COMMENTARY
While the equity rally that was resilient throughout most of 2024 seemed to fade towards the back half of December, collectively 2023 and 2024 closed out their best back-to-back years since the turn of the century. Admittedly, December was off to a good start in the equity markets until the Federal Open Market Committee (FOMC) meeting mid-month conveyed fewer rate-cuts for 2025 than anticipated. On one hand, this conveys a constructive outlook for the economy – that it can continue to show modest growth without aggressive rate-cutting – but on the other hand it also weighs on investors outlook for companies to continue to grow their revenue and earnings. 2025 brings a fresh set of opportunities to investors, beginning with a new administration, Q4 earnings and an another FOMC meeting, all before month-end.
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OVERALL MORNINGSTAR™ RATING |
During December, the Amplify CWP Enhanced Dividend Income ETF (DIVO) returned -4.95% while the benchmark, the S&P 500 Index, returned -2.38% and the CBOE S&P 500 BuyWrite Index (BXM) returned -2.22%. The Financials sector (-2.23%) was the biggest contributor to returns followed by Utilities (-7.95%) and Consumer Staples (-6.46%). Consumer Discretionary (-6.01%) contributed the least to the return followed by Health Care (-10.85%). Positions that contributed most significantly included CME Group (CME), Walmart (WMT) and Visa (V) while UnitedHealth (UNH) and Caterpillar (CAT) were among the biggest detractors. In early December, the tragic incident involving the UnitedHealth insurance division CEO weighed heavily on the sector as well as shares of UNH. In addition, new legislation was presented that would require divesting their pharmacy business (legacy CVS), and the likelihood of the legislation passing is uncertain. Nonetheless, we believe the portfolio position in UNH remains compelling and the situation will be monitored closely.
During December RTX Corporation (RTX), formerly Raytheon Technologies, was added to the portfolio. RTX is attractively priced, generates significant free cash flow and has robust revenue growth over the past 12-months in addition to an attractive dividend yield. Honeywell (HON) and Duke Energy (DUK) were also added to during the month. From a sector perspective, the Fund maintained an overweight to Financials and underweight to Information Technology, as many of the companies in that sector don’t meet the criteria to be included in the Fund.
From an options standpoint new calls were sold during the month on Apple (AAPL) while several existing call options expired.
The portfolio held no covered calls2 at the end of December 2024.
At the end of the month the portfolio was uncovered.
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. For performance data current to the most recent month-end please visit DIVOETF.com.
| Distribution Frequency: Monthly |
Distribution Rate: 4.89% |
30-Day SEC Yield: 1.87% |
The return of capital (ROC) can play a beneficial role in ETFs that utilize option writing strategies to generate income. Option premiums received from selling a call (or put) are typically classified as a capital gain to the fund. Unlike interest or dividends, capital gains can be offset with losses. For tax purposes, this can allow the ETF to distribute option premiums as a non-taxable distribution, commonly called ROC. ROC reduces the investor's cost basis, deferring the capital gains tax owed upon selling shares. Option premiums can also provide a measure of downside risk mitigation in volatile market conditions with the option premium received helping offset a decline in portfolio holdings and improving risk-adjusted returns. Option writing strategies offer an attractive after-tax, risk adjusted return for investors seeking income. ROC is 70% as of 12/31/24.
Fund inception date: 12/14/2016. DIVO’s gross expense ratio is 0.56%. The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. Short-term performance, in particular, is not a good indication of the fund’s future performance, and an investment should not be made based solely on returns. For performance data current to the most recent month-end please visit AmplifyETFs.com/DIVO. Brokerage commissions will reduce returns. A fund’s NAV is the sum of all its assets less any liabilities, divided by the number of shares outstanding. The closing price or market price is the most recent price at which the fund was traded.
Distribution Rate is computed as the normalized current distribution (annualized) over NAV per share. Distributions have been classified as a return of capital and may be comprised of option premiums, dividends, capital gains, and interest payments. There is no guarantee the ETF will pay a distribution. Click here for Form 19(a)-1 information. 30-Day SEC Yield is a standard yield calculation developed by the Securities and Exchange Commission that allows for fairer comparisons among bond funds. It is based on the most recent month end. This figure reflects the income earned from dividends – excluding option income – during the period after deducting the Fund’s expenses for the period.
| Sector | % Weight |
| Financials | 27.68% |
| Industrials | 13.94% |
| Health Care | 13.77% |
| Consumer Discretionary | 12.28% |
| Information Technology | 10.56% |
| Communication Services | 6.69% |
| Energy | 5.38% |
| Consumer Staples | 4.36% |
| Materials | 3.09% |
| Utilities | 2.26% |
TOP 10 HOLDINGS
| Ticker | Name | % Weight |
| V | Visa | 5.60% |
| UNH | UnitedHealth | 5.59% |
| MSFT | Microsoft | 5.36% |
| HON | Honeywell | 5.29% |
| CAT | Caterpillar | 5.26% |
| CME | CME Group | 5.15% |
| JPM | JPMorgan Chase | 5.01% |
| GS | Goldman Sachs | 4.96% |
| HD | Home Depot | 4.95% |
| AMGN | Amgen Inc | 4.84% |
All data as of 12/31/2024. Subject to change at any time. Fund holdings should not be considered recommendations to buy or sell any security. View Current Complete Holdings.
Index Definitions: All indexes are unmanaged and it’s not possible to invest directly in an index. S&P 500 Total Return Index—market-capitalization-weighted index of the 500 largest U.S. publicly traded companies by market value, and assumes distributions are reinvested back into the index. It does not include fees or expenses. CBOE S&P 500 BuyWrite Index (BXM)—tracks the performance of a hypothetical buy-write strategy on the S&P 500 Index. A “buy-write” strategy is generally one in which an investor buys a stock (or basket of stocks), and also writes covered calls that correspond to those holdings. CBOE Volatility Index (VIX) is a measure of implied volatility, based on the prices of a basket of S&P 500 Index options with 30 days to expiration. DIVO differs substantially from the S&P 500 Index and CBOE S&P 500 BuyWrite index, which are used for comparison purposes as widely recognized measures of U.S. stock market performance. While the returns of DIVO have exhibited positive (but varying) correlation to the indexes over time, DIVO may invest in different stocks and in different proportions than in the S&P 500 index and CBOE S&P 500 BuyWrite index.
1All percentages shown indicate total return of the sector for the month.
2A covered call refers to a financial transaction in which the investor selling call options owns an equivalent amount of the underlying security.