IDVO's Global Game Plan

The Executive Summary (For Those Between Meetings)

The Amplify CWP International Enhanced Dividend Income ETF (IDVO) is what happens when you combine global dividend hunting with options income strategy.

Look - I like this option and I started a position in our family portfolio last week. Over time, I plan to expand the position to increase our international exposure.

Table of Contents

• The Executive Summary (For Those Between Meetings)

  • The Headline Numbers

  • Quick Risk Snapshot

  • Morningstar's Quick Take

• A Business Professor's Reality Check

• The Portfolio: A Global Buffet

• The Secret Sauce: Style and Strategy

• Who Should Book This Trip?

  • 1. Income-Focused Investors Seeking Global Opportu …

  • 2. Volatility-Tolerant Investors

  • 3. Global Diversification Seekers

  • 4. Options-Savvy Investors

  • 5. Strategic Portfolio Allocators

  • Who Should Think Twice

• The Risk Baggage (Pack Accordingly)

  • 1. Return of Capital: The Elephant in the Room

  • 2. The Trading Carousel

  • 3. Concentration Conundrum

  • 4. Currency Complications

  • 5. The Youth Factor

  • 6. Risk Management Strategy

• The Morningstar Reality Check

• The Bottom Line

• Quick Feature Check: What's Your Investment Priori …

Here's what you need to know about IDVO in the time it takes to finish your coffee:

The Headline Numbers

• Current yield: 5.9% paid monthly (though 63% comes from return of capital (ROC) - more on that later)

• Two-year performance: 13.7% total return, outpacing its benchmark's 10.5%

• Expense ratio: Competitive at 0.66%, landing in the second-cheapest quintile of its peer group

• Portfolio: 49 stocks spread across 15+ countries, with 38% in the top 10 holdings

Think of IDVO as the globe-trotting sibling of the well-established Amplify CWP Enhanced Dividend Income ETF (DIVO) [Editor's note: Check out our recent deep dive into DIVO here]. While DIVO has built a strong track record focusing on U.S. blue-chip dividend stocks, IDVO takes that same winning formula international.

The fund scours international markets for dividend-paying stocks (mostly steering clear of U.S. companies at just 5% allocation) and then selectively writes covered calls on some positions to generate extra income. It's like owning a rental property portfolio across different countries while occasionally renting out the penthouse suites for special events.

This international expansion of the DIVO strategy makes sense - while DIVO has delivered impressive results with a total return of 110% over five years by focusing on U.S. dividend growers, IDVO offers a complementary approach for investors seeking to diversify globally while maintaining that same income-focused methodology.

Quick Risk Snapshot

• Higher volatility than peers (Morningstar confirms this)

• Significant portfolio turnover at 104% annually

• Young fund (launched September 2022)

• Currency exposure across multiple markets

• Concentrated positions despite global spread

Morningstar's Quick Take

They've assigned a Neutral rating, essentially saying "interesting strategy, decent execution, but let's see how it performs over a full market cycle." The fund scores "Average" on process and people, with some concerns about the parent company.

If you're looking for international dividend exposure with an income boost from options strategies, IDVO deserves a closer look. But like any international journey, you'll want to check the full itinerary before booking your ticket. Keep reading for the detailed trip plan.

A Business Professor's Reality Check

As a business school professor, I've watched countless students run simulations where they bet everything on a single market or client. When times are good, they look brilliant. Then comes the inevitable twist - a regional crisis, a major client bankruptcy, or a market meltdown. Suddenly, those concentrated strategies start to crumble like a house of cards in a hurricane.

The Portfolio: A Global Buffet

IDVO spreads its bets across:

• Financial Services (20.75%) - Banking on global money management

• Consumer Cyclical (15.25%) - Because retail therapy is universal

• Energy (14.49%) - Powering portfolios across continents

• Technology (12.17%) - A surprisingly modest tech appetite

• Basic Materials (12.14%) - Building blocks of global growth

The fund holds 49 equity positions and maintains a relatively concentrated portfolio, with about 38% of assets in its top 10 holdings. Think of it as a carefully curated selection rather than an all-you-can-eat buffet.

The Secret Sauce: Style and Strategy

According to Morningstar's analysis (and their fancy style box), IDVO tends to favor:

• Larger companies (size factor: large)

• High momentum stocks (they like winners)

• High volatility positions (more risk, potentially more reward)

• Highly liquid assets (easy to trade when needed)

The fund employs a covered call strategy on select positions - think of it as renting out your stocks for extra income. This helps support that attractive 5.9% yield but can cap your upside in strong bull markets.

Who Should Book This Trip?

Let's dive deeper into who might benefit most from adding IDVO to their portfolio. As with any investment strategy, fit is crucial – not every fund is right for every investor.

1. Income-Focused Investors Seeking Global Opportunities

If you're looking for regular income, IDVO's 5.9% yield paid monthly could be attractive. This is particularly relevant for retirees or income-focused investors who want their portfolio to generate consistent cash flow. The monthly distribution schedule can help with regular expense planning, unlike quarterly dividend payers. However, remember that a significant portion of this distribution currently comes from return of capital, so you'll need to be comfortable with that dynamic.

2. Volatility-Tolerant Investors

According to Morningstar's analysis, IDVO shows high volatility exposure compared to its peers. This means you need to be comfortable with your investment value fluctuating more than average. The fund's high momentum strategy and concentrated portfolio (38% in the top 10 holdings) can amplify these swings. The upside? This volatility has so far translated into superior returns – 13.7% over two years versus the benchmark's 10.5%. But you'll need the stomach to ride out the ups and downs.

3. Global Diversification Seekers

IDVO could be particularly valuable if you're looking to reduce your U.S. market concentration. With only 5% of assets in U.S. investments, it provides genuine international exposure across both developed and emerging markets. The geographic spread is thoughtful: 16% in the United Kingdom, 11% in Canada, and meaningful allocations to growth markets like Brazil (7%), India (5%), and China (4%). This makes it an effective diversification tool, especially given concerns about U.S. market valuations and Goldman Sachs' forecast of just 3% annual returns for the S&P 500 over the next decade.

4. Options-Savvy Investors

You don't need to be an options trading expert, but you should understand how covered call strategies work. The fund's approach of selectively writing covered calls on portions of the portfolio means you're essentially trading some potential upside for current income. During strong bull markets, this strategy might cause the fund to lag non-covered call funds. However, in sideways or moderately up markets, the additional income from option premiums can be valuable.

5. Strategic Portfolio Allocators

IDVO works best as part of a broader portfolio strategy, not as a standalone investment. It could serve well as a satellite holding for someone who:

• Already has core positions in domestic markets

• Wants to add international exposure without sacrificing income

• Is looking to diversify their income sources geographically

• Has a long enough investment horizon to ride out short-term volatility

Who Should Think Twice

This fund might not be the best fit if you:

• Need absolutely stable, predictable income (given the return of capital dynamics)

• Are highly sensitive to short-term market fluctuations

• Want pure equity exposure without options strategies

• Are looking for a core portfolio holding

• Need a long track record before investing (given the fund's youth)

The key is matching IDVO's characteristics with your investment goals and risk tolerance. While its sophisticated strategy and global exposure can add value to many portfolios, it's not a one-size-fits-all solution. Consider consulting with a financial advisor to determine if IDVO's profile aligns with your personal investment objectives and constraints.

The Risk Baggage (Pack Accordingly)

Before you pack your portfolio for this international journey, let's take a serious look at the risks that come with IDVO. Like any sophisticated investment strategy, there's quite a bit to unpack here.

1. Return of Capital: The Elephant in the Room

The most significant concern is how IDVO funds its distributions. Currently, about 63% of the fund's distributions come from return of capital rather than earned income. Think of it this way: if your monthly expenses were covered 37% by your paycheck and 63% by withdrawing from your savings account, you'd rightfully be concerned about sustainability. While return of capital isn't inherently bad (it can even be tax-efficient), this high percentage raises questions about the long-term sustainability of the current distribution level. So far, the fund's NAV has grown despite this practice, but it's something that demands ongoing monitoring.

2. The Trading Carousel

With a portfolio turnover rate of 104%, IDVO is essentially replacing its entire portfolio every year. This high turnover comes with two potential costs: First, there are the direct trading costs that eat into returns. Second, in taxable accounts, this frequent trading can generate more taxable events than a buy-and-hold strategy. While the management team might argue this active approach is necessary for their strategy, it's worth noting that every trade needs to generate enough extra return to overcome its associated costs.

3. Concentration Conundrum

While IDVO markets itself as a diversified international fund (and it is, geographically speaking), there's still significant concentration risk hiding in plain sight. With 38% of assets packed into just the top 10 holdings, the fund is more concentrated than many of its peers, where the average is closer to 11%. This means that while you're protected from single-country risk, you're still relatively exposed to company-specific risks. If one or two of these top holdings stumble, you'll feel it in your returns.

4. Currency Complications

International investing always comes with currency risk, but it's particularly important for income investors to understand. IDVO's distributions are paid in U.S. dollars, but its underlying investments earn money in various currencies. When the dollar strengthens significantly against other currencies (as it has done during various periods), the value of those foreign earnings can take a hit when converted back to dollars. Conversely, a weakening dollar can provide a tailwind. This adds another layer of volatility to your investment returns that domestic funds don't face.

5. The Youth Factor

Launched in September 2022, IDVO is still in its early days. While its performance so far has been impressive (outperforming both its benchmark and peers), we haven't yet seen how this strategy handles different market environments. We don't know, for instance, how it might perform during a prolonged international market downturn or during periods of significant currency volatility. The covered call strategy also hasn't been tested in a strong bull market, where it might lag due to capped upside potential.

6. Risk Management Strategy

To be fair, the fund's management team isn't blind to these risks. The high liquidity exposure in their holdings (noted by Morningstar) suggests they're maintaining flexibility to adapt to changing market conditions. However, investors need to decide if they're comfortable with these risks given their own investment goals and risk tolerance.

The Morningstar Reality Check

Let's dive into what the investment research giant Morningstar really thinks about IDVO. They've assigned it a Neutral rating overall, which deserves some unpacking.

First, let's talk process. Morningstar rates IDVO's investment process as "Average" – not setting the world on fire, but not raising red flags either. The fund's management has shown a consistent preference for high-momentum stocks (those on winning streaks) and highly liquid assets (easy to buy and sell without moving markets). This approach gives managers more flexibility but also means they're playing in crowded waters with other institutional investors.

When it comes to the people behind the curtain, the story is similarly middle-of-the-road. The fund's management team, led by veteran Kevin Simpson with 17 years of portfolio management experience, earns an "Average" rating. While the team brings considerable experience to the table, Morningstar notes that their personal investment in the fund (between $10,000 and $50,000) is lower than they'd like to see for optimal alignment with investor interests.

The parent company, Amplify ETFs, receives a "Below Average" rating, which is worth paying attention to. Morningstar's analysts point out that Amplify tends to target niche markets and has a history of closing or merging funds that don't gain traction. While innovation can be good, this approach suggests more emphasis on product development than long-term investment merit.

On the bright side, IDVO keeps costs competitive, with fees landing in the second-cheapest quintile among peers. This cost advantage matters because, as any seasoned investor knows, fees are one of the few predictable factors in investing – they're coming out of your returns regardless of market performance.

Performance-wise, the early results are encouraging. Over its short two-year life span, IDVO has returned 13.7%, handily beating both its benchmark (the MSCI ACWI ex USA Index at 10.5%) and the average return of its peers (10.4%). The fund has also shown superior risk-adjusted returns, boasting a higher Sharpe ratio than its index over the trailing one-year period. However, as Morningstar reminds us, this track record is still too brief to form firm conclusions about long-term prospects.

The Bottom Line

IDVO is like a well-traveled business consultant - it knows its way around global markets but comes with some baggage. Its performance has been solid so far (outperforming both its benchmark and peers), but like any young fund, it's still building its track record.

With Goldman Sachs predicting modest 3% annual returns for the S&P 500 over the next decade, having a global dividend player on your team doesn't sound half bad. Just remember: IDVO should be part of a diversified portfolio, not your only international exposure.

Quick Feature Check: What's Your Investment Priority?

Best for:

• 🎯 Income-focused investors seeking international exposure

• 🌊 Those comfortable with market volatility

• 🧩 Portfolio diversification seekers

• 📈 Options-aware investors

• 💰 Monthly income seekers

Maybe skip IDVO if:

• 😰 You need ultra-stable income

• 📉 You're very risk-averse

• 🏃‍♂️ You trade frequently

• 🎢 Market swings keep you up at night

• 📜 You only invest in long-established funds

Disclaimer: This article is for informational purposes only. Always do your own research and consider your personal risk tolerance before making investment decisions. Past performance doesn't guarantee future results, even with a passport.