High-yield ETF-of-ETFs seeks to address the needs of retired and retiring Canadians unable to keep pace with costs of living
To help Canadian retirees wrestling with the challenges of low income and high inflation, Harvest ETFs has introduced the Harvest Diversified Monthly Income ETF.
Trading under the ticker symbol HDIF on the TSX, it’s an upgraded equity income ETF that combines five of Harvest’s established equity income ETFs into a single portfolio with over 90 underlying assets. With a high target yield of 8.5%, HDIF is designed to provide investors with consistent monthly income through Harvest's industry-leading experience in covered call writing and the inclusion of mild leverage.
This ETF arrives at a time when Canadian investors are looking for a straightforward income alternative. Interest rates and income yields from fixed income products have been at or near historic lows for more than a decade. Late last year, a wave of inflation washed over the world; in Canada, the consumer price index reached 4.8% at the end of December 2021, while fixed income yields were around or below 2%.
As a result, many Canadians, particularly retirees and retirees who rely on the income generated by their income assets, are unable to keep up with the rising cost of living.
“At Harvest ETFs, we have a proven record of providing growth prospects and income to Canadian investors through our equity income ETFs,” according to Michael Kovacs, President & CEO of Harvest ETFs. “The Harvest Diversified Monthly Income ETF is built on the strength of that record. We know that Canadians need a high-yield ETF to simplify their income needs, and we believe that HDIF is that product.”
The portfolio components and strategies in HDIF that potentially provide this high income were built out by Kovacs and Harvest Chief Investment Officer Paul MacDonald. HDIF is made up of an equal weight mix of five Harvest Equity Income ETFs: the Harvest Healthcare Leaders Income ETF (HHL), the Harvest Brand Leaders Plus Income ETF (HBF), the Harvest Tech Achievers Growth & Income ETF (HTA), the Harvest Equal Weight Global Utilities Income ETF (HUTL) and the Harvest US Bank Leaders Income ETF (HUBL).
Each of HDIF's component ETFs is an equity income ETF that earns monthly income from a combination of dividends and covered call writing. Harvest ETFs is Canada's third-largest covered call writer, with a long history of adopting this approach to boost income from stock portfolios while reducing risk.
Each component ETF is currently yielding between 4.9 and 8.3%. HDIF can attain its goal yield of 8.5% with the addition of minor leverage at a rate of 25%. HDIF enables efficient access for investors who want to use leverage for either long-term growth or enhanced income in Canada, where there are few registered plan-qualified leveraged investment products to choose from.
“By adding leverage to the ETF, we’re enhancing the income and growth potential an investor can get from HDIF,” said Paul MacDonald. “In an upward market, the ETF will grow at an accelerated rate, while generating higher yields than our other income ETFs. That’s all due to the leverage.”