How Income Investors Can Tap ’Covered Calls’ for Dividends Up to 9.7%

Big companies are about to make even more money. They have discovered they no longer need armies of new hires to grow—extremely bullish news for shareholders because human employees are expensive.

Good ones can also be notoriously elusive. For example, I’m the longest-standing member of my kids’ school marketing committee, and we’re always scrambling for volunteers (what non-profit isn’t?).

Until now, that is.

Over the weekend, we welcomed the most talented marketer I’ve ever worked with to our team: ChatGPT 4.5. “GPT” graciously accepted our volunteer position, and we’re already actively boosting online referrals for the school. I’m learning cutting-edge “AI referral” techniques straight from the entity that invented them.

It was the easiest recruitment effort I’ve ever experienced. GPT and I were already collaborating closely to market and sell several software products, so extending our teamwork to the non-profit world was seamless.

The same dynamic is quietly playing out at for–profit companies, particularly the tech giants that dominate the cap-weighted S&P 500. A senior executive friend at Meta (NASDAQ:) recently confirmed to me that the company has essentially frozen hiring, pivoting entirely toward AI-driven growth.

It already shows in the numbers. Over the past year, Meta has increased revenues by 22% while only hiring 10% more people. Sales are growing faster than humans, a trend that I expect to accelerate in the months and years ahead.

In fact, I wouldn’t be surprised if Meta has already reached peak headcount, which means profits are set to surge even more.

And Meta isn’t alone in this “growing without hiring” trend.

Alphabet (NASDAQ:) (GOOG) grew revenues by 14% without any net new hires. And Nvidia (NASDAQ:) did grow headcount by 13%, but for good reason—sales exploded by 126%!

Microsoft (NASDAQ:) is likewise sailing along without the need for new engineers, with 16% revenue growth on just a 3% headcount increase:

The AI adoption at these companies is just beginning. These profit machines are already selling $1 to $2 million in product per employee, but their profits are going to pop as they sell even more without the expense drag of adding new employees!

This four-pack packs 20% of the S&P 500 index. When we combine Amazon (NASDAQ:), Tesla (NASDAQ:), Netflix (NASDAQ:) and Apple (NASDAQ:)—four more tech companies that are scaling without hiring—we have 32% of the index.

Earlier in the year, I warned that the “tech heaviness” of the S&P 500 was dangerous—and it sure was during the tariff troubles of March and April. But with trade tensions fading and tech profits exploding thanks to lean payrolls, these big 8 companies are now set to power the index higher.

Plus, we have a weakening . Stocks are, of course, priced in dollars. So, a softer dollar is another bullish catalyst for the .

As income investors, we can tap this rising tide for steady monthly income. To do so, we’ll use covered calls—a strategy where we buy stocks and then sell (“write”) call options to other investors. We earn income now from the option premiums we collect, paid upfront to agree to sell our shares at a higher price later.

Market volatility from a tumultuous spring means these options pay generous premiums right now (covered call options pay more when things are bouncing around!). So, this is a good market moment to cash in on leftover fear. I’m talking about dividends up to 9.7% that will benefit from the S&P 500 soaring towards 9000. (Yes, it sounds wild—but with record profits plus a declining dollar, this is a potential price target before the end of Trump 2.0.)

Eaton Vance Tax-Managed Global Diversified Equity Income Fund (NYSE:) yields 9.2% and trades at a 6% discount. That’s a sweet deal because it holds big winners like Amazon, Alphabet, and Microsoft, then boosts income by selling covered calls on the S&P 500 and international indices.

The income from these constantly expiring calls is the key to the EXG’s sky-high “synthetic yield.” The fund collects premiums from option buyers immediately after it writes these calls, generating steady income for shareholders.

We can think of this as “renting” out positions to generate extra cash. EXG owns the underlying shares behind the S&P 500. Each month it leases its collection of stocks and collects the option premiums. Rinse and repeat.

Nuveen S&P 500 Buy-Write Income Fund (NYSE:) pays 8.1% and trades at a 9% discount to its net asset value (NAV)—another good deal because we’re talking Apple and Amazon for 91 cents on the dollar.

Finally, the Global X S&P 500 Covered Call ETF (NYSE:) pays a 9.7% dividend. It is an ETF, so it trades at par (“fair value”), as most do.

XYLD owns the S&P 500 stocks and has also written calls on the S&P 500 that expire later in June. When that happens, the fund will write new calls for July—delivering more tasty income to its investors.

These funds all pay monthly dividends. As sellers of covered calls, they exult in market volatility that delivers high option premiums. Plus, their NAVs have a tailwind—tech profits popping!

Disclosure: Brett Owens and Michael Foster are contrarian income investors who look for undervalued stocks/funds across the U.S. markets. Click here to learn how to profit from their strategies in the latest report, “7 Great Dividend Growth Stocks for a Secure Retirement.”