An exchange-traded fund (ETF) that provides recurring income and tries to minimize volatility sounds like it could make for an optimal investment for risk-averse investors. That's what you can expect to get with the Amplify CWP Enhanced Dividend Income ETF (NYSE Arca: DIVO). In addition to seeking out high-quality dividend stocks, the fund has covered calls to help lessen the risk for investors as it tries to keep volatility low.
At 25 holdings, the fund isn't a terribly large one. The top five stocks all make up more than 5% of the ETF. They include UnitedHealth Group (NYSE:UNH), McDonald's (NYSE:MCD), Chevron (NYSE:CVX), Johnson & Johnson (NYSE:JNJ), and Visa (NYSE:V). Those are all solid blue chip stocks that pay dividends and that risk-averse investors should feel comfortable holding.
The fund's focus is on stocks that have strong track records for not just dividend growth but earnings growth as well. The ETF has a distribution rate of over 5% and it makes payments on a monthly basis.
Year to date, the fund has declined by 14%, which is less than the S&P 500's 23% drop thus far. When looking at the past three years, however, the index has outperformed the fund, 27% to 10%.
However, in a potential downturn and with the ETF giving investors a basket of safe stocks to hold, it can potentially make for the better investment moving forward. If you're not sure where to invest in today, the Amplify CWP Enhanced Dividend Income ETF may be the best option for you right now, as it balances both recurring income and safety.
