This article provides a detailed comparison between two popular ETFs: JEPI (JPMorgan Equity Premium Income ETF) and SCHD (Schwab U.S. Dividend Equity ETF).
Each of these ETFs caters to different investment goals and risk tolerances. This comparison will help investors understand the characteristics, performance, and suitability of each fund.
Overview of JEPI-JPMorgan Equity Premium Income ETF
- Focus on Higher Income Generation: by investing in high-quality growth stocks and carrying out a covered call strategy.
- Performance in Volatile Markets: JEPI is designed to perform best in volatile markets, especially when markets move sideways with high volatility. In such environments, JEPI may outperform other growth ETFs due to the high premiums collected from the covered call strategy.
- Performance in Rising Markets: In rising markets, JEPI’s covered call strategy may limit potential gains, making it underperform compared to traditional index funds.
- Tax Implications: Since JEPI generates a significant portion of its income from covered calls, income is treated as non-qualified dividends, taxed at a higher rate than qualified dividends from other ETFs.
Overview of SCHD-Schwab U.S. Dividend Equity ETF
- SCHD invests in large-cap U.S. companies with a track record of dividend growth. The fund targets companies that not only pay dividends consistently but also increase their dividend payouts over time.
- Tracks the Dow Jones U.S. Dividend 100™ Index, which includes high-quality dividend-paying companies.
- Dividends are considered qualified, offering potential tax efficiency.
JEPI Vs SCHD: Side by Side Comparison
| Aspects | SCHD | JEPI |
|---|---|---|
| Inception date | Oct 2011 | May 2020 |
| Style | Rule based passively managed fund | Actively managed fund similar to hedge fund |
| Expense ratio | 0.06%( $6 per $10K) | 0.35% ( $35 per $10K) |
| Income type | Pays Dividends | Provides Income |
| yield | 3.92% | 6.88% |
| Historic performance since inception | 12.92 % | 12.4% |
| Tax benefits | Qualified dividends. Low tax | Non-qualified dividends, taxed at ordinary income rates |
Back test result
Time Period: July 2020 – June 2020
Initial investment: $10,000
All dividends are reinvested.
| JEPI | SCHD | S&P500 ETF | |
|---|---|---|---|
| Annualized return | 12.3% | 14.6% | 16.98% |
| Start Balance | $10,000 | $10,000 | $10,000 |
| End Balance | $15,880 | $17,225 | $18,725 |
| Max drawdown | -12.99% | -15.68% | -23.98% |
| Max drawdown period | Jan 22-Sept 22 | Jan 22-Sept 22 | Jan 22-Sept 22 |
| Recovery time (Months) | 7 | 2 | 15 |
JEPI VS SCHD which is better ?
Based on a 4 year back test result, SCHD has shown higher returns than JEPI.
JEPI has a higher expense ratio, and its income is considered as “non-qualified dividends,” which are taxed at a higher rate.
SCHD offers higher upside potential due to its focus on dividend growth and lower expense ratio.
Given the likelihood of a rising market, SCHD may be better suited for long-term investors. Conversely, JEPI can be considered for short-term income strategies, especially in flat market conditions where it tends to perform well.
Suitability for the investor
- Short-term Income Seeker: JEPI
- Long-term Growth: SCHD
Price predictions : 2026-2030
4 years back test results shows JEPI is under form the SCHD by 2.3%.
SCHD has a track record of annualized return of 12.92%.
Projecting the this case for next 6 years considering JEPI is going to underperform the SCHD by 2.3%.
| Current Price | 2026 | 2027 | 2028 | 2029 | 2030 | |
|---|---|---|---|---|---|---|
| SCHD | 77 | $ 87 | $ 98 | $ 111 | $ 125 | $ 141 |
| JEPI | 56 | $ 62 | $ 68 | $ 75 | $ 83 | $ 91 |
Conclusion
In summary, both JEPI and SCHD have their unique advantages and are suitable for different types of investors.
JEPI is ideal for those seeking higher monthly income and can tolerate a higher tax rate on dividends.
SCHD is better suited for long-term investors looking for steady growth and tax-efficient qualified dividends.
Investors should consider their individual investment goals, risk tolerance, and tax situations when choosing between these two ETFs.
