Despite the strong performance of U.S. equities in 2026, highlighted by the Schwab U.S. Dividend Equity ETF (SCHD) achieving a 17.5% year-to-date total return and a 3.23% SEC yield, a less-recognized international counterpart has demonstrated superior results. The Amplify CWP International Enhanced Dividend Income ETF (IDVO) has not only outpaced its own benchmark but also offers a significantly higher dividend yield than SCHD, challenging common perceptions about the efficacy of covered call strategies.
IDVO, an actively managed ETF overseen by Capital Wealth Planning and Seymour Asset Management, strategically invests in high-quality international large- and mid-cap companies. A key element of its success lies in its use of American Depositary Receipts (ADRs), which provide access to liquid U.S. options markets, facilitating a more practical approach to individual covered call writing. The fund's managers meticulously select companies from the MSCI ACWI ex USA Index, evaluating factors such as earnings growth, free cash flow, dividend growth, return on equity, market capitalization, and management quality. This active management allows for flexible country, sector, and company weightings based on their investment outlook.
The core of IDVO's strategy is its tactical covered call approach. Unlike many funds that mechanically sell at-the-money calls across an entire index, IDVO's managers selectively write covered calls on individual holdings. They adapt strike prices, expiration dates, and overwrite levels in response to changing market conditions. This nuanced method aims to generate substantial option income while preserving more of the upside potential compared to traditional buy-write strategies. The outcome is a distribution rate of 5.93%, almost double that of SCHD, albeit intentionally lower than some conventional covered call ETFs that prioritize maximum current income at all costs.
For investors focused on long-term growth rather than just immediate income, total return is paramount. IDVO has shown remarkable performance in this regard. Since its inception through June 30, the fund's net asset value has delivered a cumulative total return of 111.16%, significantly outperforming its benchmark, the MSCI ACWI ex USA Index, which returned 95.01% over the same period. This success in outperforming benchmarks, even after factoring in option writing, is a rare feat for covered call ETFs. This is largely attributed to the managers' ability to selectively choose which stocks to write calls against and to dynamically adjust call parameters, thereby retaining more upside while still benefiting from option premiums.
However, this strategy's effectiveness is heavily reliant on the skill of its managers, implying an inherent active risk that is not present in systematic index strategies. Investors must trust the managers' expertise, as there is no guarantee of sustained outperformance. Additionally, IDVO has a higher expense ratio of 0.65%, which is considerably more than SCHD's passive 0.06% fee. Nevertheless, IDVO's impressive track record makes it an appealing option for investors looking to diversify internationally and achieve above-average income, all while successfully balancing yield with long-term total returns, especially for those with a U.S. equity home-country bias.
