ETFs Offering Monthly Dividends Ahead of 2027
As we approach 2027, income investors are navigating a landscape where the federal funds rate has remained at 3.75% for the last eight months, while 10-year Treasury yields hover around 4.65%. This situation, while risk-free, may not sufficiently meet the needs of retirees relying on their portfolios or investors seeking regular cash flow. Here’s a look at five ETFs: NEOS Nasdaq-100 High Income ETF (NASDAQ:QQQI), JPMorgan Nasdaq Stock Premium Income ETF (NASDAQ:JEPQ), Goldman Sachs NASDAQ-100 Premium Income ETF (NASDAQ:GPIQ), Virtus InfraCap U.S. Preferred Stock ETF (NYSEARCA:PFFA), and SPDR Portfolio High Yield Bond ETF (NYSEARCA:SPHY). These funds offer monthly payments with distribution rates ranging between 7% and 14%.
Each fund employs a different strategy for generating income. For instance, three of these ETFs write calls on the Nasdaq-100, while others utilize moderate leverage over preferred stocks or collect coupons from junk bonds. Understanding these nuances is crucial, as the headline yield isn’t everything.
QQQI: The Top Payout
QQQI stands out as a bold income choice among Nasdaq covered calls. NEOS utilizes data-driven index calls on the Nasdaq 100, benefiting from Section 1256 tax treatment to classify more distributions as capital returns or long-term income rather than ordinary income. The current price is $55.14, with trailing dividends reaching $7.62 per share, translating to about a 15.8% distribution rate. Monthly payments in 2026 currently range from $0.6089 to $0.6589. Notably, the fund has achieved a total return of 19% over the past year, showing its ability to still partake in Nasdaq movements even with the call overlay.
The expense ratio sits at 0.68%, competitive within this category. The trade-off? The more calls managers write to enhance income, the less potential upside the fund captures if tech stocks surge.
JEPQ: The Scale Leader
JEPQ has propelled the covered call ETF category into the mainstream. JPMorgan prefers to use equity-linked bonds instead of standard options for creating covered call returns, which allows them to select exercises and expirations more precisely. Currently, the fund showcases notable holdings like NVDA at 6.91%, AAPL at 6.61%, GOOGL at 5.28%, MSFT at 5.03%, and AMZN at 4.34%.
Recent distributions have notably surged; the August 2026 dividend of $0.70497 marks the highest monthly payment in the fund’s history, and the implied yield is now almost 10.9%. Over the past year, its total return has been 21%, outshining QQQI on a price-plus-distribution basis. Its expense ratio of 0.35% is the lowest among its peers. However, one must be cautious about tax implications since distributions are generally taxed as ordinary income, so using a Roth or IRA could be beneficial.
GPIQ: A Growth-Oriented Option
Goldman Sachs designed GPIQ to efficiently manage call overrides. Managers only write calls on a smaller fraction of the nominal exposure of Nasdaq 100 stocks, which allows shareholders to retain more upside potential during rallies, though with a lower distribution rate in return. GPIQ has seen a one-year return of 25% and a year-to-date return of 16%, outperforming both QQQI and JEPQ. Its dividend yield stands at about 9.9%, with monthly payments in 2026 ranging from $0.4319 to $0.51923. The top holdings mirror the other two funds, with NVIDIA at 8.51%, Apple at 7.31%, and Microsoft at 5.60%.
This fund might appeal to investors looking to balance yield with long-term growth. Yet, if the Nasdaq experiences a downturn, there might be less protective cushioning since the call premiums are lighter.
PFFA: A Contrarian Choice
Virtus InfraCap operates a managed portfolio focusing on U.S. preferred stocks, employing a moderate level of leverage to enhance both income and interest rate sensitivity. The fund holds 188 preferred stocks spread across around 300 positions, with particular emphasis on financial services, energy infrastructure, and REITs. Notable holdings include Energy Transfer, Apollo Global Management, KKR, and Flagstar Bank.
The monthly distribution for 2026 is fixed at $0.1725, offering an annualized yield of about 9.9% based on the current price of $20.88. With a net worth of $2.35 billion, its one-year total return is 7%, which is lower than the covered call group in the Nasdaq, yet still viable for an interest-sensitive bond fund in a tech-dominated market.
Potential buyers should keep in mind that its expense ratio of 2.11% is relatively high due to leverage costs. This can dampen the effects of leverage in both directions. If long-term yields spike, PFFA may be more sensitive compared to non-leveraged preferred funds.
SPHY: Income Diversification
SPHY distinguishes itself as the only fund among these that generates income from bond coupons rather than option premiums or preferred dividends. Managed by State Street, it tracks the ICE BofA US High Yield Index, which comprises 1,923 stocks, thus offering broad exposure to the U.S. junk bond market with a very low expense ratio of just 0.05%—the lowest in the high-yield ETF sector.
Its dividend yield is around 7.2%, albeit the lowest on this list, but it is backed by solid contractual coupon payments. With assets under management totaling $11.63 billion, the fund’s beta of 0.38 to equities indicates a different risk profile. Its one-year total return is modest at 6%, but it has lower correlation to the Nasdaq compared to the other funds.
However, investors need to weigh the credit risks. If economic conditions worsen in 2027, the default rate is likely to increase, which could pressure SPHY’s net asset value.
Who Should Consider These ETFs?
For those seeking the highest monthly distributions and comfortable with Section 1256 tax treatment, QQQI is likely appealing. GPIQ provides tech exposure with better upside potential, while JEPQ offers a middle ground with superior liquidity and lower fees. PFFA might suit someone already invested in a covered call fund looking to diversify into preferred stock income. Lastly, SPHY serves as a solid option for income diversification. It features lower yields and credit risks instead of equity risks, along with fees that are low enough for consideration as a permanent income source.
