QDPL: 4X the distribution of the S&P500 plus Growth with this Pacer ETF... And NO Options.
Summary
TLDRIn this video, Dave from Wealth Adventures discusses the QDPL ETF from Pacer ETFs, which aims to deliver quadruple the dividends of the S&P 500 with modestly reduced exposure. He explains the ETF's strategy, which combines S&P 500 investments and dividend futures contracts to generate higher yields. Dave provides insights into QDPL's performance, dividend yield, and tax efficiency, noting its appeal to income investors. While impressed by its returns, he critiques its 60 basis point fee and suggests lowering costs for greater growth potential. The video targets income-focused investors considering diversified options.
Takeaways
- đ The video discusses QDPL, an ETF from Pacer that focuses on providing cash distributions equal to 400% of the S&P 500's ordinary yield.
- đ QDPL is compared to COWS, another ETF from Pacer known for its focus on cash cows in the market.
- đ” QDPL offers a distribution yield of 5.79%, which is significantly higher than the current 1.25% yield of the S&P 500.
- đĄ The ETF allocates 85-89% of its assets to replicating the S&P 500, with the remainder used for purchasing dividend futures contracts.
- đ These dividend futures contracts are rolled over annually in December and are meant to enhance income over the long term.
- đ° The ETF has over $500 million in net assets under management, with the potential to grow significantly if expense ratios are lowered.
- đ The expense ratio for QDPL is currently 60 basis points, which some investors might consider too high for the relatively simple strategy it employs.
- đ Over the past three years, QDPL has delivered a 33% total return, trailing slightly behind the S&P 500âs 37% return.
- đ The fund is positioned as a good option for income-focused investors, especially those seeking tax-efficient strategies due to its return of capital.
- đ The host suggests that if Pacer can reduce the expense ratio further, the fund could attract more assets and grow significantly.
Q & A
What is QDPL, and who offers it?
-QDPL is an exchange-traded fund (ETF) offered by Pacer ETFs. It aims to provide cash distributions equal to 400% of the S&P 500 ordinary yield, with about 85-89% exposure to the S&P 500.
How does QDPL generate its higher yield compared to the S&P 500?
-QDPL invests about 85-89% of its funds in the S&P 500 and uses the remaining 11-15% to purchase dividend futures contracts. These contracts allow the fund to offer cash distributions four times higher than the S&P 500 yield.
What are dividend futures contracts, and how do they work in QDPL?
-Dividend futures contracts allow investors to bet on the future level of dividends. In QDPL, these contracts are bought with 11-15% of the fund's assets and can potentially deliver higher returns over time by isolating dividends from stock performance.
What is the current distribution yield of QDPL?
-As of June 30, 2024, QDPL has a distribution yield of 5.79%, which is significantly higher than the current S&P 500 dividend yield of around 1.2-1.25%.
What is the fee associated with QDPL, and why is it considered high?
-QDPL has an expense ratio of 60 basis points (0.60%). The speaker argues that this fee is relatively high, especially since most of the fund's strategy involves replicating the S&P 500 and using straightforward dividend futures contracts.
How does QDPL compare to other income-focused ETFs like JEPI or SPYI?
-QDPL has generated a total return of around 33% over the past three years, slightly trailing the S&P 500's 37% but outperforming JEPI's 28%. It offers a balance between growth and income, making it attractive for income investors.
What are the potential tax advantages of QDPL?
-A significant portion of QDPL's distributions comes from a return of capital, which is not taxed as ordinary income. This makes the fund potentially tax-efficient for investors looking to minimize their tax burden on income distributions.
What type of investors might find QDPL appealing?
-QDPL is likely to appeal to income investors, especially those nearing or in retirement who want both dividend income and tax efficiency. It may also be attractive to investors looking for diversification beyond traditional covered call ETFs.
What are some potential downsides of investing in QDPL?
-One downside is the 60 basis point fee, which is relatively high for a fund primarily invested in the S&P 500. Additionally, the dividend futures strategy could underperform in years when dividends are reduced, creating some uncertainty.
How has QDPL performed relative to the S&P 500 and other ETFs over the past year?
-Over the past year, QDPL has returned 28%, slightly underperforming the S&P 500, which returned 31%, but it has outperformed several income-focused ETFs like JEPI (16%) and XYLD (14.6%).
Outlines
đ Introduction to the QPL ETF and Disclaimers
Dave introduces the video, mentioning QPL from Pacer ETFs, and briefly references a previously reviewed ETF called 'Cows.' He humorously admits a prior mistake about 'Cows,' clarifies it is not financial advice, and transitions to discussing QPL. Dave explains that QPL offers interesting features, particularly for income investors, and highlights that it provides quadruple the dividends of the S&P 500. He emphasizes his audience's interest and encourages viewers to stick around as he dives deeper into QPL.
đ Overview of QPLâs Strategy and Performance
Dave begins with a quick review of the 'Cows' ETF, providing some details about its popularity and five-star Morningstar rating. He shifts focus to QPL, which aims to offer 400% of the S&P 500âs ordinary yield through a strategy-driven approach. QPL has been around for over three years, with a decent performance record, especially for income-focused investors seeking growth. He mentions the fund's management of $500 million in assets and suggests that lowering its 60 basis point fee could make it even more attractive.
đ QPLâs Dividend Yield and Futures Strategy
Dave explains the fund's strategy, which involves investing 85-89% of assets into the S&P 500 index and the remainder into dividend futures contracts. These contracts enable higher cash distributions. He breaks down how these contracts work, noting that they roll over every three years and are relatively simple in execution. QPL's dividend yield is currently around 5.79%, much higher than the S&P 500's 1.25%. Dave contrasts the historically low yield of the S&P 500 with the consistent potential returns of QPLâs strategy.
đ° Dividend Holdings and Future Potential of QPL
Dave takes a closer look at QPL's holdings, which mainly consist of S&P 500 stocks along with dividend futures contracts that expire in future years. He references a source from dividend.com to explain how dividend futures work, showcasing an annualized return of 6.71% over the past decade. The potential for outsized returns exists, though some years may yield lower or even negative returns. He expects positive performance over a three-year period, though returns could fluctuate.
đ Performance Comparison: QPL vs. S&P 500 and Other ETFs
Dave compares QPLâs trailing 12-month dividend yield of 5.51% to the S&P 500âs significantly lower rate. He mentions that Seeking Alpha is an excellent resource for researching ETFs like QPL, noting that taxes play a significant role in its performance. Dave highlights the fundâs tax-efficient nature, where a large portion of distributions come from return of capital, making it appealing to investors looking to minimize taxes. QPLâs performance over the past three years is solid, but not as high as the S&P 500, trailing slightly behind while still offering respectable returns.
đ Breaking Down Total Returns and Comparative Analysis
Dave reviews QPLâs total return over the last three years, comparing it with VO (S&P 500) and JEPI (covered call ETF). QPLâs return stands at 33%, slightly behind the S&P 500âs 37%, but ahead of other income-focused ETFs. He emphasizes that the dividend component makes QPL competitive with other high-yield products like JEPI. He reviews a one-year total return comparison, highlighting that QPL performed well at 28%, only slightly behind VOâs 31%.
đŒ Pros and Cons of QPL: A Unique Strategy for Income Investors
Dave explains what he likes and dislikes about QPL. He appreciates its uncapped growth potential, tax efficiency, and different strategy compared to typical covered call ETFs. On the downside, he believes the 60 basis point fee is too high for the relatively simple strategy the fund uses. He suggests that if the fee were lowered, QPL could attract more investors. Dave concludes that QPL is well-suited for income investors, especially those looking for tax efficiency and diversification. However, younger investors may not find it as appealing.
𧟠Final Thoughts and Buy/Donât Buy Verdict
Dave wraps up the video by offering his verdict on QPL. He admits heâs on the fence about adding QPL to his portfolio, as it offers solid returns but lags slightly behind the S&P 500. He invites viewers to share their thoughts on QPL, encouraging them to comment on whether they believe it's a buy or donât buy. Dave emphasizes that while QPL might not suit younger investors, it could be ideal for those closer to retirement, particularly if Pacer reduces its fees. He signs off by reminding viewers to like, subscribe, and engage with his content.
Mindmap
Keywords
đĄPacer ETFs
đĄQDPL
đĄS&P 500
đĄDividend futures contracts
đĄExpense ratio
đĄTotal return
đĄCovered call ETFs
đĄDistribution yield
đĄReturn of capital
đĄTax efficiency
Highlights
QPL is an ETF from Pacer that focuses on providing quadruple the dividends of the S&P 500 for income investors.
The QPL ETF provides cash distributions equal to 400% of the S&P 500's ordinary yield while maintaining about 85-89% exposure to the S&P 500 Index.
The fund has approximately $500 million in net assets as of September 2024, with a potential for significant growth if expenses are reduced.
The main strategy involves holding 85-89% of the S&P 500 index stocks and using the remaining 11-15% for dividend futures contracts to enhance yield.
QPL offers a distribution yield of around 5.79%, significantly higher than the current S&P 500 dividend yield of approximately 1.25%.
The fund's fees are 60 basis points, which some investors might find high given the relatively simple strategy of using S&P 500 holdings and dividend futures contracts.
QPL uses dividend futures contracts, which can provide outsized returns compared to the S&P 500, although there is some risk of reduced dividends in certain years.
QPL has a trailing 12-month dividend yield of 5.51%, which is expected to remain within the 5-7.5% range over time.
The fund is tax-efficient, with a large portion of its distributions classified as return of capital, making it appealing for investors in higher tax brackets.
QPL has provided a total return of approximately 33% over the last three years, slightly trailing the S&P 500's 37% return, but outperforming many covered call ETFs.
For income investors, QPL offers a differentiated strategy compared to covered call ETFs, allowing for uncapped growth and tax efficiency.
The fund has a distribution policy where a small portion is taxed as ordinary income, and the majority is return of capital, making it suitable for tax-sensitive investors.
QPL is particularly attractive for income investors nearing or in retirement, who seek tax-efficient income streams without capping growth potential.
The fund is not recommended for younger investors (e.g., those in their 20s or 30s) but could be a good fit for those in their 50s or 60s looking for tax-efficient income.
The speaker believes that reducing QPL's expense ratio from 60 to 30-40 basis points could significantly increase its appeal and asset growth potential.
Transcripts
hi guys welcome back to the channel my
name is Dave and today I want to talk
about qpl this comes to us from Pacer
ETFs that's the same group that brought
us the triple leverage doic ETF known as
cows all right a good time to put my uh
disclaimer down here right now not
Financial advice because that was a
dirty dirty lie that's not what cows is
about but we are going to talk about qdl
because because chip look chip keeps
bothering me about qdp why because it is
an interesting product so uh whenever I
get these requests especially if there's
like six of them uh then I add it to my
list and eventually I like to to review
it because I like to reward those that
come along for the ride here at wealth
Adventures So today we're talking qtpl
if that is what you're looking for
please stick
around so before we do jump into QD PL
cows it's a real thing it's the Pacer us
cash cows 100 ETF it's a five star
morning star rating and it is probably
their most popular ETF so you can check
this one out as well if you're not
familiar with Pacer ETFs so uh yeah
that's cows it is a real thing but we're
focused on qdp which is quadruple the
dividends of the S&P 500 so this one's
been around now for a little over three
years and the performance has been
pretty good and if you're an income
investor and you're looking for a little
bit more than the S&P 500 offers you
this might be a good option someone
that's looking for growth and some
income so as they say here a
strategy-driven exchange traded fund
that's an ETF my friends that aims to
provide cash distributions equal to 400%
of the S&P 500 ordinary yield in
exchange for modest modestly lower
exposure about 85 to 89% to the S&P 500
Index uh performance it's a
fourstar and uh yeah as of 919
2024 uh they've got about $500 million
of net assets under management and my
belief here is that this could be like a
five billion
doll ETF if they just cut these expenses
back so during my research looking into
this thing uh this was brought up time
and time again that this is not an
overly complicated fund and I think
they're charging a little bit more 60
basis point so I think some people that
are conscientious of that expense ratio
might shy away from this product so
manager out there at Pacer ETFs you
might just cut that back a little bit
more I know it was a little bit higher
at one point now it's down to 60 basis
points I think if they could get this
down to that 30 to 40 basis points I
think you're going to see a nice big
spike as far as people that are going to
be putting their money into this in Li
of just buying the S&P 500 now let's
take a quick look at their strategy
overview and one of the reasons that I
think 60 basis points is a little steep
is because a lot of this is just buying
the S&P 500 so if you gave them a 100
bucks they're going to take about $89 of
that they're going to stick it in the
S&P 500 they're going to buy ivv vo or
spy but this case they're replicating
the index within here so just like those
products so they're know all 500 of
those uh stocks that are in the s&p500
then on top of that with the remaining
11 12 15% depending on what it's at at
that time cash treasu is utilized to
purchase additional dividend payments so
what they are are dividend Futures
contracts and we'll get into a little
bit more of this but that will give you
essentially what equates to a
distribution in the amount of about four
times times that of the S&P 500 so the
S&P 500 right now is about 1.2 or
1.25% so this is going to be right
around five right now it's assing
distribution yield as of 63024 is
5.79%
so the dividend yield for the S&P 500
right now is really low it's about the
lowest it's been you know I remember
first trading when I was very young and
somebody told me if the dividend rate of
the S&P 500 is above 2% you're a buyer
go buy if it's at 1.5 to two consider
buying just continue like dollar cost
averag in at that moment if it's Falls
below 1.5 you might be overvalued might
be backing off now I'm not saying that's
the that's what we're in right now the
conditions that we're in right now but
uh it's definitely very low right now
and so that 5.79% is relatively low for
what I think you'll get in this fund
too uh overtime so I think it'll be in
there between five and 7%
historically as we move forward we'll
kind of see where that plays out but
that's the idea they're going to be
putting this in the S&P 500 then they're
going to be buying dividend Futures
contracts with the rest of this which
can give you outsize Returns versus the
S&P 500 as we will see and that is the
strategy so 60 basis points again I
think is a little bit steep for what
they're actually doing here because
those those dividend Futures contracts
they do that once a year in December and
they go out three years and then at the
end of that year they're going to roll
to the next one so not L complicated so
from the Pacer website you can download
all the Holdings of qdl and what you're
going to find is just like they said
about 88
89% of this fund is just the S&P 500 all
those individual stocks of the S&P 500
at the proper waiting equal to 89% of
the fund with the balance being these
index Futures contracts you can see the
three of them here they expire in
December each year so we have 2024 2025
and 202 6 and you can see the waiting
over here to the right and the Futures
themselves which you can see here go out
to 2026 there's simply a bet on the
expected level of dividends in the
future versus what is current now I
wanted to find something that people
could relate to if they're not really
familiar with Futures so I found this at
dividend.com and I thought it explained
it pretty well you can read through it
but I want to focus here on the part
down here where it says according to SNP
by isolating the dividend from the stock
which that's what this is all about
Investors have been able to score an
annualized
6.71% return over the last decade that's
not too shabby at all and underscores
how powerful Dividends are to Total
returns so I think the important thing
here is to understand that these
dividend Futures contracts can give you
outsize Returns versus the S&P 500 so it
may give you something much larger than
6.71% one year but there might also be
years where they cut the dividend and uh
you have a retraction in the overall
dividend amount and you lose on these
trades however because we're doing it
across a three-year period most
instances I would expect a positive
return out of those three years and just
you just don't know how positive that
will be or if it will be outsized versus
just owning the S&P 500 now we can take
a real quick look at the dividend yield
in this case it's the trailing 12 months
for qdl and right now it's sitting right
at 5.51% I'd expect it to kind of stay
in that five to 7 and a half% right
around four times that of the S&P 500 so
uh I think the S&P 500 is right now
around
1.25% so it's pretty darn low relative
to where it's been historically now I
know I've mentioned it plenty of times
before but I am a Seeking Alpha
affiliate there are affiliate links down
below if you're looking for a stock and
ETF research tool but when it comes to
products like qdp I haven't found any
place that has better coverage than
Seeking Alpha so for example if you're
trying to find information on taxes
related to
qpl that's where I would go to find that
information typically so uh you might
also finding the prospectus and it
should all be spelled out there but a
lot of times these are summarized better
in this case I'm looking at John here
John Bowman and uh he did a review of
this there's a lot of reviews actually
on Seeking Alpha so again I find that
it's money well spent for myself so it's
one of the reasons I talk about it one
of the reasons that I utilize it so if
you're looking for a tax efficient
product this might be right up your
alley so we're looking at x dividend
dates for
2023 uh over here on the left and total
distributed amount here in the middle
and you can see that a small portion of
that is ordinary income and a large
portion is return of capital so
depending on your view of Return of
capital where you are uh this could be a
very tax efficient product for you where
a large portion of it is coming back and
you're not going to be paying taxes on
it so if you're in your Peak earning
years or you're income invest or looking
for something tax efficient at this
point in your life uh that's one of the
perks of uh qdp it could perform very
well for those looking for a nice stream
of income uh that's not going to be
taxed very heavily so now let's take a
look at what really matters and that's
performance so qdl has been out for over
three years which is a nice thing a lot
of these covered call ETFs haven't been
out that long so it's hard to look at
historical performance at least with
this product we have three years of
performance data to look back on so if
I'm just looking at Price return only
forgetting about the dividends and we
compare it to a couple other products
that have been out that long namely vo
which is the S&P 500 very popular and
jei a covered call ETF that's been
around for a little while we can see
that got 10% from qdl over the last
three years and let's remember 2022 was
not a good year uh for the stock market
in general 2023 Was a Very Good Year
2024 shaping up to be a very nice year
as well vo up 30% so triple and ji
losing 2% over the last 3 years but if
we feedb all those dividends then what
do we get distributions I should say
then we get total return so with uh
seeing Alpha all you got to do is hit
select metrics get rid of price return
look at performance a total return and
update our chart we can kind of see how
they compare when you also allow for all
those uh distributions to be accounted
in these returns then you're going to
see that qdl pretty respectable at about
33%
not too far off the pace by about 4% of
the S&P 500 you still get that better
return and perhaps that's the fee
difference right it's really affecting
that then with jeppy you actually have a
a pretty decent return also of 28% over
the last three years so respectable all
of them but you kind of see qdl kind of
fits right in the middle when we just
look at Total return for these these
three products and let's do one more
comparison and look at a one-year chart
Total return and compared to some other
products that you might compare this to
if you are an income investor so qdl
Total return one year 28% pretty darn
good vo
31% you know we just cut rates by 50
basis points so we do want to get long
some equities but if you don't want to
buy the straight S&P 500 you want to use
covered call strategies or something
like qpl I think it's still time to
start activating money again not
Financial advice but I am moving out of
cash I'm I'm getting along with some
equities I'm buying some more income
products uh Jeffy there at 16% not too
bad
spyied dvo doing 20.5% when I say not
too bad I'm saying not too bad compared
to the S&P 500 I'll take all of these um
and then x yld uh
14.6% I'm not really a fan of this
family you've probably heard but yeah
qdp L is doing quite well when you look
at the total return it's just trailing
the market but it's doing pretty well
compared to some of these other income
products so let's play a little like
don't like what do I like about this fun
well what I like most of all is it's not
a covered call ETF it's a different
strategy it's uncapped so it's allowed
to grow at least 89% of it is so when we
have big moves like we had Thursday
after a 50 point rate cut you're not
going to cap your upside uh so it's
allowed to grow and you need some of
that in your portfolio things that don't
correlate if you're just have a bunch of
covered call ETFs so it's a little bit
different I like that that might work
really well for somebody yes it's not 10
12% like you're getting distributed from
some of those funds that's okay because
that offers that growth and you can see
that total return was actually better so
it might be time to add a little bit of
qdl if if that's your situation second
thing that I like here is uh the tax
efficiency so if I'm getting those
distributions and I'm in a position
where I don't want to pay heavy taxes
right now I I'll push those off to a
later date this might be a good fund for
me to consider as well so getting five
to 6% maybe even 7% at times off of this
fund sounds pretty attractive if I get
to keep the majority of that because the
rest of it the majority of it is return
of capital so that might work out really
well for some investors I know I would
find that attractive uh right now if I
wanted the extra income uh what I don't
really like though is the fee associated
with this so 60 basis points seems
pretty steep for this strategy if you're
the fund manager and you're watching
this right now if you can find a way to
reduce that I truly think that you're
going to take something that's I think
was like 50 million of assets under
management and it could grow
substantially larger and maybe you could
offset that maybe you'd make a lot more
what do you think about that idea so who
should consider this ETF well I think if
you're an income investor that's heavily
uh into cover call ETFs and other income
schemes that you might look at something
like qdl as well to get that extra
little bit of income and that tax
efficiency so again spyied the same
strategy right 1256 contracts and return
of capital combine that with this
combine that with an MLP something that
gives you a K1 a lot of it is a return
of Capital Tax efficiency wow that looks
pretty good especially if you're in your
Peak earning years but then maybe you
don't want income anyway but if that's
your uh plan of attack then this is a a
pretty good one to consider so it is for
income investors I wouldn't say if I was
25 years old I'm not buying this uh if
I'm 55
65 then I'm definitely shopping around
for qpl especially if we can get that uh
60 basis points I I won't say it again
but but you you get the point so for me
buy don't buy I'm on the fence I'm on
the fence with this one like do I need
this in my portfolio right now or should
I just continue to buy the S&P 500 so
let me know what you think about qpl
down below do you own this one is it a
buy or don't buy I'd love to hear from
you and if you have any questions ask
down below like And subscribe if you
like this type of content and uh we will
see you next time have a great night
[Music]
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