Summary
- JEPQ ETFs dividend historically
- JEPQ ETFs use of ELNs
- How is JEPQ ETF taxed compared to others
With some many great high income ETF investments across the market in 2025 it’s hard to know which of the ETFs is “best” or at least “best” for you and your personal situation. What I mean by that is there are NASDAQ-100 focused ETFs like JEPQ, GPIQ, or QQQI for example that all offer NASDAQ-100 exposure through a high-income strategy, but each of those three ETFs although having things in common are also very different.
JEPQ or the JPMorgan Nasdaq Equity Premium Income ETF has amassed a huge following in the dividend income space and has grown to over 22B in AUM. The ETF has given investors income exposure to the NASDAQ and monthly income that has clocked in at anywhere from around 9-12% yield (depending)
ELNs | What is an equity-linked note?
According to Investopedia: “An equity-linked note (ELN) is an investment product that combines a fixed-income investment with additional potential returns that are tied to the performance of equities. Equity-linked notes are usually structured to return the initial investment with a variable interest portion that depends on the performance of the linked equity. ELNs can be structured in many different ways, but the vanilla version works like a strip bond combined with a call option on a specific security, a basket of securities or an index like the S&P 500 or DJIA. In the case of a note linked to an equity index, the security would typically be called an equity index-linked note.”
JEPQ ETFs use of ELNs
JEPQ is built for monthly income, but with less volatility than just owning the Nasdaq 100 outright.
It holds a bunch of tech-heavy stocks similar to the Nasdaq 100 but keep in mind, it doesn’t exactly track the index. Then it sells monthly out-of-the-money covered calls on the index or related ETFs via equity-linked notes (“ELNs”). Per its prospectus, the fund will invest up to 20% of its portfolio in these ELNs and hold the rest in equities.
Due to the use of ELNs and JEPQ ETF’s strategy the fund is not paying a majority of the income distributed in the form of Return of capital or ROC
The fund reported in their annual report with the year ending on June 30th, 2024, that JEPQ paid $809M in ordinary income distributions. Only $61M of the $809M received reduced tax rates and would be more tax friendly income since those were qualified dividends within JEPQ ETF.
2025 non-qualified dividend tax rates
Conclusion
JEPQ or the JPMorgan Nasdaq Equity Premium Income ETF has offered dividend income investors solid monthly income for a long time and has even offered a very impressive total return since inception. But since JEPQ ETF is taxed the way, it is, and since there are other ETFs that offer a similar strategy without the tax burden (the use of ROC for example) investor should assess JEPQ ETF and how JEPQ ETF dividends are taxed in order to know if or if not, this ETF is right for them.