Enhanced Income

  • Overview

    Overview

    Eagle’s Enhanced Income seeks to provide high levels of current income and consistent dividend growth. The portfolio typically consists of 20 – 25 dividend paying stocks that are forecasted to grow their dividend above the market average. Short-term out-of-the money (OTM) call options are sold on a portion of the underlying stock holdings to generate additional income. By selling OTM call options as opposed to at-the-money call options, the portfolio is able to participate in price appreciation on the stock positions.

    Investment Process

    The Eagle Enhanced Income team identifies investment opportunities based on the following criteria:

    Investment objective1
    • Manage equity portfolio consisting of 20-25 blue chip dividend growth stocks
    • Opportunistically sell out-of-the-money (OTM) call options to enhance income
    • Generate income through OTM call options while still allowing participation in equity upside
    • Balance total returns and income
    • Target 4% annualized yield consisting of dividend income plus option premium income

    Sell discipline
    • Earnings or dividend outlook deteriorates
    • Large position size may result in trim
    • Better total return or dividend growth opportunity identified
    • Potential to cover a call and restrike based upon stock performance


    1 Not every investment opportunity will meet all of the stringent investment criteria mentioned to the same degree. Trade-offs must be made, which is where experience and judgment play a key role. Accounts are invested at the discretion of the portfolio manager and may take up to 60 days to become fully invested.

    Portfolio Characteristics (as of March 31, 2024)

    Typical Market Capitalization

    $400 billion or greater

    Benchmark

    Dow Jones Industrial Average Index

    Typical Number of Holdings

    20 to 30

    Typical Initial Equity Size:

    1-5%

    Dividend Yield:

    1.90%

    1 Year Dividend Growth:

    8.37%

    Typical Turnover

    Generally below 50%

    Account Minimum

    $300,000

    Descriptions and Definitions
    Indices are unmanaged, and one cannot invest directly in an index.

    The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry.

    Enhanced Income - Portfolio consisting of long equity positions and selling call options on the underlying equity positions to generate additional income.

    Out of the Money - An out-of-the-money (OTM) call option will have a strike price that is higher than the market price of the underlying asset.

    Call Option - A call option is a contract that gives the option buyer the right to buy an underlying asset at a specified price within a specific time period.

    Restrike - Selling option of the same underlying holding but at a different strike price.

    Eagle Enhanced Income investing is based upon the identification of companies which possess moderate growth rates. Writing covered calls may limit the upside of a portfolio; furthermore, the income from premiums may not totally protect against loss of capital in the event of a market decline. Options are not for everyone, and they do involve risk.

    Investing in Large Capitalization stocks (“Large Caps”) is based on the expectation of positive price performance due to continued earnings growth or anticipated changes in the market or within the company itself. However, if a company fails to meet that expectation or anticipated changes do not occur, its stock price may decline.

    Historically, dividend yields have been relatively constant and therefore have created a cushion for investors when stock prices have declined. However, as with all equity investing, there is the risk that a company will not achieve its expected earnings results, or that an unexpected change in the market or within the company will occur, both of which may adversely affect investment results. The biggest risk of equity investing is that returns can fluctuate and investors can lose money.

    The Eagle Enhanced Income expects to hold a concentrated portfolio of a limited number of securities and may have less diversified sector or industry exposure relative to a portfolio with a larger number of holdings. A decline in the value of these investments could cause the portfolio’s overall value to decline to a greater degree than that of a less concentrated portfolio. Position sizes may also be larger in concentrated portfolios which could lead to higher idiosyncratic risk.

  • Investment Team

    Enhanced Income Investment Team

    James Camp

    James Camp, CFA

    Managing Director, Portfolio Manager

    35 Years Of Industry Experience

    27 Years With Eagle Asset Management

    Bishop Jordan

    Bishop Jordan, CFA

    Portfolio Manager

    23 Years Of Industry Experience

    6 Years With Eagle Asset Management

    Joseph Jackson

    Joseph Jackson, CFA

    Senior Research Analyst

    25 Years Of Industry Experience

    20 Years With Eagle Asset Management

    John Lagowski

    John Lagowski, CFA

    Senior Research Analyst

    17 Years Of Industry Experience

    9 Years With Eagle Asset Management

    Lucas Iacovino

    Lucas Iacovino

    Research Analyst

    4 Years Of Industry Experience

    3 Year With Eagle Asset Management

  • Performance

    Performance1 as of June 30, 2024

        Current
    Quarter
    Year
    to Date
    One
    Year
    Three
    Year
    Since Inception
    (Jan. 1, 2021)

    Eagle Enhanced Income

    Gross

    0.65% 7.66% 13.55% 7.53% 11.79%

    Eagle Enhanced Income

    Net

    -0.10% 6.07% 10.22% 4.36% 8.52%

    Dow Jones Industrial Average Index

      -1.27% 4.79% 16.02% 6.42% 9.44%

    Calendar Year Returns1

        2023 2022 2021
    Eagle Enhanced Income Gross 16.12% -6.01% 25.70%
    Eagle Enhanced Income Net 12.72% -8.85% 22.17%

    Dow Jones Industrial Average Index

      16.18% -6.86% 20.95%

     

    Risk Information
    Eagle Enhanced Income investing is based upon the identification of companies which possess moderate growth rates. Writing covered calls may limit the upside of a portfolio; furthermore, the income from premiums may not totally protect against loss of capital in the event of a market decline. Options are not for everyone, and they do involve risk. Historically, dividend yields have been relatively constant and therefore have created a cushion for investors when stock prices have declined. However, as with all equity investing, there is the risk that a company will not achieve its expected earnings results, or that an unexpected change in the market or within the company will occur, both of which may adversely affect investment results. The biggest risk of equity investing is that returns can fluctuate and investors can lose money. Not every investment opportunity will meet all of the stringent investment criteria mentioned to the same degree. Trade-offs must be made, which is where experience and judgment play a key role. Accounts are invested at the discretion of the portfolio manager and may take up to 30 days to become fully invested.

    The Eagle Enhanced Income expects to hold a concentrated portfolio of a limited number of securities and may have less diversified sector or industry exposure relative to a portfolio with a larger number of holdings. A decline in the value of these investments could cause the portfolio’s overall value to decline to a greater degree than that of a less concentrated portfolio. Position sizes may also be larger in concentrated portfolios which could lead to higher idiosyncratic risk.

    (1)Performance Disclosures
    The calculation of the performance data includes reinvestment of all income and gains and is depicted on a time-weighted and size-weighted average for the entire period. Performance is shown after deduction of transaction costs and both “gross” (before the deduction of management fees) and “net” (after the deduction of management fees). The net returns reflect the application of the highest wrap fee of 3% annum. Performance figures include all internal, retail Enhanced Income accounts of Eagle Asset Management, a St. Petersburg, Florida-based firm. No inference should be drawn by present or prospective clients that managed accounts will achieve similar investment performance in the future. Past performance does not guarantee future results. Because accounts are individually managed, returns for separate accounts may be higher or lower than the average performance stated in the charts. Investing in equities may result in a loss of capital. A client’s return will be reduced by the advisory fees. Eagle’s fees are set forth in Eagle’s Form ADV, Part II. Over a period of five years, an advisory fee of 1 percent could reduce the total value of a client’s portfolio by 5 percent or more. Realized fees may differ depending on the agreed upon fee schedule for your particular account. Net returns are calculated using a max wrap fee of 3% for this strategy.

    Past performance does not guarantee or indicate future results. No inference should be drawn by present or prospective clients that managed accounts will achieve similar performance in the future. Investment in a portfolio, investment manager or security should not be based on past performance alone. Because accounts are individually managed, returns for separate accounts may be higher or lower than the average performance stated. Individual portfolio/performance results may vary due to market conditions, trading costs and certain other factors, which may be unique to each account. There is no guarantee that these investment strategies will work under all market conditions, and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Investing in equities may result in a loss of capital. Investing involves risk and you may incur a profit or a loss. Investment returns and principal value will fluctuate so that an investor’s portfolio, when redeemed, may be worth more or less than their original cost. Diversification does not ensure a profit or guarantee against a loss.

    Currency: all monetary amounts displayed on this website are in U.S. dollars.

    Descriptions and Definitions
    The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry.

    Enhanced Income - Portfolio consisting of long equity positions and selling call options on the underlying equity positions to generate additional income.

    Out of the Money - An out-of-the-money (OTM) call option will have a strike price that is higher than the market price of the underlying asset.

    Call Option - A call option is a contract that gives the option buyer the right to buy an underlying asset at a specified price within a specific time period.

    Restrike - Selling option of the same underlying holding but at a different strike price.

    Investing in Large Capitalization stocks (“Large Caps”) is based on the expectation of positive price performance due to continued earnings growth or anticipated changes in the market or within the company itself. However, if a company fails to meet that expectation or anticipated changes do not occur, its stock price may decline. Moreover, as with all equity investing, there is the risk that an unexpected change in the market or within the company itself may have an adverse effect on its stock. As with all equity investing, there is the risk that a company will not achieve its expected earnings results, or that an unexpected change in the market or within the company will occur, both of which may adversely affect investment results. The biggest risk of equity investing is that returns can fluctuate and investors can lose money. Not every investment opportunity will meet all of the stringent investment criteria mentioned to the same degree.

    To obtain a compliant presentation and/or the firm's list of composite descriptions, please contact Eagle Asset Management at 1.800.237.3101.

  • Literature

    Documents available for download


    You will need Adobe Acrobat Reader Adobe PDF document in order to view the PDF files linked above. If you do not have Acrobat Reader installed on your computer, you may obtain it free of charge at the Adobe Web site. Click here to go to the Adobe Web site (link will open in new window).