan is to eventually roll out of JEPQ when the temporary need for cash flow is relieved. I’ll wait until I have held the JEPQ for at least a year so the gains are taxed as long-term capital gains. At that point, I will likely roll the money into my primary allocations. For me, that is SCHD / VGT / VOO / individual stocks. The vast majority being the ETFs. I may, at that point, start a position in QQQM as well. Anything I do will be shared on the channel. JEPQ is amazing for cash-flow in a retirement situation. I love the underlying holdings being based on the Nasdaq-100 index. The price appreciation is a bonus along with the high yield.
I am 22, and im looking to retire off dividends at 40. Wouldn’t it still be better in my case to go into high yield early on, such as JEPI/JEPQ, or even a BDC such as ARCC, with reinvesting? Doesn’t this beat out the growth of yield on the “growth” ones, such as SCHD, or even doing stocks such as PEP, PG, JPM, TGT, etc? Your feedback would be great, as im torn between both, but with my short timeframe backtesting both shows the high yield being more dividend income, even long term, despite lower ending balance. I want to ideally not have to sell anything, just live off dividends. For numbers, i have 25k to dump in, and will be contributing about 1600 monthly. Thanks!
Current plan was aggressive, with around 35% ARCC, 12.5% MAIN, 12.5% JEPI, 10% SCHD, 10% VOO, 20% individual dividend aristocrats (PEP, HD, JPM, MCD, etc). Over the 18 years, the last few years I will rebalance into more SCHD/dividend aristocrats, lowering the ARCC. Thoughts?
Thank you for watching and for leaving a comment. This is a great question. There is no 'one size fits all' solution. You will be fine at 22 if you pick at strategy and stay the course. For example: If you went growth: Don't flip flop and panic sell low the market crashes. That is when you would want to buy. Or, don't FOMO into buying growth when it is soaring and your dividend stocks and ETFs are meh (like SCHD the past couple years). This is the time to buy dividend stocks. Basically, do opposite of what our human emotions naturally want. I think a balanced approach would work well for you. Because generally speaking, growth will outperform dividend ETFs over 20 years *IF* and it is a huge required if, you dollar cost average in and *never* sell when things look bloody. If VGT and QQQM crash by half, that's *great* for you in your accumulation stage because you're getting double the shares per dollar. You could have a dividend section that is 50% of your target allocations. It could be the mix you described, possibly add a bit more of the dividend growers, but that's up to you. Then maybe something like 25% growth ETFs (VGT, QQQM, SCHG, or many others). And 25% cornerstone (VOO or VTI). That way, when you go to buy, you'll buy the ones that are the most beat up relative to the target allocation. This is assure that you always buy the 'relative dip' within your portfolio. Getting the most shares for each dollar over the years. For example, so your growth and cornerstone shoot way up, and dividends stay steady. You may find yourself with 48% dividend holdings, 26% growth and 26% cornerstone. Your next dollars would go to dividends to get them back up to your desired 50%. I'm just making up the numbers here. You can make it your own. I wouldn't go toooooo heavy in high yield as historically it will underperform total returns over 20 year stretches of time compared to something like VOO. But a mix should work well.
I think this would do fine if you stay the course and stick to your target allocations in all markets. Don't fall victim to trying to 'time the market' with your gut. It is a big problem that most investors experience at one time or another before building a quality system.
@@JeffTeeples Thank you for the response! I will move the percentages around to get some more dividends growers. The biggest issue for me going growth is my end goal of never selling, as the yield is around 1-1.5 on VOO, and over 20 years the yield on cost still only gets up to around 3 from my backtests. I see VOO as the more traditional “sell 4% rule”, which I am trying to avoid. I think I’ll move 10% of the ARCC into the dividend aristocrats to be a bit more safe, and once again the last few years change the percentages around to hit my goals. For the DCA, I use fidelity’s basket portfolios, which has a built in rebalance. As I put money in it will buy to get the percentages back to my goals, which is the exact scenario you describe! Once again thanks for the reply, I’ll make a few changes based on this. Hopefully in 18 years I will be sitting back retired ;)
Thank you for the feedback. I think people get enamored with the high starting yield. And it is great for those that need massive cash flow now. I like SCHD and JEPQ for different reasons, but I easily prefer SCHD as a long-term holding.
Thank you for watching Cindy. I think SCHD is a great long-term holding. It has been a bit meh the past couple years, but I don't think that changes anything. Solid methodology that will pass the test of time IMO.
I like SCHD better than SCHY, but a balance could be the right way to go. With ETFs, price doesn't mean anything as far as the quality of the holdings are 'what you are getting' per dollar. For example, SPLG and VOO hold the exact same mix (the S&P 500). VOO is 10x more per share, but they will have the same return. If your online broker allows fractional shares then price means nothing with ETFs. However, it can make a nice difference if your broker doesn't allow fractional shares and you don't have a large chunk of money investing in the beginning.
thanks for the info Jeff…. I’ve been throwing in $150/week for the last 6 months…. my SCHD holdings FINALLY ended up on the positive side after 6 months of investing in the stock…. as soon as I’m able to afford it, I will try and add as much as a possibly can per month….
Thanks for the comment. Yeah, SCHD has been brutal on total returns over the past year and change. But nothing has changed fundamentally with this amazing dividend ETF. Great buying opportunity. Price will go up and down, but dividends will grow exponentially in time.
Thank you for the comment. I completely agree. In reality, a mix of both is a killer combo. I know I have both in my portfolio (more SCHD, but I use that cash flow of JEPQ to bolster other holdings).
Thank you for the feedback Samar. I use a few tools for different things. My 'main' research tool is Seeking Alpha. I have been using it for years and I love it. It is where I aggregate all investments (to see and research in one view), run my screens for my selection process, read most articles, update spreadsheet data, and research individual stocks and ETFs. I do have a link in the description of my videos if you (or anyone else) wants to try Seeking Alpha Premium for free for 7 days. If you like what you see, you'll save 25% off your first year with the link. Saves you money and helps the channel a lot. I don't want my channel full of sponsorships I don't believe in. But this is one I think is top notch.
Setting up my children accounts Age 15yr I was thinking 50k JEPI for the next year or so due to my thoughts that I see a market 20-30% correction coming Then transferring all to SCHD for 20 yr plan Thoughts Thank you !
For a 15 year old, I would lean to a mix of value and growth. Something like this maybe: 20% VGT, 20% QQQM, 30% SCHD, 30% VOO. I think that will grow well for a 15 y/o over many years. But any investing is great that early. JEPI and JEPQ are structured to produce cash flow now. QQQM and VOO will grow more wealth when we zoom out 20-30 years.
Thanks for the question. I think that is nearly as good as it gets for cash flow NOW. It is going to beat any high yield savings and T-bill over long stretches of time. As long as your willing to see the base amount go up and down with the market. I personally have most my (what I consider) 'cash' in JEPQ. I want cashflow with it, as I quit my job and need cash flow now (: I don't mind the price waves at all. If it cut in half, I wouldn't blink, I would buy more with the dividends. For long term investing, if you're not living on the portfolio, I would focus primarily on VOO over JEPI, and QQQM over JEPQ. I have 90% of my portfolio in VGT (my choice for growth over QQQM), SCHD (my replacement for bonds), and VOO (my core fund). This is if you're looking to grow over 10+ years and don't need cash now.
@@JeffTeeples thanks for answer . In my country dividends get taxed by 5% so I'm thinking of this portfolio idea . They have dividends, they have growth, they have diversity and you get 11% dividend no matter what . I hope it works out
Great video, my wife and I hold SCHD in our retirement accounts, so I'm excited to see the potential growth of the price and the dividends as well get larger over the years, since it's in a regular non Roth IRA, the only downside are the eventual taxes due at my RMD age I'm concerned about, not before RMD age
In your example, when you put 100% in schd, does that mean the dividend yield would be over 10% by year 8? around 20% after 14 years? I'm not sure if I am understanding/ calculating/ defining that correctly, but if I am, I think dividend growth rate can be very deceiving. I think a schd dividend yield is likely to max out at less than 5%. I have had Exxon stock for 15 years for example and it increases its divided every year, but it's still under 4% Anyway, I'm just trying to learn and understand, you are my main RUclips advisor right now haha. As I'm retiring at the end of this month, I recently bought SCHD as my first dividend ETF based on your (and many others) opinion. It seems a big part of the draw of schd is the dividend growth though and if the calculation is that the dividend is going to grow to 20% that just doesn't seem sensible to me. Tell me I'm wrong please 🙂
Or maybe I'm having some confusion about what dividend growth rate even is: I see on seeking alpha that the average yield of schd was 2.59% in 2014 and 3.58% in 2023 (a little less in 2024). Doesn't that calculate to an increase of 38% in those nine years (or about an average of 4.2% a year for nine years)? Yet, seeking alpha also says the average dividend growth rate over the last ten years was 10+%. What am I missing? (I realize there is a little discrepancy as I didn't want to include the 2024 figure because it's not a complete year, also the chart I was looking at only went to 2014... but don't either of those significantly effect my point/question...) Anyway, thanks for your videos and discussion
Thank you for the great question. These dividend numbers can feel all over the map & they get confusing. Dividend yield is more of a vanity metric for buy and hold investors. Now of course, it is important when you go buy a stock or ETF because it shows you exactly how many dollars you get for each share you purchase. For example, if you buy a stock that has a 5% yield and is $100 per share, you get $5 for every $100 you invest. This is important information when you go to buy the stock. It is important to know that the 5% yield is a simple calculation of the dividend paid per share divided by the current share price (5 / 100 = 5%). The stock REALLY pays $5 per share. NOT 5%. 5% is backed into with the simple formula. For example, if the price dropped to $50 per share the next day, a new investor will get a 10% yield! But... this is because they are buying 2 shares for $100. 1 share cost $100 for you the prior week. The dividend per share is still $5, period. It is what matters, not the 'current yield' based on the price you buy it. The beauty about dividend CAGR is that it uses REAL numbers that don't change based on price. It is the 'real growth' of your dividends. It will only go down if dividends are cut, or up when dividend raises (per share) are announced. SCHD has grown its dividend per share (the amount of $ that each share pays regardless of price to accumulate them) by 10.87% per year over the past 10 years. It is the 10 year dividend CAGR. This is how much your dividends have actually grown if you held it for 10 years. Dividend yield along the way is entirely meaningless for reliable dividend income. Let's show the power of dividend CAGR in practice (these are real numbers of what actually happened, zero assumptions): 1,000 shares of SCHD purchased in 2013. Dividends per share (no reinvestments, holding exactly 1,000 shares all along): 2013 - $904 2014 - $1,047 2015 - $1,147 2016 - $1,258 2017 - $1,346 2018 - $1,439 2019 - $1,724 2020 - $2,028 2021 - $2,249 2022 - $2,561 2023 - $2,658 Long-term, compound math (that crazy thing) cares much more about CAGRs than snapshots of ever changing formulas. It's just hard to think it's 'doing anything' in the every day grind.
I think I answered this in my first book I just replied with (: The short version is that dividend yield is fairly meaningless outside of the snapshot in time that you buy an asset at. CAGR (compound annual growth rate) means everything over time.
@@JeffTeeplesStill not sure I grasp that entirely, but no fault of yours..🙂. I appreciate your thoughtful and thorough response. I can ruminate on it a bit longer... I will say, once again, I feel assured by your response. A big take away is a renewed confidence in your opinions, knowledge, and also in SCHD.
Hey Jeff, thanks for the video! I have a question if you don’t mind, I’m 33 years old(not living in America) and I have around $160k in my investment portfolio(invested in growth ETFs) and $130k in my 401k(pension). I really want to receive some income from dividends as I want to stop working so hard(I wish to move to around 2-3 workdays). Would you say it makes sense for me to put my 401k money on a dividend ETF like SCHD/JEPI so I can get some dividend income which would allow me to work less(while leaving my investment portfolio to grow)? Or does it not make sense at all? Thanks!
Thank you for watching and for the detailed comment. For 'most' people that want to retire early, it makes sense to do the following: Invest a traditional 401k into growth ETFs to build wealth over time (ignoring the crazy market dips over a decade or more). Invest taxable brokerage accounts and Roth IRA into dividend producing assets. SCHD is great in a taxable account because of the treatment on qualified dividends. JEPQ is great in a Roth because you pay zero taxes on the non-qualified dividends. Roth's are powerful because unlike traditional 401ks and IRA, you ARE able to take the money out well before 59.5 years old tax and penalty free. You only have to have the Roth open and funded for 5 years. Then you can take out the contribution amounts you have put in over the years.
@Jeff Teeples what would be an example of a dividend growth portfolio if someone was 30 years from retirement and wanted to live of dividends in retirement
Thanks for the great question. If someone was 30 years from retirement, I would likely recommend little to no dividend growth holdings 'now'. I may go something like 50% between VGT, QQQM, or SCHG (any mix), 40% VOO, and maaaaaybe 10% of a mix between SCHD, DGRO and or VIG to get the snowball rolling. Closer to retirement, I would slowly start transitional some growth ETFs to dividend ETFs (the long-term capital gains aren't too bad during the transition). My video on Sunday talks about how to plan for a retirement using dividend ETFs. It is important to keep yield and dividend growth in mind depending on the specific situations. But with 30 years, and the mindset to NEVER sell, just buy in all markets, VOO and growth ETFs will do way better over time. Even considering the inevitable crashes (heck, especially considering them, that is buying low and how you can build massive wealth).
Yeah, the qualified dividends of SCHD make it even better than the (mostly) non-qualified dividends of JEPQ. I wanted to limit the scope of this video to save confusion. It’s always a tough balance of how much to drop in each video. Do I go into retirement accounts vs taxable, qualified vs ordinary, etc. Thank you for watching!
Pretty crazy how that growth and price appreciation is way more than a lot pf people earned from their full time jobs during that time. Makes investment income seem absolutely insane compared to salary work. Even right now for me if the market goes up 0.5%, it is about the same dollar value of me working 15 days and saving 40% of my gross earnings, so 3 weeks. It gets crazy fast I feel like! That means 1% is six weeks, 2% is twelve weeks, etc.
Thanks for watching and for the comment. It is crazy to look at it from that perspective. The power of compound is hard to comprehend even for someone that understands the concept. It feels fake. It's one of the reasons I made this channel. I want every day people like me (late starter, not an entrepreneur, not overly ambitious... basically just a guy) to be able to get rocking. I know my portfolio looks solid now, but at 28 I was a newly graduated college kid (5 or 6 years late to my peers) with 75k of debt and completely confused about the world. It felt at first like 'what is the point in starting, I'm just unlucky'. Want to share how you don't need to be a rocket scientist for this stuff, and there is no such thing as luck. Nothing I saw on RUclips was fully relatable.
@@JeffTeeples Right, I am definitely interested in just keeping it going. Really curious to see if we'll have a big drawdown ever again. Feels like prices will almost never come down. I figure I'm about 1/3 of the way through accumulating, so I wouldn't mind a 15-25% downturn. But in the meantime I'll just continue plugging away!
I actually asked for this video and pleasantly surprised you actually did it. Much appreciated. Very helpful and insightful. I do have a small portion in JEPQ with the dividends reinvested. After this video I am trying to decide if I should a.) hold it and turn off the drip - take the yield and use the cash flow to just buy SCHD or b.) should I just sell and put it all in SCHD now as I can wait 10 years and don’t need the money now. Appreciate your advice
Thank you for watching and for your support! I think a) is a great option! Another commenter mentioned that as well. I think if you need more cash now, A) makes sense. Gets nice cashflow going AND can be used to buy more SCHD. If you're not using the cash at all (which as it sounds like your situation), and simply building for future cash flow, I would vote for b). But you can't go wrong either way. Maybe even a combo of the two for diversity. I love JEPQ, and it has had an incredible year. I made this video to show how crazy the dividend growth rate is over time with the power of compound, however, there are multiple variables to consider. Thanks!
Definitely. This video is to isolate the dividend growth rate specifically (to get people to understand there is more to dividends than current yield). I agree there is more to the story with both, and both are great. Thanks for your comment.
Thanks for your comment, Will. I attempted to share a spreadsheet here in comments before, and I didn't have the option. What I am planning on doing is adding it to my entry level Memberships level. I want to have a collection of spreadsheets that I can share with everyone. I do need to clean them up a little before sharing, but I have maybe 10-15 spreadsheets I use for different scenario testing. More to come.
I know that most of JEPQs income is from Covered Calls, but could we not use the actual CAGR of the Nasdaq? The Nasdaq CAGR is like 10.55% from the time of me posting this, I know JEPQ and the Nasdaq isn’t exactly the same index, but I’m sure JEPQs CAGR isn’t 0%
Thank you for the comment and question. Yes, well, kind of. Yes it does have holdings from the Nasdaq-100. But that is about 1/18th of JEPQs dividend payment. 17/18ths is based on the market’s volatility. I think 0% growth (high yield, but strictly speaking growth of the dividend) is fair. Maybe 1% but that could be too high. It’s similar to assuming 0% growth for high yield savings, which is about right. Sometimes higher, sometimes lower, averages to about 0% indefinitely. For example, the VIX has been lower lately. The last 5 dividends from JEPQ have been: .38, .34, .39, .42, .42 per share. Compared to the following (same months one year ago). .43, .44, .58, .55, .68. They are down by a crazy amount. But nothing is wrong outside of the market being less volatile now. Only a very very very small % of those dividends are the qualified dividends from the underlying holdings.
@@JeffTeeples yes the Nasdaqs 0.6% is rather low compared to JEPQs entire 9-11%, but if it is a growing dividend then that would at the very least raise the bottom floor of JEPQs dividend range, even if it is a rather small amount that’s hard to track or notice It’s not a consistent grower like DGRO or SCHD but just like the Nasdaq it should still have some sort of CAGR associated with it
@CaptainProx in the world of forecasting, it is common to take a slightly conservative approach. 0% would be my take, but 1% would be fine. My point is mainly that it will be -30% (like now), or +25% (if volatile). This will be how it works. I like JEPQ, to be perfectly clear here.
To be a true apples, apples comparison, you’d have to take the same amount of dividends kept from each and then reinvest the extra dividends from jepq going forward and compound that to show the difference. Otherwise you’re completely negating the extra hundred and $50,000 in extra money kept.
Thank you for watching & commenting. You’re 100% correct. I made this video strictly to isolate the power of dividend growth rate. In a real world scenario, we would take what we are living on, specifically, and reinvest the difference. This would help JEPQ big time. I hold both, and like both. I’ve just heard so much about high yield lately, and I wanted to showcase dividend growth power for long term outlooks.
@@JeffTeeples I like both as well. I don’t have any schd and only a very small amount of jepq, but I’m going to build a bigger position in both going forward.
Awesome idea. I think both are fantastic in their role. Sprinkle in some VOO or VTI for a foundational fund, and QQQM or VGT for some growth, and you’re pretty much covered from all angles.
Unfortunately we can't buy SCHD in Europe. I do like JEPI/Q as an income play. I am going to sell real estate (since this year it is taxed ridiculously) and like to have similar monthly income. JEPI/Q seems to provide that quite well. I understand that total return on the long run will be less, but I need the income and in a bear market I don't want to be forced to sell stocks. Dividends received from JEPI I don't spend I want to invest in VOO or VWRL (or something similar) for additional total return. From what I've seen JEPI is very defensive while still receive a really nice income and great for retirees for an income strategy like I've mentioned.
Thanks for sharing! I agree with you wholeheartedly! I have JEPQ as an income play now as well. I know QQQ will likely outperform long term, but I don’t have it for the total returns.
Would be great if you could do a video on DGRW. Would you consider diversifying away from SCHD and putting money into this. Last 10 year performance beats SCHD and seems to have more potential to grow. What’s holding me back is the very low yield and expense ratio. But if taking a long term perspective that’s not a big issue if the performance is there. Another concern would be if ScHD can maintain the same momentum it’s had over the last 10 years for the next 10 years. Let me know if you would continue to go all in on schd or consider this? Thank you
DGRW to me is more of a growth fund. Well, it’s really a hybrid. The holdings are tech heavy, much like the S&P500. To me, it has a high expense ratio at 0.28% (compared to SCHD at 0.06% and VOO at 0.03%). It falls short on dividend yield and growth by a lot to SCHD, even tho it has had slightly higher total returns (mainly because SCHD has had a rough year, which could help its value atm). It falls waaaaay short of VGT on the growth side. A 50/50 split between SCHD and VGT will get you a higher yield, superior dividend growth, and much higher total return. Very little overlap in SCHD and VGT, and I think the combo make a lot better dividend + growth combo than 100% DGRW. Don’t get me wrong, it’s a solid all around fund, but I think stringing together best in class funds (best growth + best dividend) will be a better bet. And I’m not saying only my best count, could use other dividend ETFs and growth ETFs, and shape the weighing with your age (more VGT while young, more SCHD as getting older, for example, instead of having one fund that is always some of both). It’s actually my video coming next Sunday. Shows how the yield and total return look with different mixes. I’ll be watching DGRW closely, and I’ll throw it in a future video if applicable.
Please do the same with a smaller amount, like 20k or 30k. I noticed that SCHD would not help much if the amount is less than six zeros, as the base of this dream is to have massive capital; even if I started with 100k, I would only be in green ($564) monthly (considering the Inflation 3% & SSI Raise 2%) after 38 years! (I used your Dividend Projections sheet), so consider having a plan for (late entry investors with minimum or low income) considering they have many financial obligations as they are above the 40s. Thank you very much for your understanding.
Thank you for the feedback. I'm glad you used that spreadsheet, it's very cool because it is always 'updated' as long as we change our holdings. The first year is always 'now'. Fun to check out how things scale in time. You are right in that lower starting amounts require a higher yield to get by. It is a fine balance. I'll be sure to make a video with smaller starting amounts in the future. The math does scale the same, for example, if you start with $10 of dividends compared to $100,000, they will increase the same, proportional. If you get to $12, it is the same as getting to $120,000. The zeros can be dropped (or added) for testing purposes. Each scenario will be different. I'll make a video with a smaller amount in the future next time I do something like this. Then people can 'add' zeros if they want. Probably makes more sense to do it that way. The 'number of years to breakeven' (SCHD vs JEPQ) is 'the same' with any numbers.
@@JeffTeeples Thank you very much for your response. I appreciate your consideration of making such a video, which the majority will benefit from. It will attract them to start with reasonable and affordable capital, at least to roll the ball and test this methodology. To add to this, I built my portfolio a month ago (still new) with 100K, and my portions go to (60% Growth and 40% Dividends ETFs/Stocks) The Dividends ETFs/Stocks, which account for 40% of my capital as of now (I'm still toning and planning to close some), are allocated as follows. 1-QQQI / 6.5% 2- SCHD / 24.4% 3- O / 16.6% 4-JEPI / 23.6% 5-JEPQ / 28.7% As I actively manage my portfolio, I will remove some investments and rebalance others as soon as their prices reach the entry-level. currently, with the above setup, my dividends are 7.01%, and as I'm not a US citizen, a -30% tax is applied, so my net is 4.91%, and hopefully, I will reach the right portion of each, considering dividend growth. Thanks
Very nice on the dividend yield. That is a great starting point. It does depend on where you are at in life and in your career. For example, if you're in your 20's you'll want a lot more SCHD compared to high yielders. The income producers with derivatives will go up and down with market volatility. But SCHD will continue to increase the qualified dividends each year. I'll give you an example with real numbers (zero assumptions here): On 1/1/2013 you could have purchased 350 shares of SCHD for $9,919. Let's say you hold those 350 shares without reinvesting a penny. Here are you dividends over the years (again, real numbers, this actually happened): 2013: $316 2014: $366 2015: $401 2016: $440 2017: $471 2018: $504 2019: $603 2020: $710 2021: $787 2022: $896 2023: $930 When you bought SCHD in 2013, the dividend yield 'looked weak' because it was about the same as it is now. Dividend yield is a simple formula that only gives a snapshot of information. It is mostly meaningless over time when dividend growth is compounded into the equation. Yield is dividend / price. If a price goes down (like many of the ETFs that produce high dividends) the 'yield' goes up. However, that has nothing to do with actual dollars paid for what you already own if that makes sense. People say high yield savings looks so good at 5% and I just shake my head knowing how the math works. It is always nice to have a mix, but if you don't NEED cash now, high yield is 'generally' throwing money away long-term (via opportunity cost).
Great video, except one little thing we assume we will be alive and well at the 10 year mark to see those dividends, I say split it in half and use half and reinvest half , live well now and live well after too
Thanks for watching & commenting. I agree that it is a balancing act between living it up now and reinvesting for the future. Happiness, in general, is so much more important than money. Money is just what we need to help get there.
I still don't understand about JEPQ. it's based on NASDAQ and those companies pay little to nothing of dividends because they gear up for growth. How JEPQ can generate dividend over 10% and pay monthly???
Thanks for the question! JEPQs underlying holdings, based on the NASDAQ-100, do not pay a very high dividend. You are correct about that. The majority of JEPQ's income comes from call options on its holdings. It basically works like this: Stock A, that JEPQ holds, is worth $100 per share. An outside party thinks that Stock A is going to go way up in the near future. The outside party agrees to buy Stock A at a price of $105 over the next 2 months. The outside party pays a premium, say $2, the day the contract is made. This is what JEPQ pays to us as a dividend. Now, if Stock A goes up to $115 per share in 37 days, the outside party can 'strike' and buy stock A at $105 per share. JEPQ has to sell the stock that is now worth $115 bucks for $105, which limits the ceiling. But we (JEPQ) get the premium income whether Stock A goes up or not. This limits JEPQs ceiling compared to QQQ, but also raises the floor (because we are getting that income from the contracts all the time).
Thank you for watching and commenting. SCHD had a down year on dividend CAGR to be sure. However, the 3 year CAGR is above 9%, the 5 year CAGR is over 13, and the 10 year CAGR is over 11% (this includes the 3.77%). It could very well trend down, but last year is currently the outlier when it comes to working models and future projections. I’ll update it in future videos to be sure! I don’t remember what I showed in this video, but I have one that shows year by year actual CAGR that will help understand trends over time.
That would add a lot to the portfolio. Realistically, a combination is the best move. This video was to isolate the crazy dividend growth rate effect over time.
@@JeffTeeples i had both and sold SCHD. It’s filled with companies I would never buy. After the rebalance when they added Ford and Chevron, i was totally confused why Chevron wasn’t in there in the first place and Ford is just awful. I sold around $77 and it has done nothing but get worse. Also, no way does it maintain that CGAR if interest rates stay elevated
That you for watching & for the question. Let's take SCHD at it's price RIGHT NOW to answer this. 73.30 is the price at 8:32 am PST. This would get you 1,364 shares for $100,000. At the 3.58% yield as of today (via seeking alpha), this would get someone $3,580 in 2024. Here are the end results to your question assuming the following dividend growth rates: Dividend payout in 2043 at each dividend CAGR assumptions: 13.69% (current 5 year dividend CAGR): $40,983 10%: $21,895 8%: $15,450 This is assuming you are NOT reinvesting the dividends. You're using them to live over the timeline in question. Thanks again.
I think the equation changes a little with drip. But i played with the numbers on a spreadsheet and found one item that helps schd. Often people evaluate an investment, and it comes down to total return (stock appreciation and dividends). Ignoring taxes, if its 10% growth 0 dividend, vice versa or 5%/5%, the cagr will be the same. This assumes if the value appreciates 10%, the dividend payout appreciates 10%, but at a somewhat constant rate to the stock price. Looking at the history of schd, the dividend payout rate has increased and is now at 3.7% (was 2.7% 10 years ago). I think this is saying something similar to what you are saying but in a different way. And it may appear this way due to recent stagnant prices, but stock growth plus dividend yield still are critical, but dividend payout acceleration relative to stock price is a big factor
Thank you for the comment & and the detailed feedback. You are exactly right about DRIP, and total returns being major factors. SCHD is the best mix of the holy trinity (yield / dividend growth / total return) I've found for a dividend ETF. This video was specifically isolating the dividend growth component. I feel it is often times the most overlooked factor, and that people tend to 'yield chase' a little bit.
Hi Jeff. I think I need to stop watching your videos. Each video causes me to add more ETF’s to my M1 portfolio, lol. I now have: 1. QQQM, SMH, XLK, JEPQ, JEPI, 20% each 2. SCHD 35%, DGRO 15%, VGT 50% 3. VTI, VOO 50% each. Would you switch anything around as far as percentages or pairing certain ETFs with others? I’ll be investing about $10,000 to $12,000 a month evenly into all 3 pies.
Haha, love the feedback. Thanks for watching. JEPI and JEPQ are great for cash flow. However, I would only recommend holding them if you NEED the cash flow. I think the compound growth will be better by holding the underlying index of each over 10+ year stretches. JEPI selects stocks from VOO (the S&P 500). JEPQ selects from QQQM (the Nasdaq-100). The JEPs will naturally lower your ceiling and raise your floor. So when the market crashes, you’ll be happy to have them (temporarily). When it is booming, VOO and QQQM will do better. Long-term, I think the indexes will win, but of course I don’t KNOW that. Also, if you do hold JEPQ or JEPI as a high earner, be sure it is in a retirement account and not a taxable account. The taxes are mostly at your marginal tax rate, and they WILL push you to a higher tax bracket & make you pay more in taxes. It’s like adding more ordinary income (from a job) instead of special treatment qualified dividends (like SCHD, which saves a lot on taxes because they are ‘qualified dividends’). As a buy and hold investor that has a lot of money (talking about you, not me, haha), I would probably skip the JEPs if you don’t NEED the cash flow for bills.
Wow. Makes total sense. I’ll get with my CPA and check my current brackets. I still really want to add the Jep’s to this portfolio. I think the current set up is a very solid portfolio. Thank you again.
Thanks for the question. I think that would be a great strategy. Realistically a mix of both would be the best. I would have more SCHD, because it will likely be a lot better long-term. But having some JEPQ and putting the dividends into SCHD is a great idea.
@@JeffTeeples Thanks for the quick response. Another question, if the underlying JEPI assets are SPY, why would we not expect price appreciation in line with SPY? Similar for if the SPY underlying holdings increase their dividends?
There are two primary reasons I don't expect price appreciation of JEPI to keep up with SPY: 1) JEPI holds 136 of the more conservative S&P 500 companies. Generally speaking, these value holdings will have higher dividend at the expense of price appreciation. It wants to be more stable while still seeking 'most' of the total returns of the index. 2) JEPI uses a covered call strategy to maximize dividend yield. This drastically raises the floor (more guaranteed income) and lowers the ceiling (the income premiums come at the risk of having to sell shares at a discount to the person that strikes on the contract). Basically, a potential buyers enters a contract with us (JEPI) for stock A. Stock A is selling for $100, and is one of JEPIs holdings. The buyer will pay $2 'right now' (in the form of dividends to JEPI holders) to have the RIGHT to buy stock A at $110 strike price for the next 3 months. If stock A shoots up to $130 in 2 months and the buyer 'strikes', we (JEPI) have to sell it at $110 per share (when it's worth $130). We still made $10 per share, BUT, lost what would have been $20 additional dollars if we just held the stock and never entered the contract. (Numbers made up for this example to show how it works in general).
@@JeffTeeples Would you consider JEPI/JEPQ an alternative to a HYSA as a place to put some extra cash that you're not sure what to do with? obviously would get some short term volatility in price but overall a position to park cash in that pays decent yield, while not expecting too much fluctuation in price?
Thanks for the great question! If I were asked that question, would either say no or it depends. For 'me', or other people with long-term outlooks that don't need the cash now (so the fluctuations are fine), I would say yes. In fact, I have some JEPQ that I consider my 'greedy cash' in addition to the majority of my 'cash' being in VMFXX (vanguard money market). If someone is living on, or may need the cash soon, then no. I doesn't replace CASH, but it sure does cash flow nice (:
Thanks for the comment. I completely agree with you. It doesn't 'seem like much', but the difference will add up over the years. I like to keep expense ratios at 0.10% or lower if possible.
SCHD has strong companies but if the market falls significantly next year, these will fall with the herd. Not as sharply, but they will fall. That's why I'm waiting to buy SCHD. Do you think I'm wrong to wait?
Hmm, that's a loaded question. 'In general', it's better to be invested than to be on the sidelines. However, it's also nice to have some money on the sidelines to strike when an opportunity hits. I'm a big fan of % allocations. Let's say I'm 10% cash for example. If the market drops, I will naturally buy the dip to stay at 10% cash. If the market goes way up, I will naturally save more cash (to get back to 10%), which will help for the next opportunity. This is a way to always 'automatically buy the dip'. One thing I don't do is to try to make market predictions. Nobody, definitely me included, can accurately make these. Look at the market right now, for example, and read EVERYTHING a couple months ago... As always, the news was exactly wrong. I'm a bit nervous when I read the market will be going up (: I don't think you're wrong to wait, as long as you are 'mostly invested at all times' as an investor over the years. Because the market averages going up over 10% per year with all the ups and downs.
@@JeffTeeples thanks for your answer, but I'm definitely "on the sidelines" making about 5.5% with lowest risk (Tbills). All we have is probabilities, and at these lofty valuations, I think I could lose a lot of money in equities in the near term. I appreciate your point of view and enjoy your videos. However, I'm older than you are, and my advanced age (and dare I say wisdom) makes me lean heavily towards capital preservation. I do plan to buy a significant amount of SCHD. I like it. But, I think I'll do better by waiting. If I'm wrong, I'm still making 5.5% in the meantime.
I appreciate your point of view and agree that 5.5% is an amazing return on your cash position in the meantime. I hope you hit it just right and make it big! Thank you for supporting the channel. I really do appreciate it.
Why cant we switch from JEPQ to SCHD when DIV yield will match? i.e. In 2030/2031 switch over your investment from JEPQ to SCHD. That' way, you will enjoy JEPQ high dividend payout and switch to SCHD when it beats or matches JEPQ DIV yield.
Thanks for the comment. This is something an investor can do. SCHD will (likely) never match the dividend yield of JEPQ. And JEPQ will never match the dividend growth rate of SCHD. It's just the way they are structured. I think a mix of them isn't a bad idea at all.
Your calculations leave a little bit out. I'm guessing this retiring couple probably isn't spending $100k per year in retirement. But let's assume they do spend $100k per year. All of the extra money generated by JEPI or JEPQ could (and should) be reinvested into the portfolio. The CAGR may not be accelerating but the month on month compounding of dividends has not been accounted for anywhere in your calculations. I'm betting if you plug those #'s in you'll have a more accurate picture of the JEPQ/JEPI returns.
Thanks for watching & commenting. You are absolutely correct. This video was isolating dividend CAGR. I’ve seen so many fall for juicy dividend yield in general. Wanted to show the power of compound. JEPQ is great, and I hold it. Price appreciation and dividends over costs reinvested will make a nice difference as well. JEPQ is a nice high interest savings like beast to deploy the dividends as we see fit. SCHD is more of a ‘meh’ on dividend yield until we zoom out.
Right!? I hope it becomes a reality. The people this video was about knew NOTHING about investing. They plowed money into their 401k, soaked in the company match, and woke up wealthy (: I always stress 401k funding early and often!
Jepi and jepq are strickly for monthly income not growth for everyone leaving comments. Schd is a growth etf compared to the others. If you need imcome now jepi and jepq is for you if you have time to grow and compound if your a dividend investor then schd is for you
Amen my friend! I could not agree more. I’m long SCHD, and enjoying the cash flow from JEPQ. I will eventually roll the JEPQ into my long-term portfolio when the cash flow isn’t needed. They are all great for a role.
That is a great way to go about it. The 100% is an extreme way to show the difference between SCHD and JEPQ. In reality, it will be a mix, along with growth like QQQM or VGT, and a cornerstone like VOO. This video was strictly to show long-term cash flow. Thanks for watching and commenting!
JEPI and JEPQ have not been around 5 years, you cannot compare SCHD to them in terms of 5 Year CAGR. Giving them an 0% CAGR is unrealistic, as JEPI alone has Amazon, Microsoft, Adobe, Progressive, Trane, Mastercard, Intuit, Accenture, Visa, and UNH as its top 10 holdings in common stock (which secure the call options). These are not QYLD-type ETFs.
Thanks for watching and commenting. That is true, however, the vast majority of the ‘dividend income’ from JEPQ comes from options, which will increase or decrease based on the current market volatility. About 90% of the dividends will not go up over time. It’s probably greater than zero, but not much. Time will tell. I personally love JEPQ for its role. It’s in my portfolio. I like a little income NOW. Thanks!
@@JeffTeeples Time is the only way to tell with these. Your analysis with SCHD is great and I don’t think anyone could go wrong investing in it (not investment advice). Keep making great videos!
Thanks, I appreciate it! Also, I like to be ultra conservative until I have real data. In a few years I’ll make an updated video if JEPQ grows consistently! That is my hope for it. I love practicing what I preach (will be sharing portfolio and strategy soon) and correcting anything I botched along the way. This stuff is so fun. Thanks!
Agree. And considering that Jepi and Jepq holds a lot of tech values it can be assumed that over the last ten years the price appreciation would have been close to SCHDs. Not at all saying they are better than SCHD. But it is not black or white as it seems in the video. My bigger worries about JEPI/Q is that there is more active management involved which historically was often not a good thing. I'm holding all three, but more SCHD.
I requested you do this video and am pleasantly surprised and thankful that you actually did it. Very informative and insightful. Thank you! Will continue to be a loyal viewer.👍
Thanks for watching & commenting. A 5 year dividend growth rate will change every quarter when a new dividend is paid (one from just over 5 years ago falls off as new is added). My numbers comes straight from Seeking Alpha for each video. I also double check the math on a spreadsheet. It is still a touch over 13% right now.
Thanks for watching and commenting. I agree that a mix is the best setup. Along with mixing in VOO and a growth ETF as well. I mainly wanted to show the power of dividend growth rate. I’ve been seeing a lot of ‘why would I ever take 3.5% over 10%’ narrative online.
I agree. I would take VOO over SCHD if I could only have one forever. This last year doesn’t change that for me, but I always look at very large sample sizes (prefer 10 to 100 years). I prefer VGT to both (long term tech believer). Past performance IS a huge indicator for passively managed ETFs that are based on specific indexes or criteria. I love seeing how funds handle different macro situations. Where past performance is dangerous is when people use it with anything that has gut decisions involved. I don’t invest in these at this point at any time. This is individual stocks or mutual funds / ETFs that are actively managed. No thanks to the ‘my gut says go hard in XYZ’ vibes.
Thanks for the comment. I know a lot of people don't like the quarterly payment schedule. I personally don't mind, but I can understand monthly being more appealing for you.
@@JeffTeeples one thing i am wondering about the 0% dividend growth for jepi is: doesn't it still hold normal stocks so it will have some inherent dividend growth, maybe 2 to 3% a year?
@@Asstronauts93 it does, yes. I was being very conservative with that growth rate. However, JEPI and JEPQ dividends have been way down compared to last year as of late. It really will vary based on the market volatility at the time.
Sorry, that analysis is flawed. JEPI and JEPQ will have a (+) CAGR that grows the NAV of these ETFs. Why? They are both tied to an underlying index, and those indexes will have growth causing the ETF to grow on kind regardless of the call option method. Plus, you cannot assume a zero growth on these as they are so new, there isn't sufficient history. Time will show that as S&P grows, and NASDAQ grows, so will JEPI and JEPQ respectively.
I agree that JEPI and JEPQ will growth as the markets grow. The dividend CAGR (not total return CAGR) will be random based on the market's volatility. JEPQ is currently at -16% compared to last year. That isn't because it's bad or did anything wrong. The volatility decreased, so the call options weren't as juicy. Over 90% of the dividend is 'that', while a tiny slice will be helped by the underlying index. I conservatively use 0%, but you could push it for 1%. I think that is aggressive. Again, remember, we are STRICLY talking about *dividend* CAGR, not 'growth CAGR' (all growth).
I have a video coming out a week from today. But basically between SCHD, VYM, DGRO, and VIG, SCHD is first in yield, 5 year dividend growth rate, and 10 year total return. And I think SCHD is a great buy right now bc it has underperformed in the last year+. Thanks for watching!
This video seems to have caused some confusion. All of these ETFs will ‘grow’ over time on total return. I was specifically isolating the ‘dividend growth’ on the spreadsheet. Not the ‘overall return’. We are 100% talking 'cash flow from a set amount of shares held'. In reality, you can use the excess dividends to buy more SCHD or JEPQ, or both. And your portfolio 'should' gain in value too, but not shares (by default). This is what I'm talking about. Here is the monthly dividend paid per share held of JEPQ. It will be 'more random' because of the nature of options. It relies on the markets fluctuations. Per share dividend by month (new stuff on top): 2023 Dec 0.3925 Nov 0.4221 Oct 0.4177 Sep 0.4172 Aug 0.4506 Jul 0.3659 Jun 0.3668 May 0.3566 Apr 0.4841 Mar 0.4539 Feb 0.433 Jan 0.4406 2022 Dec 0.5755 Nov 0.5463 Oct 0.6813 Sep 0.3795 Aug 0.5463 Jul 0.4071 Jun 0.3397 May 0.3764 The average dividend per share from May through Dec: 2023 - $0.398 2022 - $0.482 This doesn't mean it has 'gotten worse at its core and will never go up', it just means it will be random. 2023 was an off year for most dividend growths (not total return), but SCHD still grew its dividends by 3.77% (worst single year ever, we will see how the future goes). JEPQ decreased by 17.2% in its short history. It was to show how important dividend growth is. Check out the history of the ‘monthly dividend growth’ of JEPQ. It will be random, because it is based on how volatile the market is (on the call options). I probably should have used 1-3% for the underlying holdings and explained HOW JEPQ pays dividends (I do have a separate video about it). You are right, both will ‘grow’ (the price + dividend) over time. Trying to teach about yield vs ‘dividend’ growth. I’ll make another that is more clear in the future to clear it up.
Haha, thanks for the comment! I normally use smaller numbers, but wanted to show the crazy impact over time in this one. The beauty is, it’s all relative! In most instances I start with 10k to 100k in these things, which is far from poor (: If you’re investing at all, you’re already way ahead of the game.
Hey Daniel. Yes, it will be about 0%. I'm not sure which side of the coin you're on, but I want to defend JEPQ in case you are on the hater side at the moment. It is 'around 0%' because 90% of the dividend will be based on the VIX. Basically, to make it easy, these are non-qualified dividends that will increase the more volatile the market is, and will decrease with less volatility. The Nasdaq portion (about .6% yield of the 9%+) will grow around 10%. So just under 1% with a sumproduct weighted average of the yield. This means you could use 1% CAGR, but that would 'often exaggerate' the results. 'Usually' when we forecast, we will round down, or use slightly conservative estimates for the future. For the VIX side of the growth, think of it like a high yield savings account. Sometimes they are higher, sometimes lower, but if you zoom WAY out the growth would be zero. It is the yield that fluctuates. Right now, it is high to park money in savings, but you can realistically assume a 0% 'growth' (not yield) for the next 50 years. See what I mean? For JEPQ, in case you are on the hater side, yes, the dividend growth is negative 53% over the past 5 months. I get that, but again, this is directly due to the nature of the call options (almost all of the premium income produced from the ceiling reducing covered calls). The VIX has been low, so I wouldn't hold that again JEPQ. The dividends could be up 40% on the next 5 months. Again, averaging to roughly 0% when we 'project and zoom out'.
Love this. 60 years old now. Will retire in 2 years. Have now accumulated 4900 shares of SCHD still on drip. Still buying a thousand dollars' worth per month!
Thank you for watching and commenting!
That is amazing! SCHD is so good in that role! My parents are retired, and they roll with a big chunk of SCHD (along with just a touch of VOO and VGT).
You’ll be happy long-term! You may not get the huge market swings upward like growth ETFs, but you shouldn’t drop much either with the downs. It’s a machine.
How much is that in dividends a year
@@shiverop8027right now SCHD is $83.36 and the dividend rate is roughly 3.37%. That means the annual dividend payout is $2.81 per share. Multiple that times 4900 shares. ($13,765 annual payouts before taxes, if it’s in a taxable account).
If you just invest in JEPI and/or JEPQ and only use 4% of the dividend yield to live on, while reinvesting the other 4% to 7% (this assumes a total dividend rate of 8% to 11%), you are going to end up with a lot more money!! It seems like a poor comparison to assume if you invest in JEPI or JEPQ you will spend three times as much money on your life than if you invest in SCHD. Am I missing something?
Thank you for your feedback Christine.
You are not missing anything. I was showing the power of the isolated dividend CAGR in this video. (So people don’t simply chase yield).
I did not include the price appreciation + overflow dividends back into the picture. It was a simple breakdown of dividend growth with no reinvestments.
I will make another video with the full picture (actually helps SCHD a lot overall).
Thank you!
Lol schd is better
@@carlosarodriguez7266 Did you even read what Christine wrote?
If you were maxing out Roth IRA, and 30% of investments going to dividend ETF's, at the age of 27 would you put all in SCHD, or include JEPI/JEPQ? This is assuming current 30% dividend ETF, 35% foundational (VOO) and 35% growth (QQQM, SCHG, and VGT)?
Hey Jordan, great question! First of all, awesome investments in each of your allocation groups! Love it.
At 27, and assuming you don’t need the extra cash flow now, I wouldn’t have JEPI or JEPQ.
If anything, I would make the dividend group a little less overall. SCHD is great, could mix in DGRO if you wanted as well.
But I would add more of your growth section if I made any change. If it crashes, even better (assuming you don’t sell, and keep making contributions).
The only way I would add one of the JEPs is if you need cash flow now. Otherwise, the underlying indexes (VOO and QQQM) are better long-term holds.
I know this is off topic but would it be best to just focus on growth right now then near retirement sell off a good percentage of my growth and get into income producing funds or dividends like schd or jepi? Or should i consider getting into dividends now to make up for no bonds to reduce the volatility? Thank you for your response.
Hi Mommy Investor, thanks for the great question. This one will depend a lot on you and your goals & risk tolerance.
I would say a general answer is a bit of both. It is the path I will take as I get closer and closer.
I think it’s good to have some growth and dividend ETFs at all times (even in retirement, if possible).
I would focus on dividend ETFs more and more as retirement approaches, depending on your portfolio value.
It mostly depends on your portfolio value. To be extreme, if you retire on $100,000, you may have to go 100% JEPQ (and or other high yield assets) to pay the bills.
If you had 10 million dollars, you could roll with VOO / VGT / SCHD and keep growing while still paying bills with a 2% yield.
Of course, I’m guessing you’re in the middle like most of us, and you’ll likely want to roll into SCHD coming into retirement, while still having some growth ETFs. Then maybe at retirement, roll as much as necessary into high yielding to get by, and focus the rest on dividend growth to crush inflation. It’s a fine balance that will be personal.
thanks for this bro, im going in on JEPQ, right now my big holding is SPY AND SCHD. any thoughts on SVOL?
Thanks for the comment and the question.
SPY, SCHD and JEPQ are all great funds for their roles.
I’m actually not familiar with SVOL. At a glance I wouldn’t invest in SVOL personally.
An expense ratio of 1.16% will cost thousands of dollars long term when accounting for the compound effect.
It has a 16.52% yield. That is pretty wild. It has only been around for a couple years.
I don’t know anything more than my quick glance, but it looks scary.
If you go for it, I wish you luck (:
SCHD is the clear winner! Great video. It's better to invest in a pot of gold that will free you and your family potentially generationally rather than quick easy returns. SCHD to the moon!
Thank you for watching and for the comment! I love SCHD, and think it will continue to perform well, long-term!
great video, never seen a comparison on SCHD against other funds and the importance of CAGR vs. div yield. Bravo.
Awesome, I’m glad you liked it! Thanks for watching and for your feedback.
I've been in SCHD for over 4 years now and the growth is essentially flat. The dividends with CAGR are still much lower than JEPI /JEPQ as well. Like most mature funds today, the time to get into SCHD was in the early 2010s. Alas, I believe that ship has sailed. JEPI/JEPQ are the future as they are adapted for the next 10 years of sideways/no growth trading. With just one year in JEPQ, it makes my SCHD position look like a joke.
Hey John, thanks for watching and commenting. The below isn't to argue with you, I think you could do a lot worse than JEPI and JEPQ. They are two of my favorite actively managed ETFs, and they are based on what I think are the best indexes in investing (S&P 500 and Nasdaq-100). But...
Congrats on being in SCHD over the past 4 years. It's total return of 50.12% during that time has been amazing. The dividends and dividend growth rate really add up.
Past 3 years is 26.73% and the past 5 years is 87.84% (just to show I'm not cherry picking data).
It's deceptive because you will not SEE your increases in SCDH in your online broker. Dividends reinvested = 0% unrealized gains (what you see when you look at how your holdings are doing). It is very deceptive and misunderstood in general (growth ETFs usually 'look better' on gains / losses because of the way cost basis with reinvestments work).
Now, for the people that just got in recently, you're right, it's been fairly flat on total return. I still think it's methodology will do very well long-term. I love how it screens stocks, personally. It has nice key metrics.
Also, the dividend growth rate is still amazing. It was 3.77% in 2023, that is true. But it's 3Y-5Y-10Y dividend annual growth rates (what we compare to inflation or salary increases) are 9.43%/13.05%/11.39%. JEPQ and JEPI will act 'more like' a high yield savings account. Dividends go up and down based on market volatility with the option strategy. Sure, the underlying holdings may increase some, but that is a very small % of the dividend payments. And, the majority are not qualified dividends.
Remember, SCDH is screening for the top 100 dividend companies all the time. It is not technically anything but a basket with a set of rules. 'A ship sailing' would apply to a company, like say, maybe someone could think Apple is going to slow down and the ship has sailed 'the ship has sailed'.
It's been a growth stock market, and thus SCHD has been recently lagging, but it will always have the potential to grab new companies as things change over the years.
I own & buy all 3 every month. I am retired and use JEPI & JEPQ for income.
Very nice! That is quite the combo for short and long-term cash flow. Thanks for the comment!
Same here and putting more in growth oriented ETF in Roth account!
Question, when you do the example of getting 275k per year with Jepq 100%, lets say you choose to live off 200k, if you reinvest the other 75k every year just back into jepq how would that work out would you still be losing purchasing power?
Yessir. Reinvesting the dividends will provide future cash flow. JEPQ is great. I wanted to highlight why SCHD makes a lot of sense, long-term, even though it seems 'weak' as far as current yield. It's a yield on cost beast.
In a perfect world, we have both, and reinvest some of those juicy JEPQ dividends (:
Excellent video. Thank you. If I buy small positions of JEPQ and JEPI ($25-50k), after 3 years when my SCHD will take over, do I sell them or just keep them forever?
I think the answer to that is either. You can roll your long-term capital gains from JEPQ and JEPI into SCHD, OR, keep JEPQ and JEPI forever and invest the monthly dividends into SCHD.
@@JeffTeeplesthank you
I have all 3 and am taking the money from the dividends and reinvesting into the one that has dropped. Insuring more returns later.
Love it! Great strategy. Stay the course and you'll be swimming in cash (:
Good Evening sir,
I invest JEPI Etf long term , and I Reinvest dividend jepi , Retirement purpose, After 10 years, I think it's good idea sir?
Hi there,
Thanks for the question! As long as you don’t mind the volatility of a bit more tech exposure, that should be fine long term.
I would highly recommend a mix of JEPI (for more cash now) and SCHD (for more growth in the future).
But JEPI is indexed to value companies form the S&P 500, and I think it will be fine LONG term. Could be some 20-50% down turns (just like the S&P 500 index in general) along the way, but just keep reinvesting and watch those dividends pile up!
If you don’t sell when it’s down, you’ll very likely be fine.
Thanks for watching!
@@JeffTeeples Thank you sir
What do you think of SPYI and QQQI ETF for retirement income? I already hold SCHD, DIVO, JEPI in my portfolio
Hey Mike. I'm not a huge fan of SPYI and QQQI because of the high expense ratios. I'm not saying they are bad, but they are not my cup of tea.
Thanks for watching and for the question.
Great video Jeff. One question: wouldn't it make sense to hold JEPI/JEPQ until SCHD "catches up" to the 10% +/- that they offer? I don't see why one would own SCHD until it surpasses JEPI/JEPQ in yield. What am I missing?
Hey Jan! I featured this comment in a video I recorded today (coming out 9/15) because it is a great question. Dividend growth will help your compound returns because the per share dividend will increase.
For example, if a dividend ETF like SCHD has a 10 year dividend CAGR (compound annual growth rate) of 10%, which it actually has 11%, the dividend will double every 7 years. For example, SCHD paid $1.05 per share in 2014, and $2.66 in 2023. But the 'yield' stayed the same because the price also increased by about 3x. Price is in the denominator of 'dividend yield', making it a vanity metric outside of the the day you buy the holding.
Hi Jeff. Really enjoying your videos. Congrats on believing in yourself with your recent move. You note you use JEPQ/I for cash flow. Does that mean you’ll move out of JEPQ/I eventually? If so, what would be your next move? I’m looking to retire next year or two. Creating cash flow could make it a year! Appreciate your thoughts
Thank for for watching & for the kind words. My plan is to eventually roll out of JEPQ when the temporary need for cash flow is relieved.
I’ll wait until I have held the JEPQ for at least a year so the gains are taxed as long-term capital gains.
At that point, I will likely roll the money into my primary allocations. For me, that is SCHD / VGT / VOO / individual stocks. The vast majority being the ETFs. I may, at that point, start a position in QQQM as well. Anything I do will be shared on the channel.
JEPQ is amazing for cash-flow in a retirement situation. I love the underlying holdings being based on the Nasdaq-100 index. The price appreciation is a bonus along with the high yield.
In a taxable regular account would SPYI/QQQI be better instead of JEPI/JEPQ? Do to Section 1256 contracts?
I think that is an accurate statement regarding the tax treatment.
I am 22, and im looking to retire off dividends at 40. Wouldn’t it still be better in my case to go into high yield early on, such as JEPI/JEPQ, or even a BDC such as ARCC, with reinvesting? Doesn’t this beat out the growth of yield on the “growth” ones, such as SCHD, or even doing stocks such as PEP, PG, JPM, TGT, etc? Your feedback would be great, as im torn between both, but with my short timeframe backtesting both shows the high yield being more dividend income, even long term, despite lower ending balance. I want to ideally not have to sell anything, just live off dividends. For numbers, i have 25k to dump in, and will be contributing about 1600 monthly. Thanks!
Current plan was aggressive, with around 35% ARCC, 12.5% MAIN, 12.5% JEPI, 10% SCHD, 10% VOO, 20% individual dividend aristocrats (PEP, HD, JPM, MCD, etc). Over the 18 years, the last few years I will rebalance into more SCHD/dividend aristocrats, lowering the ARCC. Thoughts?
Thank you for watching and for leaving a comment. This is a great question. There is no 'one size fits all' solution. You will be fine at 22 if you pick at strategy and stay the course.
For example: If you went growth: Don't flip flop and panic sell low the market crashes. That is when you would want to buy.
Or, don't FOMO into buying growth when it is soaring and your dividend stocks and ETFs are meh (like SCHD the past couple years). This is the time to buy dividend stocks.
Basically, do opposite of what our human emotions naturally want.
I think a balanced approach would work well for you. Because generally speaking, growth will outperform dividend ETFs over 20 years *IF* and it is a huge required if, you dollar cost average in and *never* sell when things look bloody. If VGT and QQQM crash by half, that's *great* for you in your accumulation stage because you're getting double the shares per dollar.
You could have a dividend section that is 50% of your target allocations. It could be the mix you described, possibly add a bit more of the dividend growers, but that's up to you.
Then maybe something like 25% growth ETFs (VGT, QQQM, SCHG, or many others). And 25% cornerstone (VOO or VTI).
That way, when you go to buy, you'll buy the ones that are the most beat up relative to the target allocation. This is assure that you always buy the 'relative dip' within your portfolio. Getting the most shares for each dollar over the years.
For example, so your growth and cornerstone shoot way up, and dividends stay steady. You may find yourself with 48% dividend holdings, 26% growth and 26% cornerstone. Your next dollars would go to dividends to get them back up to your desired 50%.
I'm just making up the numbers here. You can make it your own. I wouldn't go toooooo heavy in high yield as historically it will underperform total returns over 20 year stretches of time compared to something like VOO. But a mix should work well.
I think this would do fine if you stay the course and stick to your target allocations in all markets. Don't fall victim to trying to 'time the market' with your gut. It is a big problem that most investors experience at one time or another before building a quality system.
@@JeffTeeples Thank you for the response! I will move the percentages around to get some more dividends growers. The biggest issue for me going growth is my end goal of never selling, as the yield is around 1-1.5 on VOO, and over 20 years the yield on cost still only gets up to around 3 from my backtests. I see VOO as the more traditional “sell 4% rule”, which I am trying to avoid. I think I’ll move 10% of the ARCC into the dividend aristocrats to be a bit more safe, and once again the last few years change the percentages around to hit my goals.
For the DCA, I use fidelity’s basket portfolios, which has a built in rebalance. As I put money in it will buy to get the percentages back to my goals, which is the exact scenario you describe!
Once again thanks for the reply, I’ll make a few changes based on this. Hopefully in 18 years I will be sitting back retired ;)
Great analysis. Don't understand why some RUclipsrs emphasize JEPQ and JEPI are better long term investment.
Thank you for the feedback. I think people get enamored with the high starting yield. And it is great for those that need massive cash flow now. I like SCHD and JEPQ for different reasons, but I easily prefer SCHD as a long-term holding.
Can create video if you reinvested different between SCHD and JEPI dividend and what year does SCHD passes JEPI?
That is a great video idea Danny. I’ll throw that on my future video list. Should be able to make it work. Thanks for watching!
Thank you for all the great content you have uploaded
Thanks Jeff, I have some steak in SCHD and will add more after this video. The number really tells the story about SCHD, thanks for the deep analysis.
Thank you for watching Cindy. I think SCHD is a great long-term holding. It has been a bit meh the past couple years, but I don't think that changes anything. Solid methodology that will pass the test of time IMO.
How about schy? 1/4th the price of schd so I can buy more shares.
I like SCHD better than SCHY, but a balance could be the right way to go. With ETFs, price doesn't mean anything as far as the quality of the holdings are 'what you are getting' per dollar.
For example, SPLG and VOO hold the exact same mix (the S&P 500). VOO is 10x more per share, but they will have the same return.
If your online broker allows fractional shares then price means nothing with ETFs. However, it can make a nice difference if your broker doesn't allow fractional shares and you don't have a large chunk of money investing in the beginning.
thanks for the info Jeff…. I’ve been throwing in $150/week for the last 6 months…. my SCHD holdings FINALLY ended up on the positive side after 6 months of investing in the stock…. as soon as I’m able to afford it, I will try and add as much as a possibly can per month….
Thanks for the comment. Yeah, SCHD has been brutal on total returns over the past year and change. But nothing has changed fundamentally with this amazing dividend ETF. Great buying opportunity.
Price will go up and down, but dividends will grow exponentially in time.
SCHD could be the better option for retirement, but reinvesting dividends in JEPQ could be pretty amazing.
Thank you for the comment. I completely agree.
In reality, a mix of both is a killer combo. I know I have both in my portfolio (more SCHD, but I use that cash flow of JEPQ to bolster other holdings).
Thanks Jeff, great video. Which tool are you using to research your investments?
Thank you for the feedback Samar. I use a few tools for different things. My 'main' research tool is Seeking Alpha. I have been using it for years and I love it. It is where I aggregate all investments (to see and research in one view), run my screens for my selection process, read most articles, update spreadsheet data, and research individual stocks and ETFs.
I do have a link in the description of my videos if you (or anyone else) wants to try Seeking Alpha Premium for free for 7 days. If you like what you see, you'll save 25% off your first year with the link. Saves you money and helps the channel a lot.
I don't want my channel full of sponsorships I don't believe in. But this is one I think is top notch.
perfect, thanks Jeff :) @@JeffTeeples
Very nice illustration on SCHD. Thank you.
You’re welcome. Thanks for watching and providing feedback.
Setting up my children accounts
Age 15yr
I was thinking 50k JEPI for the next year or so due to my thoughts that I see a market 20-30% correction coming
Then transferring all to SCHD for 20 yr plan
Thoughts
Thank you !
For a 15 year old, I would lean to a mix of value and growth. Something like this maybe:
20% VGT, 20% QQQM, 30% SCHD, 30% VOO.
I think that will grow well for a 15 y/o over many years.
But any investing is great that early. JEPI and JEPQ are structured to produce cash flow now. QQQM and VOO will grow more wealth when we zoom out 20-30 years.
Greetings Jeff, what you think of a 50% JEPI and 50% JEPQ portfolio ? Covers both sp500 and Nasdaq
Thanks for the question. I think that is nearly as good as it gets for cash flow NOW. It is going to beat any high yield savings and T-bill over long stretches of time.
As long as your willing to see the base amount go up and down with the market. I personally have most my (what I consider) 'cash' in JEPQ. I want cashflow with it, as I quit my job and need cash flow now (: I don't mind the price waves at all. If it cut in half, I wouldn't blink, I would buy more with the dividends.
For long term investing, if you're not living on the portfolio, I would focus primarily on VOO over JEPI, and QQQM over JEPQ. I have 90% of my portfolio in VGT (my choice for growth over QQQM), SCHD (my replacement for bonds), and VOO (my core fund). This is if you're looking to grow over 10+ years and don't need cash now.
@@JeffTeeples thanks for answer . In my country dividends get taxed by 5% so I'm thinking of this portfolio idea . They have dividends, they have growth, they have diversity and you get 11% dividend no matter what . I hope it works out
Great video, my wife and I hold SCHD in our retirement accounts, so I'm excited to see the potential growth of the price and the dividends as well get larger over the years, since it's in a regular non Roth IRA, the only downside are the eventual taxes due at my RMD age I'm concerned about, not before RMD age
Thank you for watching and for the feedback. You and your wife will outpace inflation by a mile with SCHD. Will be a nice retirement!
In your example, when you put 100% in schd, does that mean the dividend yield would be over 10% by year 8? around 20% after 14 years?
I'm not sure if I am understanding/ calculating/ defining that correctly, but if I am, I think dividend growth rate can be very deceiving. I think a schd dividend yield is likely to max out at less than 5%.
I have had Exxon stock for 15 years for example and it increases its divided every year, but it's still under 4%
Anyway, I'm just trying to learn and understand, you are my main RUclips advisor right now haha. As I'm retiring at the end of this month, I recently bought SCHD as my first dividend ETF based on your (and many others) opinion. It seems a big part of the draw of schd is the dividend growth though and if the calculation is that the dividend is going to grow to 20% that just doesn't seem sensible to me. Tell me I'm wrong please 🙂
Or maybe I'm having some confusion about what dividend growth rate even is:
I see on seeking alpha that the average yield of schd was 2.59% in 2014 and 3.58% in 2023 (a little less in 2024). Doesn't that calculate to an increase of 38% in those nine years (or about an average of 4.2% a year for nine years)? Yet, seeking alpha also says the average dividend growth rate over the last ten years was 10+%. What am I missing? (I realize there is a little discrepancy as I didn't want to include the 2024 figure because it's not a complete year, also the chart I was looking at only went to 2014... but don't either of those significantly effect my point/question...)
Anyway, thanks for your videos and discussion
Thank you for the great question. These dividend numbers can feel all over the map & they get confusing.
Dividend yield is more of a vanity metric for buy and hold investors. Now of course, it is important when you go buy a stock or ETF because it shows you exactly how many dollars you get for each share you purchase. For example, if you buy a stock that has a 5% yield and is $100 per share, you get $5 for every $100 you invest. This is important information when you go to buy the stock. It is important to know that the 5% yield is a simple calculation of the dividend paid per share divided by the current share price (5 / 100 = 5%).
The stock REALLY pays $5 per share. NOT 5%. 5% is backed into with the simple formula.
For example, if the price dropped to $50 per share the next day, a new investor will get a 10% yield! But... this is because they are buying 2 shares for $100. 1 share cost $100 for you the prior week.
The dividend per share is still $5, period. It is what matters, not the 'current yield' based on the price you buy it.
The beauty about dividend CAGR is that it uses REAL numbers that don't change based on price. It is the 'real growth' of your dividends. It will only go down if dividends are cut, or up when dividend raises (per share) are announced.
SCHD has grown its dividend per share (the amount of $ that each share pays regardless of price to accumulate them) by 10.87% per year over the past 10 years. It is the 10 year dividend CAGR. This is how much your dividends have actually grown if you held it for 10 years. Dividend yield along the way is entirely meaningless for reliable dividend income.
Let's show the power of dividend CAGR in practice (these are real numbers of what actually happened, zero assumptions):
1,000 shares of SCHD purchased in 2013.
Dividends per share (no reinvestments, holding exactly 1,000 shares all along):
2013 - $904
2014 - $1,047
2015 - $1,147
2016 - $1,258
2017 - $1,346
2018 - $1,439
2019 - $1,724
2020 - $2,028
2021 - $2,249
2022 - $2,561
2023 - $2,658
Long-term, compound math (that crazy thing) cares much more about CAGRs than snapshots of ever changing formulas. It's just hard to think it's 'doing anything' in the every day grind.
I think I answered this in my first book I just replied with (:
The short version is that dividend yield is fairly meaningless outside of the snapshot in time that you buy an asset at. CAGR (compound annual growth rate) means everything over time.
@@JeffTeeplesStill not sure I grasp that entirely, but no fault of yours..🙂. I appreciate your thoughtful and thorough response. I can ruminate on it a bit longer...
I will say, once again, I feel assured by your response. A big take away is a renewed confidence in your opinions, knowledge, and also in SCHD.
Hey Jeff, thanks for the video! I have a question if you don’t mind, I’m 33 years old(not living in America) and I have around $160k in my investment portfolio(invested in growth ETFs) and $130k in my 401k(pension). I really want to receive some income from dividends as I want to stop working so hard(I wish to move to around 2-3 workdays). Would you say it makes sense for me to put my 401k money on a dividend ETF like SCHD/JEPI so I can get some dividend income which would allow me to work less(while leaving my investment portfolio to grow)? Or does it not make sense at all?
Thanks!
Thank you for watching and for the detailed comment. For 'most' people that want to retire early, it makes sense to do the following:
Invest a traditional 401k into growth ETFs to build wealth over time (ignoring the crazy market dips over a decade or more).
Invest taxable brokerage accounts and Roth IRA into dividend producing assets. SCHD is great in a taxable account because of the treatment on qualified dividends. JEPQ is great in a Roth because you pay zero taxes on the non-qualified dividends. Roth's are powerful because unlike traditional 401ks and IRA, you ARE able to take the money out well before 59.5 years old tax and penalty free. You only have to have the Roth open and funded for 5 years. Then you can take out the contribution amounts you have put in over the years.
@@JeffTeeples Thank you 🙏
ThanX Jeff.... Yes, I am shoveling as best I can into my three different SCHD holdings.... Great video....
Very nice! I think SCHD will always be stable and provide a nice combo of dividend growth, yield, and total return.
@Jeff Teeples what would be an example of a dividend growth portfolio if someone was 30 years from retirement and wanted to live of dividends in retirement
Thanks for the great question. If someone was 30 years from retirement, I would likely recommend little to no dividend growth holdings 'now'.
I may go something like 50% between VGT, QQQM, or SCHG (any mix), 40% VOO, and maaaaaybe 10% of a mix between SCHD, DGRO and or VIG to get the snowball rolling.
Closer to retirement, I would slowly start transitional some growth ETFs to dividend ETFs (the long-term capital gains aren't too bad during the transition). My video on Sunday talks about how to plan for a retirement using dividend ETFs. It is important to keep yield and dividend growth in mind depending on the specific situations.
But with 30 years, and the mindset to NEVER sell, just buy in all markets, VOO and growth ETFs will do way better over time. Even considering the inevitable crashes (heck, especially considering them, that is buying low and how you can build massive wealth).
How about investing in JEPI and reinvesting the dividends yield in SCHD for the long term?
Absolutely. That’s a winning formula. I am doing that now (albeit with JEPQ, but same concept).
Thanks for watching and for the comment!
Lol. Don't forget taxes
Yeah, the qualified dividends of SCHD make it even better than the (mostly) non-qualified dividends of JEPQ.
I wanted to limit the scope of this video to save confusion. It’s always a tough balance of how much to drop in each video. Do I go into retirement accounts vs taxable, qualified vs ordinary, etc.
Thank you for watching!
nice breakdown so educational tooo
Thank you for watching and for the kind words. I appreciate it!
Pretty crazy how that growth and price appreciation is way more than a lot pf people earned from their full time jobs during that time. Makes investment income seem absolutely insane compared to salary work. Even right now for me if the market goes up 0.5%, it is about the same dollar value of me working 15 days and saving 40% of my gross earnings, so 3 weeks. It gets crazy fast I feel like! That means 1% is six weeks, 2% is twelve weeks, etc.
Thanks for watching and for the comment. It is crazy to look at it from that perspective. The power of compound is hard to comprehend even for someone that understands the concept. It feels fake.
It's one of the reasons I made this channel. I want every day people like me (late starter, not an entrepreneur, not overly ambitious... basically just a guy) to be able to get rocking.
I know my portfolio looks solid now, but at 28 I was a newly graduated college kid (5 or 6 years late to my peers) with 75k of debt and completely confused about the world. It felt at first like 'what is the point in starting, I'm just unlucky'. Want to share how you don't need to be a rocket scientist for this stuff, and there is no such thing as luck.
Nothing I saw on RUclips was fully relatable.
@@JeffTeeples Right, I am definitely interested in just keeping it going. Really curious to see if we'll have a big drawdown ever again. Feels like prices will almost never come down. I figure I'm about 1/3 of the way through accumulating, so I wouldn't mind a 15-25% downturn. But in the meantime I'll just continue plugging away!
I actually asked for this video and pleasantly surprised you actually did it. Much appreciated. Very helpful and insightful. I do have a small portion in JEPQ with the dividends reinvested. After this video I am trying to decide if I should a.) hold it and turn off the drip - take the yield and use the cash flow to just buy SCHD or b.) should I just sell and put it all in SCHD now as I can wait 10 years and don’t need the money now. Appreciate your advice
Thank you for watching and for your support!
I think a) is a great option! Another commenter mentioned that as well.
I think if you need more cash now, A) makes sense. Gets nice cashflow going AND can be used to buy more SCHD.
If you're not using the cash at all (which as it sounds like your situation), and simply building for future cash flow, I would vote for b). But you can't go wrong either way. Maybe even a combo of the two for diversity.
I love JEPQ, and it has had an incredible year. I made this video to show how crazy the dividend growth rate is over time with the power of compound, however, there are multiple variables to consider.
Thanks!
Thank you
Unless you reinvest with Jepq it will take several more years to catch up. And that doesn't take into price appreciation too. Both are great imo
Definitely. This video is to isolate the dividend growth rate specifically (to get people to understand there is more to dividends than current yield).
I agree there is more to the story with both, and both are great.
Thanks for your comment.
Great video. Could you share the spreadsheet?
Thanks for your comment, Will.
I attempted to share a spreadsheet here in comments before, and I didn't have the option.
What I am planning on doing is adding it to my entry level Memberships level. I want to have a collection of spreadsheets that I can share with everyone.
I do need to clean them up a little before sharing, but I have maybe 10-15 spreadsheets I use for different scenario testing.
More to come.
@@JeffTeeples Sounds good. Thanks!
I know that most of JEPQs income is from Covered Calls, but could we not use the actual CAGR of the Nasdaq?
The Nasdaq CAGR is like 10.55% from the time of me posting this, I know JEPQ and the Nasdaq isn’t exactly the same index, but I’m sure JEPQs CAGR isn’t 0%
Thank you for the comment and question. Yes, well, kind of. Yes it does have holdings from the Nasdaq-100. But that is about 1/18th of JEPQs dividend payment.
17/18ths is based on the market’s volatility.
I think 0% growth (high yield, but strictly speaking growth of the dividend) is fair. Maybe 1% but that could be too high.
It’s similar to assuming 0% growth for high yield savings, which is about right. Sometimes higher, sometimes lower, averages to about 0% indefinitely.
For example, the VIX has been lower lately. The last 5 dividends from JEPQ have been: .38, .34, .39, .42, .42 per share. Compared to the following (same months one year ago).
.43, .44, .58, .55, .68.
They are down by a crazy amount. But nothing is wrong outside of the market being less volatile now.
Only a very very very small % of those dividends are the qualified dividends from the underlying holdings.
@@JeffTeeples yes the Nasdaqs 0.6% is rather low compared to JEPQs entire 9-11%, but if it is a growing dividend then that would at the very least raise the bottom floor of JEPQs dividend range, even if it is a rather small amount that’s hard to track or notice
It’s not a consistent grower like DGRO or SCHD but just like the Nasdaq it should still have some sort of CAGR associated with it
@CaptainProx in the world of forecasting, it is common to take a slightly conservative approach. 0% would be my take, but 1% would be fine.
My point is mainly that it will be -30% (like now), or +25% (if volatile). This will be how it works.
I like JEPQ, to be perfectly clear here.
To be a true apples, apples comparison, you’d have to take the same amount of dividends kept from each and then reinvest the extra dividends from jepq going forward and compound that to show the difference. Otherwise you’re completely negating the extra hundred and $50,000 in extra money kept.
Thank you for watching & commenting.
You’re 100% correct. I made this video strictly to isolate the power of dividend growth rate.
In a real world scenario, we would take what we are living on, specifically, and reinvest the difference. This would help JEPQ big time.
I hold both, and like both. I’ve just heard so much about high yield lately, and I wanted to showcase dividend growth power for long term outlooks.
@@JeffTeeples I like both as well. I don’t have any schd and only a very small amount of jepq, but I’m going to build a bigger position in both going forward.
Awesome idea. I think both are fantastic in their role. Sprinkle in some VOO or VTI for a foundational fund, and QQQM or VGT for some growth, and you’re pretty much covered from all angles.
Unfortunately we can't buy SCHD in Europe. I do like JEPI/Q as an income play. I am going to sell real estate (since this year it is taxed ridiculously) and like to have similar monthly income. JEPI/Q seems to provide that quite well.
I understand that total return on the long run will be less, but I need the income and in a bear market I don't want to be forced to sell stocks. Dividends received from JEPI I don't spend I want to invest in VOO or VWRL (or something similar) for additional total return.
From what I've seen JEPI is very defensive while still receive a really nice income and great for retirees for an income strategy like I've mentioned.
Thanks for sharing! I agree with you wholeheartedly! I have JEPQ as an income play now as well. I know QQQ will likely outperform long term, but I don’t have it for the total returns.
Would be great if you could do a video on DGRW. Would you consider diversifying away from SCHD and putting money into this. Last 10 year performance beats SCHD and seems to have more potential to grow. What’s holding me back is the very low yield and expense ratio. But if taking a long term perspective that’s not a big issue if the performance is there. Another concern would be if ScHD can maintain the same momentum it’s had over the last 10 years for the next 10 years. Let me know if you would continue to go all in on schd or consider this? Thank you
DGRW to me is more of a growth fund. Well, it’s really a hybrid.
The holdings are tech heavy, much like the S&P500.
To me, it has a high expense ratio at 0.28% (compared to SCHD at 0.06% and VOO at 0.03%).
It falls short on dividend yield and growth by a lot to SCHD, even tho it has had slightly higher total returns (mainly because SCHD has had a rough year, which could help its value atm). It falls waaaaay short of VGT on the growth side.
A 50/50 split between SCHD and VGT will get you a higher yield, superior dividend growth, and much higher total return.
Very little overlap in SCHD and VGT, and I think the combo make a lot better dividend + growth combo than 100% DGRW.
Don’t get me wrong, it’s a solid all around fund, but I think stringing together best in class funds (best growth + best dividend) will be a better bet. And I’m not saying only my best count, could use other dividend ETFs and growth ETFs, and shape the weighing with your age (more VGT while young, more SCHD as getting older, for example, instead of having one fund that is always some of both).
It’s actually my video coming next Sunday. Shows how the yield and total return look with different mixes.
I’ll be watching DGRW closely, and I’ll throw it in a future video if applicable.
Take a look at the review viktoriya just posted.
Please do the same with a smaller amount, like 20k or 30k. I noticed that SCHD would not help much if the amount is less than six zeros, as the base of this dream is to have massive capital; even if I started with 100k, I would only be in green ($564) monthly (considering the Inflation 3% & SSI Raise 2%) after 38 years! (I used your Dividend Projections sheet), so consider having a plan for (late entry investors with minimum or low income) considering they have many financial obligations as they are above the 40s. Thank you very much for your understanding.
Thank you for the feedback. I'm glad you used that spreadsheet, it's very cool because it is always 'updated' as long as we change our holdings. The first year is always 'now'. Fun to check out how things scale in time.
You are right in that lower starting amounts require a higher yield to get by. It is a fine balance. I'll be sure to make a video with smaller starting amounts in the future.
The math does scale the same, for example, if you start with $10 of dividends compared to $100,000, they will increase the same, proportional. If you get to $12, it is the same as getting to $120,000. The zeros can be dropped (or added) for testing purposes.
Each scenario will be different. I'll make a video with a smaller amount in the future next time I do something like this. Then people can 'add' zeros if they want. Probably makes more sense to do it that way. The 'number of years to breakeven' (SCHD vs JEPQ) is 'the same' with any numbers.
@@JeffTeeples Thank you very much for your response. I appreciate your consideration of making such a video, which the majority will benefit from. It will attract them to start with reasonable and affordable capital, at least to roll the ball and test this methodology.
To add to this, I built my portfolio a month ago (still new) with 100K, and my portions go to (60% Growth and 40% Dividends ETFs/Stocks)
The Dividends ETFs/Stocks, which account for 40% of my capital as of now (I'm still toning and planning to close some), are allocated as follows.
1-QQQI / 6.5%
2- SCHD / 24.4%
3- O / 16.6%
4-JEPI / 23.6%
5-JEPQ / 28.7%
As I actively manage my portfolio, I will remove some investments and rebalance others as soon as their prices reach the entry-level.
currently, with the above setup, my dividends are 7.01%, and as I'm not a US citizen, a -30% tax is applied, so my net is 4.91%, and hopefully, I will reach the right portion of each, considering dividend growth.
Thanks
Very nice on the dividend yield. That is a great starting point.
It does depend on where you are at in life and in your career. For example, if you're in your 20's you'll want a lot more SCHD compared to high yielders. The income producers with derivatives will go up and down with market volatility. But SCHD will continue to increase the qualified dividends each year. I'll give you an example with real numbers (zero assumptions here):
On 1/1/2013 you could have purchased 350 shares of SCHD for $9,919. Let's say you hold those 350 shares without reinvesting a penny. Here are you dividends over the years (again, real numbers, this actually happened):
2013: $316
2014: $366
2015: $401
2016: $440
2017: $471
2018: $504
2019: $603
2020: $710
2021: $787
2022: $896
2023: $930
When you bought SCHD in 2013, the dividend yield 'looked weak' because it was about the same as it is now. Dividend yield is a simple formula that only gives a snapshot of information. It is mostly meaningless over time when dividend growth is compounded into the equation.
Yield is dividend / price. If a price goes down (like many of the ETFs that produce high dividends) the 'yield' goes up. However, that has nothing to do with actual dollars paid for what you already own if that makes sense.
People say high yield savings looks so good at 5% and I just shake my head knowing how the math works.
It is always nice to have a mix, but if you don't NEED cash now, high yield is 'generally' throwing money away long-term (via opportunity cost).
@@JeffTeeples Thank you very much Jeff for your response. It makes sense, and I will consider it in my plan.
Great video, except one little thing we assume we will be alive and well at the 10 year mark to see those dividends, I say split it in half and use half and reinvest half , live well now and live well after too
Thanks for watching & commenting. I agree that it is a balancing act between living it up now and reinvesting for the future.
Happiness, in general, is so much more important than money. Money is just what we need to help get there.
I still don't understand about JEPQ. it's based on NASDAQ and those companies pay little to nothing of dividends because they gear up for growth. How JEPQ can generate dividend over 10% and pay monthly???
Thanks for the question!
JEPQs underlying holdings, based on the NASDAQ-100, do not pay a very high dividend. You are correct about that.
The majority of JEPQ's income comes from call options on its holdings. It basically works like this:
Stock A, that JEPQ holds, is worth $100 per share.
An outside party thinks that Stock A is going to go way up in the near future.
The outside party agrees to buy Stock A at a price of $105 over the next 2 months.
The outside party pays a premium, say $2, the day the contract is made. This is what JEPQ pays to us as a dividend.
Now, if Stock A goes up to $115 per share in 37 days, the outside party can 'strike' and buy stock A at $105 per share.
JEPQ has to sell the stock that is now worth $115 bucks for $105, which limits the ceiling.
But we (JEPQ) get the premium income whether Stock A goes up or not.
This limits JEPQs ceiling compared to QQQ, but also raises the floor (because we are getting that income from the contracts all the time).
@@JeffTeeples thank you very much for your explanation.
Schd dividend growth only 3.77% this past year so your 10% cagr estimate in your excel program is way overboard. 4-6% would be more likely
Thank you for watching and commenting.
SCHD had a down year on dividend CAGR to be sure. However, the 3 year CAGR is above 9%, the 5 year CAGR is over 13, and the 10 year CAGR is over 11% (this includes the 3.77%).
It could very well trend down, but last year is currently the outlier when it comes to working models and future projections.
I’ll update it in future videos to be sure! I don’t remember what I showed in this video, but I have one that shows year by year actual CAGR that will help understand trends over time.
What if you took the almost $1 million in extra dividends in the first 10 years and reinvested them?
That would add a lot to the portfolio. Realistically, a combination is the best move. This video was to isolate the crazy dividend growth rate effect over time.
@@JeffTeeples i had both and sold SCHD. It’s filled with companies I would never buy. After the rebalance when they added Ford and Chevron, i was totally confused why Chevron wasn’t in there in the first place and Ford is just awful. I sold around $77 and it has done nothing but get worse. Also, no way does it maintain that CGAR if interest rates stay elevated
Nothing wrong with that. Lots of good ETFs out there.
Thanks for your comment.
Thank you. Agree.
Thanks for watching! (:
If owned $100k of SCHD on January 1st of 2024, what would you expected the dividend to be January of 2043?
That you for watching & for the question.
Let's take SCHD at it's price RIGHT NOW to answer this. 73.30 is the price at 8:32 am PST.
This would get you 1,364 shares for $100,000.
At the 3.58% yield as of today (via seeking alpha), this would get someone $3,580 in 2024.
Here are the end results to your question assuming the following dividend growth rates:
Dividend payout in 2043 at each dividend CAGR assumptions:
13.69% (current 5 year dividend CAGR): $40,983
10%: $21,895
8%: $15,450
This is assuming you are NOT reinvesting the dividends. You're using them to live over the timeline in question.
Thanks again.
@@JeffTeeples Is that if I let it drip the whole time and didn't touch it until that date?
That is with no drip. It’s with spending the dividends to live. The exact same amount of shares over the years.
@JeffTeeples Thanks. You must be the best I've seen at answering questions in the comment section 🙌🙏
I think the equation changes a little with drip. But i played with the numbers on a spreadsheet and found one item that helps schd. Often people evaluate an investment, and it comes down to total return (stock appreciation and dividends). Ignoring taxes, if its 10% growth 0 dividend, vice versa or 5%/5%, the cagr will be the same. This assumes if the value appreciates 10%, the dividend payout appreciates 10%, but at a somewhat constant rate to the stock price. Looking at the history of schd, the dividend payout rate has increased and is now at 3.7% (was 2.7% 10 years ago). I think this is saying something similar to what you are saying but in a different way. And it may appear this way due to recent stagnant prices, but stock growth plus dividend yield still are critical, but dividend payout acceleration relative to stock price is a big factor
Thank you for the comment & and the detailed feedback. You are exactly right about DRIP, and total returns being major factors. SCHD is the best mix of the holy trinity (yield / dividend growth / total return) I've found for a dividend ETF. This video was specifically isolating the dividend growth component. I feel it is often times the most overlooked factor, and that people tend to 'yield chase' a little bit.
We hold jepi jepq and svol and roll all divs into schd and vym
That is a great way to get the dividend snowball rolling strong! Thank you for watching and commenting.
Great insights!
Thank you for watching & for the positive feedback.
Hi Jeff. I think I need to stop watching your videos. Each video causes me to add more ETF’s to my M1 portfolio, lol. I now have:
1. QQQM, SMH, XLK, JEPQ, JEPI, 20% each
2. SCHD 35%, DGRO 15%, VGT 50%
3. VTI, VOO 50% each.
Would you switch anything around as far as percentages or pairing certain ETFs with others?
I’ll be investing about $10,000 to $12,000 a month evenly into all 3 pies.
Haha, love the feedback. Thanks for watching.
JEPI and JEPQ are great for cash flow. However, I would only recommend holding them if you NEED the cash flow. I think the compound growth will be better by holding the underlying index of each over 10+ year stretches.
JEPI selects stocks from VOO (the S&P 500). JEPQ selects from QQQM (the Nasdaq-100). The JEPs will naturally lower your ceiling and raise your floor.
So when the market crashes, you’ll be happy to have them (temporarily). When it is booming, VOO and QQQM will do better.
Long-term, I think the indexes will win, but of course I don’t KNOW that.
Also, if you do hold JEPQ or JEPI as a high earner, be sure it is in a retirement account and not a taxable account. The taxes are mostly at your marginal tax rate, and they WILL push you to a higher tax bracket & make you pay more in taxes. It’s like adding more ordinary income (from a job) instead of special treatment qualified dividends (like SCHD, which saves a lot on taxes because they are ‘qualified dividends’).
As a buy and hold investor that has a lot of money (talking about you, not me, haha), I would probably skip the JEPs if you don’t NEED the cash flow for bills.
Wow. Makes total sense. I’ll get with my CPA and check my current brackets. I still really want to add the Jep’s to this portfolio. I think the current set up is a very solid portfolio. Thank you again.
Since I do want Jeps, I just reduced my holdings a little. It’s now QQQM 40%, SMH 20, XLK 20, Jeps 10% each
Great video love it!
Thanks Oldrin. I appreciate the positive feedback.
just amazing
Thank you!
What do you think of the strategy of investing in JEPI and using the cash flow (if you don’t need it) to put in SCHD?
Thanks for the question. I think that would be a great strategy. Realistically a mix of both would be the best. I would have more SCHD, because it will likely be a lot better long-term. But having some JEPQ and putting the dividends into SCHD is a great idea.
@@JeffTeeples Thanks for the quick response. Another question, if the underlying JEPI assets are SPY, why would we not expect price appreciation in line with SPY? Similar for if the SPY underlying holdings increase their dividends?
There are two primary reasons I don't expect price appreciation of JEPI to keep up with SPY:
1) JEPI holds 136 of the more conservative S&P 500 companies. Generally speaking, these value holdings will have higher dividend at the expense of price appreciation. It wants to be more stable while still seeking 'most' of the total returns of the index.
2) JEPI uses a covered call strategy to maximize dividend yield. This drastically raises the floor (more guaranteed income) and lowers the ceiling (the income premiums come at the risk of having to sell shares at a discount to the person that strikes on the contract).
Basically, a potential buyers enters a contract with us (JEPI) for stock A. Stock A is selling for $100, and is one of JEPIs holdings.
The buyer will pay $2 'right now' (in the form of dividends to JEPI holders) to have the RIGHT to buy stock A at $110 strike price for the next 3 months.
If stock A shoots up to $130 in 2 months and the buyer 'strikes', we (JEPI) have to sell it at $110 per share (when it's worth $130).
We still made $10 per share, BUT, lost what would have been $20 additional dollars if we just held the stock and never entered the contract.
(Numbers made up for this example to show how it works in general).
@@JeffTeeples Would you consider JEPI/JEPQ an alternative to a HYSA as a place to put some extra cash that you're not sure what to do with? obviously would get some short term volatility in price but overall a position to park cash in that pays decent yield, while not expecting too much fluctuation in price?
Thanks for the great question! If I were asked that question, would either say no or it depends.
For 'me', or other people with long-term outlooks that don't need the cash now (so the fluctuations are fine), I would say yes. In fact, I have some JEPQ that I consider my 'greedy cash' in addition to the majority of my 'cash' being in VMFXX (vanguard money market).
If someone is living on, or may need the cash soon, then no. I doesn't replace CASH, but it sure does cash flow nice (:
Great video. Thanks
Of course. Thank you for watching and commenting!
Also, JEPI is very expensive to own 0.35% compare to the 0.06% for SCHD
Thanks for the comment. I completely agree with you. It doesn't 'seem like much', but the difference will add up over the years. I like to keep expense ratios at 0.10% or lower if possible.
SCHD has strong companies but if the market falls significantly next year, these will fall with the herd. Not as sharply, but they will fall. That's why I'm waiting to buy SCHD.
Do you think I'm wrong to wait?
Hmm, that's a loaded question. 'In general', it's better to be invested than to be on the sidelines. However, it's also nice to have some money on the sidelines to strike when an opportunity hits.
I'm a big fan of % allocations. Let's say I'm 10% cash for example. If the market drops, I will naturally buy the dip to stay at 10% cash. If the market goes way up, I will naturally save more cash (to get back to 10%), which will help for the next opportunity. This is a way to always 'automatically buy the dip'.
One thing I don't do is to try to make market predictions. Nobody, definitely me included, can accurately make these. Look at the market right now, for example, and read EVERYTHING a couple months ago... As always, the news was exactly wrong. I'm a bit nervous when I read the market will be going up (:
I don't think you're wrong to wait, as long as you are 'mostly invested at all times' as an investor over the years. Because the market averages going up over 10% per year with all the ups and downs.
@@JeffTeeples thanks for your answer, but I'm definitely "on the sidelines" making about 5.5% with lowest risk (Tbills). All we have is probabilities, and at these lofty valuations, I think I could lose a lot of money in equities in the near term. I appreciate your point of view and enjoy your videos.
However, I'm older than you are, and my advanced age (and dare I say wisdom) makes me lean heavily towards capital preservation.
I do plan to buy a significant amount of SCHD. I like it. But, I think I'll do better by waiting. If I'm wrong, I'm still making 5.5% in the meantime.
I appreciate your point of view and agree that 5.5% is an amazing return on your cash position in the meantime. I hope you hit it just right and make it big!
Thank you for supporting the channel. I really do appreciate it.
Why cant we switch from JEPQ to SCHD when DIV yield will match? i.e. In 2030/2031 switch over your investment from JEPQ to SCHD. That' way, you will enjoy JEPQ high dividend payout and switch to SCHD when it beats or matches JEPQ DIV yield.
Thanks for the comment. This is something an investor can do. SCHD will (likely) never match the dividend yield of JEPQ. And JEPQ will never match the dividend growth rate of SCHD. It's just the way they are structured.
I think a mix of them isn't a bad idea at all.
Great video
Thank you! I appreciate it!
Your calculations leave a little bit out. I'm guessing this retiring couple probably isn't spending $100k per year in retirement. But let's assume they do spend $100k per year. All of the extra money generated by JEPI or JEPQ could (and should) be reinvested into the portfolio. The CAGR may not be accelerating but the month on month compounding of dividends has not been accounted for anywhere in your calculations. I'm betting if you plug those #'s in you'll have a more accurate picture of the JEPQ/JEPI returns.
Thanks for watching & commenting. You are absolutely correct. This video was isolating dividend CAGR. I’ve seen so many fall for juicy dividend yield in general. Wanted to show the power of compound.
JEPQ is great, and I hold it. Price appreciation and dividends over costs reinvested will make a nice difference as well.
JEPQ is a nice high interest savings like beast to deploy the dividends as we see fit. SCHD is more of a ‘meh’ on dividend yield until we zoom out.
Imagine having 2.5 million in retirement :D!
Right!? I hope it becomes a reality. The people this video was about knew NOTHING about investing. They plowed money into their 401k, soaked in the company match, and woke up wealthy (: I always stress 401k funding early and often!
Just own it all?!!
A nice mix is likely the way to go.
Jepi and jepq are strickly for monthly income not growth for everyone leaving comments. Schd is a growth etf compared to the others. If you need imcome now jepi and jepq is for you if you have time to grow and compound if your a dividend investor then schd is for you
Amen my friend! I could not agree more. I’m long SCHD, and enjoying the cash flow from JEPQ. I will eventually roll the JEPQ into my long-term portfolio when the cash flow isn’t needed.
They are all great for a role.
So why wouldn’t you just reinvest the difference of 275k and 95k? If you add 170k to the portfolio each year, you won’t lose purchasing power…
That is a great way to go about it.
The 100% is an extreme way to show the difference between SCHD and JEPQ.
In reality, it will be a mix, along with growth like QQQM or VGT, and a cornerstone like VOO.
This video was strictly to show long-term cash flow.
Thanks for watching and commenting!
JEPI and JEPQ have not been around 5 years, you cannot compare SCHD to them in terms of 5 Year CAGR. Giving them an 0% CAGR is unrealistic, as JEPI alone has Amazon, Microsoft, Adobe, Progressive, Trane, Mastercard, Intuit, Accenture, Visa, and UNH as its top 10 holdings in common stock (which secure the call options). These are not QYLD-type ETFs.
Thanks for watching and commenting. That is true, however, the vast majority of the ‘dividend income’ from JEPQ comes from options, which will increase or decrease based on the current market volatility. About 90% of the dividends will not go up over time. It’s probably greater than zero, but not much.
Time will tell.
I personally love JEPQ for its role. It’s in my portfolio. I like a little income NOW.
Thanks!
@@JeffTeeples Time is the only way to tell with these. Your analysis with SCHD is great and I don’t think anyone could go wrong investing in it (not investment advice). Keep making great videos!
Thanks, I appreciate it! Also, I like to be ultra conservative until I have real data. In a few years I’ll make an updated video if JEPQ grows consistently! That is my hope for it.
I love practicing what I preach (will be sharing portfolio and strategy soon) and correcting anything I botched along the way. This stuff is so fun.
Thanks!
Agree. And considering that Jepi and Jepq holds a lot of tech values it can be assumed that over the last ten years the price appreciation would have been close to SCHDs.
Not at all saying they are better than SCHD. But it is not black or white as it seems in the video.
My bigger worries about JEPI/Q is that there is more active management involved which historically was often not a good thing.
I'm holding all three, but more SCHD.
I requested you do this video and am pleasantly surprised and thankful that you actually did it. Very informative and insightful. Thank you! Will continue to be a loyal viewer.👍
I think you need to double check SCHD’s dividend growth rate.
Thanks for watching & commenting.
A 5 year dividend growth rate will change every quarter when a new dividend is paid (one from just over 5 years ago falls off as new is added).
My numbers comes straight from Seeking Alpha for each video. I also double check the math on a spreadsheet. It is still a touch over 13% right now.
If you just use the amount of dividend that SCHD would have made and drip the rest JEPI/JEPQ would pull away. Mixture of all 3 the ticket.
Thanks for watching and commenting. I agree that a mix is the best setup. Along with mixing in VOO and a growth ETF as well.
I mainly wanted to show the power of dividend growth rate. I’ve been seeing a lot of ‘why would I ever take 3.5% over 10%’ narrative online.
Yes , your video is spot on.
Past performance is no guarantee of future returns. This year has been a disaster for SCHD. I also hold all three.
Thanks for watching. Stay the course, I would put more into 10+ years than 1 year with SCHD.
@@JeffTeeples I prefer VOO to SCHD tbh. This year clinched it for me. Great discussion
I agree. I would take VOO over SCHD if I could only have one forever. This last year doesn’t change that for me, but I always look at very large sample sizes (prefer 10 to 100 years). I prefer VGT to both (long term tech believer).
Past performance IS a huge indicator for passively managed ETFs that are based on specific indexes or criteria. I love seeing how funds handle different macro situations.
Where past performance is dangerous is when people use it with anything that has gut decisions involved. I don’t invest in these at this point at any time. This is individual stocks or mutual funds / ETFs that are actively managed.
No thanks to the ‘my gut says go hard in XYZ’ vibes.
SCHD might as well pay monthly so I dont go insane. I want monthly cash flow. 4 months of payments is too lopsided
Thanks for the comment. I know a lot of people don't like the quarterly payment schedule. I personally don't mind, but I can understand monthly being more appealing for you.
@@JeffTeeples one thing i am wondering about the 0% dividend growth for jepi is: doesn't it still hold normal stocks so it will have some inherent dividend growth, maybe 2 to 3% a year?
@@Asstronauts93 it does, yes. I was being very conservative with that growth rate.
However, JEPI and JEPQ dividends have been way down compared to last year as of late. It really will vary based on the market volatility at the time.
Sorry, that analysis is flawed. JEPI and JEPQ will have a (+) CAGR that grows the NAV of these ETFs. Why? They are both tied to an underlying index, and those indexes will have growth causing the ETF to grow on kind regardless of the call option method. Plus, you cannot assume a zero growth on these as they are so new, there isn't sufficient history.
Time will show that as S&P grows, and NASDAQ grows, so will JEPI and JEPQ respectively.
I agree that JEPI and JEPQ will growth as the markets grow. The dividend CAGR (not total return CAGR) will be random based on the market's volatility.
JEPQ is currently at -16% compared to last year. That isn't because it's bad or did anything wrong. The volatility decreased, so the call options weren't as juicy.
Over 90% of the dividend is 'that', while a tiny slice will be helped by the underlying index. I conservatively use 0%, but you could push it for 1%. I think that is aggressive. Again, remember, we are STRICLY talking about *dividend* CAGR, not 'growth CAGR' (all growth).
Why not VYM, its cheaper
I have a video coming out a week from today. But basically between SCHD, VYM, DGRO, and VIG, SCHD is first in yield, 5 year dividend growth rate, and 10 year total return.
And I think SCHD is a great buy right now bc it has underperformed in the last year+.
Thanks for watching!
Oh cool. All I have to do is get to 2.5 million. lol
Right!? It's that easy (:
Uranus
To Uranus we go! Wait...
Why would you assume growth for SCHD without assuming the NASDAQ would grow too ??? This is a bogus comparison.
This video seems to have caused some confusion. All of these ETFs will ‘grow’ over time on total return. I was specifically isolating the ‘dividend growth’ on the spreadsheet. Not the ‘overall return’. We are 100% talking 'cash flow from a set amount of shares held'. In reality, you can use the excess dividends to buy more SCHD or JEPQ, or both. And your portfolio 'should' gain in value too, but not shares (by default).
This is what I'm talking about. Here is the monthly dividend paid per share held of JEPQ. It will be 'more random' because of the nature of options. It relies on the markets fluctuations.
Per share dividend by month (new stuff on top):
2023
Dec 0.3925
Nov 0.4221
Oct 0.4177
Sep 0.4172
Aug 0.4506
Jul 0.3659
Jun 0.3668
May 0.3566
Apr 0.4841
Mar 0.4539
Feb 0.433
Jan 0.4406
2022
Dec 0.5755
Nov 0.5463
Oct 0.6813
Sep 0.3795
Aug 0.5463
Jul 0.4071
Jun 0.3397
May 0.3764
The average dividend per share from May through Dec:
2023 - $0.398
2022 - $0.482
This doesn't mean it has 'gotten worse at its core and will never go up', it just means it will be random. 2023 was an off year for most dividend growths (not total return), but SCHD still grew its dividends by 3.77% (worst single year ever, we will see how the future goes). JEPQ decreased by 17.2% in its short history.
It was to show how important dividend growth is. Check out the history of the ‘monthly dividend growth’ of JEPQ. It will be random, because it is based on how volatile the market is (on the call options).
I probably should have used 1-3% for the underlying holdings and explained HOW JEPQ pays dividends (I do have a separate video about it).
You are right, both will ‘grow’ (the price + dividend) over time. Trying to teach about yield vs ‘dividend’ growth.
I’ll make another that is more clear in the future to clear it up.
hey lets make videos for us poor people :P lets go with like 100k or even drop it down to 10k? or maybe how to start as a beginner at 30 years old!
Haha, thanks for the comment! I normally use smaller numbers, but wanted to show the crazy impact over time in this one. The beauty is, it’s all relative! In most instances I start with 10k to 100k in these things, which is far from poor (:
If you’re investing at all, you’re already way ahead of the game.
sent you an mail
Sounds good, thanks.
@@JeffTeeples let me know when you check it
What is a mail?
cagr is 0%? funny
Hey Daniel. Yes, it will be about 0%. I'm not sure which side of the coin you're on, but I want to defend JEPQ in case you are on the hater side at the moment.
It is 'around 0%' because 90% of the dividend will be based on the VIX. Basically, to make it easy, these are non-qualified dividends that will increase the more volatile the market is, and will decrease with less volatility.
The Nasdaq portion (about .6% yield of the 9%+) will grow around 10%. So just under 1% with a sumproduct weighted average of the yield. This means you could use 1% CAGR, but that would 'often exaggerate' the results. 'Usually' when we forecast, we will round down, or use slightly conservative estimates for the future.
For the VIX side of the growth, think of it like a high yield savings account. Sometimes they are higher, sometimes lower, but if you zoom WAY out the growth would be zero. It is the yield that fluctuates. Right now, it is high to park money in savings, but you can realistically assume a 0% 'growth' (not yield) for the next 50 years. See what I mean?
For JEPQ, in case you are on the hater side, yes, the dividend growth is negative 53% over the past 5 months. I get that, but again, this is directly due to the nature of the call options (almost all of the premium income produced from the ceiling reducing covered calls). The VIX has been low, so I wouldn't hold that again JEPQ. The dividends could be up 40% on the next 5 months. Again, averaging to roughly 0% when we 'project and zoom out'.
i bought some JGPI and FUSD@@JeffTeeples