Global Courant 2023-05-06 20:00:01
This dividend-paying ETF can help protect investors during wild market swings.
Kevin Simpson of Capital Wealth Planning recommends clients the Amplify CWP Enhanced Dividend Income ETF (DIVO)which focuses on blue-chip companies likely to raise future dividends.
“We want strong, strong dividend growth,” the company’s chief investment officer, Kevin Simpson, told “ETF Edge” on Monday. “That is mainly the fuel that feeds our engine.”
DIVO is a 5-star Morningstar fund launched in December 2016. The Amplify ETFs website lists Microsoft And Proctor & Gamble as its top positions.
The ETF also uses a covered call option strategy to generate more profit. Simpson claims it can increase the potential for capital appreciation while still minimizing risk exposure.
“The covered call piece has been implemented as a means of volatility harvesting to protect a little bit of the downside,” he said. “We tactically sprinkle in some short-term talks, without the money being covered.”
When asked if selling covered calls forfeits upside reward potential, Simpson argues there is a balance at play.
“We are thinking about how we can capture 80% to 90% of the rising market and limit participation in a falling market to 65% or 75%,” he said. “Covered conversations work best when you need them most.”
DIVO has been virtually flat so far this year.
