If You Invested $5,000 In GPIQ At Inception, This Is How Much Cash From Dividends You Would Have Today

The Magnificent 7 Stocks, i,e, Apple, Amazon, Alphabet (Google), Meta Platforms (Facebook), Microsoft, Nvidia, and Tesla – are all technology stocks, and are part of the top 10 largest companies by market cap in the S&P 500 Index. Their tandem massive bull run, in part as a result of the huge excitement over AI (Artificial Intelligence), has been the major reason for the stock market’s overall bull market over the past decade. 

Due to its omission of financial companies, the Nasdaq 100 Index is heavily weighted in the high flying technology sector. Since the rest of the Nasdaq 100 are all large cap companies, it is an index watched by investors comfortable with technology and unafraid of its aggressive market volatility. Such a potentially strong upside index would inevitably attract Exchange Traded Funds. Invesco’s QQQ Trust was the first ETF to enter the fray and others were soon to follow. 

The possibilities of augmenting returns by using index option call writing and other derivative strategies for this fast moving index soon became apparent, and Neos, Global X, Defiance, Yield Max, and JP Morgan all issued their respective interpretations of this strategy. Never failing to take advantage of a financial market opportunity whenever its resources gave it an advantage, Goldman Sachs threw its hat into the Nasdaq 100 + options ring with The Goldman Sachs Nasdaq 100 Premium Income ETF (NASDAQ: GPIQ).     

The Goldman Sachs Nasdaq 100 Premium Income ETF

Designed to “approximate” the Nasdaq 100 Index, The Goldman Sachs Nasdaq 100 Premium Income ETF will normally carry 80% or more of its portfolio in proportion to the Nasdaq 100 Index, with management discretion over variables. While its portfolio stocks buoy its capital appreciation side, the 11.09% yield is derived predominantly from its derivative strategies. Unlike rival JEPQ, which uses Nasdaq 100 Equity Linked Notes as a principal protected method to capture call option premium income without disrupting the portfolio’s stocks, GPIQ is much more hands-on.

Goldman Sachs’ call option overlay can span anywhere from 25% to 75% of the stocks in the portfolio, and its managers oversee call options directly. Additionally, they will deploy FLEX options and similar derivatives as needed. FLEX options are underwritten with custom expiration dates, strike prices, contract sizes, and other variable characteristics to precisely match the hedging strategy at the moment and are generally traded solely on an  institutional basis. GPIQ’s info below is based on the market at the time of this writing. 

The top 5 weighted holdings in GPIQ are:

1. Apple – 8.89%
2. Microsoft – 8.18%
3. NVIDIA – 7.40%
4. Amazon – 5.44%
5. Broadcom – 4.15%

The aggressive covered call writing explains GPIQ’s somewhat higher expense ratio, but investors should be aware that means the portfolio is subject to higher turnover and greater risks in a strong bull market. This is because underlying stocks can potentially be subject to call if they become in-the-money before expiration, which could detract from dividend payouts.

Monthly Dividends Make A 19 month Difference

As the calculator demonstrates, a $5,000 investment in GPIQ back in October, 2023 would be worth $7,241.83 today, at the time of this writing, which equates to a 44.84% ROI. The total return would be $2,241.83.  

The annualized return equates to 26.20%. This calculation also includes compounding through reinvested dividends. The reinvested dividend value equates to $1,058.24. The cash dividends paid out from the initial 129.34 shares equates to $946.49. If the dividends were not reinvested, the total investment would be worth $6,183.59 and the total return would be $1,183.59. 

Monthly DRIP Dollars

Although GPIQ only has a 19 month history, it pays dividends monthly. The 19 month period dividend difference of $1,0854.25 represents over 20% value above the initial investment. As a monthly dividend generator, GPIQ would continue to compound and dollar cost average every month, which gives it an edge over a dividend that is paid quarterly. This could be facilitated under a Dividend Reinvestment Plan (DRIP), which puts the additional share purchases on autopilot and (usually) feeless basis. As each month’s newly acquired shares also generate dividends, the overall dividend total for purchases will continue to compound as well, thus supplying an exponential factor to the overall wealth building process.

While its limited history makes an extended period projection of future performance difficult to gauge, Goldman Sachs’ trading prowess in practically every area of finance is renowned for its ruthless pursuit of profits, justifying its “Vampire Squid” sobriquet, as coined by journalist Matt Taibbi.  Its global equity options operation is considered one of the top 3 in the world. Taking this factor into account, the risk/reward ratio for GPIQ is more favorable than what statistics alone might indicate.

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