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A Hedged ETF With Big Income and Upside Potential

BY | ETF Database
7:43 am ET 12/29/25 | 42 VIEWS
Advisors and investors familiar with the famed Nasdaq-100 Index (NDX) and the various ETFs tracking that gauge know the benchmark and the related funds have delivered stellar long-term gains due in large part to outsized exposure to large-cap technology stocks. One thing NDX is not known for is income.Only recently has the technology sector become a reliable dividend destination, but with NDX steadily trending higher, its dividend yield is a paltry 0.45%. Investors can significantly improve upon that scenario with the NEOS Nasdaq-100 Hedged Equity Income ETF (QQQH A-). The $353.55 million QQQH, which recently turned six years old, checks the income box in a big way as highlighted by a distribution rate of 9%, which is even more compelling when considering this fund offers some downside protection, too.Protection and Upside CaptureIn addition to that big yield mentioned above, QQQH offers another source of allure by way of its buffering qualities. The ETF “may offer a measure of downside protection via a constant, fully financed market hedge that seeks to reduce downside risk,” according to the issuer. “The Fund may offer flexibility across markets throughout a systematic approach that may aid in capturing gains and minimizing losses.” QQQH’s track record speaks for itself. For the three years ending Dec. 22, the ETF’s average annualized volatility was 13.4%, well below the 20.1% sported by the largest NDX-tracking ETF. During that period, QQQH’s largest drawdown was 760 basis points below that of the parent gauge. In other words, the NEOS didn’t just promise downside protection. It delivered just that. What’s interesting and perhaps overlooked regarding QQQH is that its hedging properties and income stream don’t require full sacrifice of upside capture. No, this ETF won’t capture all of NDX’s gains, but don’t doesn’t leave investors out in the cold, either. Over the past three years, the NEOS ETF returned nearly 87%, which is quite solid considering those gains accrued with big income and reduced volatility. At a time when the artificial intelligence (AI) trade has momentum and is expected to grind higher in 2026, QQQH could be relevant to a broad swath of investors, particularly if predictions of some AI lumpiness pan out. “While adoption is broadening, productivity gains vary widely across sectors. AI continues to deliver strong benefits in routine, document-centric, or customer-facing tasks, but complex workflows still face frictions,” says Moody’s. “Even when models perform well in controlled environments, deploying AI into an enterprise’s operations requires the redesign of full processes. As a result, we expect productivity gains to gradually increase but remain highly uneven both across and within sectors.” For more news, information, and analysis, visit the Tax Efficient Income Content Hub.

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