Want Decades of Passive Income? Buy This ETF and Hold It Forever.

Investing always requires patience. Even if you're looking for the hottest growth stocks, there aren't any magic shortcuts to instant riches. Real wealth is built over many years, thanks to the mathematical magic of compound returns.

That's even more true in the field of income investments. Growth investors often use dividend reinvestment plans (DRIPs) to buy more shares and boost their long-term returns with every dividend payment. Generating income from your investment means leaving the DRIP checkbox unchecked, collecting cash payouts instead of reinforcing your investments.

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So the criteria for a successful income investment are a bit different. You may not care much whether the price of your chosen stock or exchange-traded fund (ETF) is going up or down, as long as it offers robust dividend payouts in pretty much any economy.

The JPMorgan Equity Premium Income ETF (NYSEMKT: JEPI) checks all the right boxes for a long-term income investment. Let's take a closer look at this popular ETF, from the perspective of an income-craving dividend investor.

How generous are these payouts?

The Premium Income ETF currently offers an annual dividend yield of 8%. That's about 6 times the yield of a simple S&P 500 (SNPINDEX: ^GSPC) tracker like the Vanguard S&P 500 ETF (NYSEMKT: VOO), and more than twice the yield of the well-respected income stock ExxonMobil (NYSE: XOM), for example. In fact, only two S&P 500 stocks offer a richer payout than this ETF nowadays.

The dividend is also quite generous next to other income-generating investment vehicles. The best money market and savings accounts have annual percentage yields (APYs) hovering around the 4% mark. Certificates of deposit are in the same range. About a dozen bond funds can put up a fight with yields of 8% or more, but they are smaller and less liquid than the ultrapopular Premium Income ETF.

In other words, this fund can deliver more than a robust dividend yield -- the payout is among the most lucrative options on the market today.

Image source: Getty Images.

How the Premium Income ETF delivers on its promises

How safe and secure is this fund, though? JPMorgan Chase (NYSE: JPM) launched it in the spring of 2020, so the ETF can't fall back on decades of proven performance.

As a reminder, this ETF isn't supposed to "beat the market" in terms of share price returns. The stated goal is to "deliver consistent monthly income and the potential for capital appreciation, aiming to capture a majority of the returns associated with the S&P 500 with less volatility." So its returns tend to trail behind the S&P 500 funds over any given time period.

At the same time, the JPMorgan fund really delivers on its income-generating goals. The high yield you see today is no short-lived fluke, but actually the lower end of a high long-term standard:

JEPI Dividend Yield data by YCharts

The fund itself has seen very modest returns so far, with a 6% price drop over the last 4 years. But its total return stays close to the S&P 500 funds if you enable the DRIP option for a few years:

JEPI data by YCharts

And of course, the Premium Income ETF offers a stellar income stream when the time is right. Turn off the DRIP feature and watch those generous payouts appear on a monthly basis.

Where this ETF fits in an intelligent investment strategy

So I wouldn't necessarily build my investing portfolio around the JPMorgan Equity Premium Income ETF quite yet. I'm only 50 and have a long way to go before retirement, which is when those beefy payouts would come in handy. The dependable returns and lower annual expense ratio of a large S&P 500 tracker seem like a better choice at this point.

There's nothing wrong with including it as an income-generating part of a diversified portfolio, though. It's also an extremely diversified ETF, where none of the 129 holdings account for more than 2% of the total fund value. And when the time is right for passive income streams, it's hard to beat this high-quality dividend payer.

Should you invest $1,000 in JPMorgan Equity Premium Income ETF right now?

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JPMorgan Chase is an advertising partner of Motley Fool Money. Anders Bylund has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends JPMorgan Chase and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.