DIVO Commentary January 2024
After 9 consecutive weeks of gains in the S&P 500, it seemed like the equity rally had run out of steam just as the calendar turned the page on a new year. Or had it? Softer than expected inflation data reinforced expectations that interest rate cuts were a real possibility this year, though the timing continues to be a source of debate. Generally positive economic news and earnings releases supported the thesis that – despite being on the other side of one of the most aggressive interest rate hike campaigns ever – the economy and the consumer appeared relatively healthy. The result: by mid-January the equity markets were making all-time highs.
During January, the Amplify CWP Enhanced Dividend Income ETF (DIVO) returned 1.79% while the benchmark, the S&P 500 TR Index, returned 1.68% and the CBOE S&P 500 BuyWrite Index returned 1.77%. The Information Technology sector (+4.77%) contributed most significantly to the Fund’s return for the month along with Consumer Staples (+5.33%) and Financials (+1.84%). Energy (-2.25%) contributed the least to the return during the period followed by Materials (-7.74%).1 Positions that contributed most significantly included Procter & Gamble (PG), Merck (MRK) and Microsoft (MSFT). Positions that detracted most from returns in January included UnitedHealth (UNH) and Schlumberger (SLB).
The Fund added two new positions during January; Apple (AAPL) and Marathon Petroleum (MPC). Apple (AAPL) was called away in November and we were able to re-enter a position at a more attractive price than where we got called away. They pay a modest dividend but have an attractive shareholder-friendly total return profile and are a leader in the Information Technology sector. Marathon Petroleum (MPC) is another name that we have owned in the past and were called away from last year. They are a leader in the Energy sector and produce large amounts of free cash flow, have shareholder friendly buybacks and continue to increase their dividend. We also added to the position in Agnico Eagle Mines (AEM) reflecting our positive outlook on gold/gold miners as well as Home Depot (HD), a name we’ve owned for a while and continue to believe is well positioned within the Consumer Discretionary sector. Schlumberger (SLB) was one of the companies we used to express our positive view on the Energy sector, but it has underperformed and we decided to exit our position.
From an options standpoint, while overall volatility remained relatively muted there were opportunities that allowed us to be fairly active throughout the month. We sold new calls during the month on Broadcom (AVGO), Cisco (CSCO), Goldman Sachs (GS), Home Depot (HD), IBM (IBM), JPMorgan (JPM) and Microsoft (MSFT). We had one call that we wrote last month on Coca-Cola (KO), which expired during January.
The portfolio held a total of seven covered calls2 at the end of January 2024: Broadcom (AVGO), Cisco (CSCO), Goldman Sachs (GS), Home Depot (HD), IBM (IBM), JPMorgan (JPM) and Microsoft (MSFT). At the end of the month, approximately 11.2% of the portfolio was covered.
Distribution Rate is computed as the normalized current distribution (annualized) over NAV per share. In addition to net interest income, distributions may include capital gains and return of capital (ROC). Please click here for more 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.
Fund inception date: 12/14/2026. DIVO's gross expense ratio is 0.55%.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 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.
All data as of 1/31/2024. 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 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.
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.
THIS MATERIAL MUST BE PROCEDED OR ACCOMPANIED BY A FUND PROSPECTUS. Read the prospectus carefully before investing.
© 2023 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
Carefully consider the Funds’ investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in Amplify Funds statutory and summary prospectus, which may be obtained by calling 855-267-3837 or by visiting AmplifyETFs.com. Read the prospectus carefully before investing.
Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns.
Amplify ETFs are distributed by Foreside Fund Services, LLC.