QDPL: 4X the distribution of the S&P500 plus Growth with this Pacer ETF... And NO Options.

Summary

In 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

• 📈 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.
• 🐄 QDPL is compared to COWS, another ETF from Pacer known for its focus on cash cows in the market.
• 💵 QDPL offers a distribution yield of 5.79%, which is significantly higher than the current 1.25% yield of the S&P 500.
• 💡 The ETF allocates 85-89% of its assets to replicating the S&P 500, with the remainder used for purchasing dividend futures contracts.
• 🔄 These dividend futures contracts are rolled over annually in December and are meant to enhance income over the long term.
• 💰 The ETF has over $500 million in net assets under management, with the potential to grow significantly if expense ratios are lowered.
• 🔎 The expense ratio for QDPL is currently 60 basis points, which some investors might consider too high for the relatively simple strategy it employs.
• 📊 Over the past three years, QDPL has delivered a 33% total return, trailing slightly behind the S&P 500’s 37% return.
• 📉 The fund is positioned as a good option for income-focused investors, especially those seeking tax-efficient strategies due to its return of capital.
• 🛠 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

00:00

📊 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.

05:01

📈 Overview of QPL’s 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 500’s 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.

10:03

📜 QPL’s 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 QPL’s strategy.

💰 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.

📊 Performance Comparison: QPL vs. S&P 500 and Other ETFs

Dave compares QPL’s trailing 12-month dividend yield of 5.51% to the S&P 500’s 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 fund’s tax-efficient nature, where a large portion of distributions come from return of capital, making it appealing to investors looking to minimize taxes. QPL’s 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.

📉 Breaking Down Total Returns and Comparative Analysis

Dave reviews QPL’s total return over the last three years, comparing it with VO (S&P 500) and JEPI (covered call ETF). QPL’s return stands at 33%, slightly behind the S&P 500’s 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 VO’s 31%.

💼 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.

🧮 Final Thoughts and Buy/Don’t Buy Verdict

Dave wraps up the video by offering his verdict on QPL. He admits he’s 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 don’t 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.

Keywords

💡Pacer ETFs

Pacer ETFs is the financial company behind the investment products mentioned in the video, including QDPL and COWS. They specialize in exchange-traded funds (ETFs), which allow investors to buy into specific financial strategies or market sectors. The video's speaker highlights Pacer ETFs for offering innovative products like the Cash Cows 100 ETF (COWS) and QDPL.

💡QDPL

QDPL is the main focus of the video, an ETF provided by Pacer ETFs designed to offer dividends that are quadruple the yield of the S&P 500. The speaker discusses how this fund aims to distribute income at 400% of the ordinary yield of the S&P 500, making it an attractive option for income investors looking for higher payouts.

💡S&P 500

The S&P 500 is a stock market index that tracks the performance of 500 of the largest publicly traded companies in the United States. It serves as the benchmark against which QDPL's performance is measured, as QDPL aims to deliver higher dividend yields by holding 85-89% of the S&P 500 stocks and adding dividend futures contracts.

💡Dividend futures contracts

Dividend futures contracts are financial instruments that allow investors to speculate on the future dividends of a stock index like the S&P 500. In the video, QDPL uses these contracts to increase the overall yield of the ETF by adding an additional income stream on top of the regular dividends paid by the stocks in the S&P 500.

💡Expense ratio

The expense ratio is a key metric in the video, representing the annual fee charged by an ETF to its investors. QDPL has an expense ratio of 60 basis points (0.60%), which the speaker criticizes as being too high for a relatively simple strategy that primarily involves replicating the S&P 500 and purchasing dividend futures contracts.

💡Total return

Total return refers to the overall performance of an investment, including both price appreciation and dividends. The speaker compares the total return of QDPL over three years to other ETFs like the S&P 500 (VO) and a covered call ETF (JEPI), noting that QDPL has a respectable total return of 33%, close to the S&P 500's 37%.

💡Covered call ETFs

Covered call ETFs are mentioned as a comparison to QDPL. These funds generate income by selling call options on the stocks they hold, which caps their upside potential but provides steady income. The speaker prefers QDPL to covered call ETFs because it does not cap upside growth, allowing more participation in rising markets.

💡Distribution yield

Distribution yield refers to the annualized percentage return that an ETF provides to investors through dividends. QDPL's current distribution yield is around 5.51%, significantly higher than the S&P 500’s yield of 1.25%. The speaker expects QDPL’s yield to stay within the 5-7% range, making it attractive for income-focused investors.

💡Return of capital

Return of capital is an important tax concept discussed in the video, where part of the ETF's distribution is considered a return of the investor’s own capital, rather than income. For QDPL, this structure can be beneficial to tax-conscious investors, as return of capital is not taxed in the year it is received, making the fund more tax-efficient.

💡Tax efficiency

Tax efficiency is highlighted as a key advantage of QDPL, particularly for investors looking to minimize taxes on their income. Because a large portion of QDPL's distributions is classified as a return of capital, investors can defer taxes, making the ETF more appealing to those in higher tax brackets or in their peak earning years.

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]