Investors seeking consistent income are exploring strategies that combine stability, high yield, and potential for growth. One approach involves a diversified portfolio of four specific assets: an income-focused exchange-traded fund, a major energy company, a heating and ventilation distributor, and a household appliance manufacturer.
This combination, featuring JPMorgan Nasdaq Equity Premium Income ETF (JEPQ), Chevron (CVX), Watsco (WSO), and Whirlpool (WHR), currently offers an average dividend yield of approximately 5.8%. The strategy aims to provide a blend of monthly income, market stability, and long-term capital appreciation.
Key Takeaways
- A diversified portfolio of four assets—JEPQ, Chevron, Watsco, and Whirlpool—offers a combined average dividend yield of 5.8%.
- The strategy combines a high-yield monthly income ETF with stocks selected for stability and potential for capital growth.
- Chevron provides stability through its strong balance sheet, while Watsco and Whirlpool present opportunities for recovery and growth.
- The monthly distributions from the JEPQ ETF can be used to strategically reinvest in the other holdings during market downturns.
A Diversified Approach to Generating Income
Constructing a portfolio for passive income requires a balance between high current yields and the potential for future growth. Relying on a single asset can introduce significant risk. By combining different types of dividend-paying securities, investors can create a more resilient income stream.
This particular four-asset model is designed to cover multiple bases. It includes an ETF engineered for monthly income generation, an established energy company with a solid financial foundation, and two industrial companies currently facing temporary headwinds but possessing potential for future recovery and stock price appreciation.
The core idea is to use the consistent monthly cash flow from one asset, the JPMorgan ETF, to reinvest in the other three stocks. This allows an investor to buy more shares when prices might be lower due to market volatility, a practice known as dollar-cost averaging.
The Income Engine: JPMorgan's Premium Income ETF (JEPQ)
The cornerstone of this income strategy is the JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ: JEPQ). This fund is structured to provide investors with monthly income while offering some protection against stock market declines. It has a trailing distribution yield of 11.1%.
JEPQ's strategy involves two main components. The majority of its assets, up to 80%, are invested in equities listed on the Nasdaq index. The remaining portion, up to 20%, is invested in equity-linked notes (ELNs).
These ELNs generate income by selling monthly call options on the Nasdaq index. This process collects premiums, which are then distributed to the ETF's shareholders. The strategy performs well when the market moves sideways or declines moderately, as the premiums provide a steady income stream.
How Covered Call ETFs Work
ETFs like JEPQ use a "covered call" strategy. They own a basket of stocks and sell call options on those stocks or a related index. A call option gives the buyer the right, but not the obligation, to purchase a stock at a set price. The ETF collects a fee (premium) for selling this option. This generates income but can limit the fund's upside potential during strong bull markets.
If the market rises significantly, the ELN strategy may result in losses. However, the value of the ETF's direct equity holdings is expected to increase, partially offsetting the ELN performance. This structure is designed to capture some market upside while prioritizing income generation and mitigating downside risk.
Stability from an Energy Leader: Chevron (CVX)
For stability and a reliable dividend, the portfolio includes Chevron (NYSE: CVX), one of the world's largest integrated energy companies. The company currently offers a dividend yield of 4.3%.
Chevron's business is divided into two primary segments: upstream (exploration and production) and downstream (refining and chemicals). This integrated model provides a natural hedge against fluctuations in energy prices.
When oil and gas prices are high, the upstream segment generates substantial profits. Conversely, when energy prices fall, the downstream operations, which use oil and gas as raw materials, tend to become more profitable. This balance helps smooth out earnings over time.
Chevron's Financial Strength
According to Wall Street consensus estimates, Chevron is projected to generate $47.8 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2026. This compares favorably to its net debt of $37.7 billion, highlighting the company's strong balance sheet.
This financial stability makes Chevron a suitable choice for conservative investors. It provides exposure to the energy sector with a degree of protection against sharp declines in oil prices, all while paying a consistent dividend.
Growth Potential in Industrial Sectors
The final two components of the strategy, Watsco and Whirlpool, are included for their potential for capital appreciation in addition to their dividend payments. Both companies are currently navigating challenging market conditions, which may present a buying opportunity for long-term investors.
Watsco: A Leader in HVACR Distribution
Watsco (NYSE: WSO) is the largest distributor of heating, ventilation, air conditioning, and refrigeration (HVACR) equipment and parts in North America. The company has a strong track record of creating shareholder value, delivering a total return of 1,370% over the last 20 years. Its current dividend yield is 3%.
However, the stock has declined by more than 17% over the past year. Management attributes this to "soft market conditions" stemming from a regulatory-mandated transition to new, more environmentally friendly A2L refrigerants. This transition has temporarily disrupted normal business patterns.
Once the transition to A2L refrigerants is complete, analysts believe Watsco is positioned to resume its growth trajectory. The company's long-term strategy involves consolidating a highly fragmented industry through acquisitions.
Watsco's "buy-and-build" approach allows it to acquire smaller distributors and integrate them into its network, providing them with access to its advanced technology and extensive inventory. This strategy has been a key driver of its historical success.
Whirlpool: Navigating Market and Policy Shifts
Whirlpool (NYSE: WHR), a major manufacturer of household appliances, offers a dividend yield of 4.7%. The company's stock performance is often tied to interest rates, as lower rates can stimulate the housing market and increase demand for appliances.
Beyond interest rate sensitivity, a key factor for Whirlpool's future performance is international trade policy. The potential imposition of tariffs on appliances imported from Asian competitors could make Whirlpool's products more price-competitive in the United States.
Whirlpool's U.S. Manufacturing Footprint
A significant portion of Whirlpool's products are made domestically. The company manufactures approximately 80% of the appliances it sells in the U.S. within the country. This reduces its direct exposure to import tariffs on finished goods.
The company faced a difficult environment in 2025 after competitors reportedly increased shipments to the U.S. ahead of anticipated tariffs. However, as this excess inventory is sold, Whirlpool may find itself in a stronger competitive position next year if tariffs on imported products are enforced.
