High Dividend ETF Canada
What You Should Know
- Investing in dividend ETFs likely produces higher returns because dividend payment imposes discipline on a company.
- Look out for a high dividend yield trap when dividend investing.
- Over the past year, the return of non-zero interest rate has deflated dividend stocks and ETFs and most other asset classes.
- A high dividend yield might signal that part of the dividend is a return of capital to investors.
Highest Yielding Canadian ETFs
| Name | Symbol | Unit Price ($) | Dividend Yield (%) | Category |
|---|---|---|---|---|
| CI Tech Giants Covered Call ETF | TXF | 12.88 | 13.63 | Sector Equity |
| Accelerate Enhanced Canadian Benchmark Alternative Fund | ATSX | 22.91 | 11.41 | Alternative Equity Focused |
| Horizons Gold Producer Equity Covered Call ETF | GLCC | 21.69 | 11.2 | Precious Metals Equity |
| CI Tech Giants Covered Call ETF (Unhedged) | TXF.B | 15.47 | 11.16 | Sector Equity |
| Horizons Canadian Oil and Gas Equity Covered Call | ENCC | 12.45 | 10.51 | Energy Equity |
| Mackenzie US TIPS Index ETF (CAD-Hedged) | QTIP | 86.56 | 10.23 | Global Fixed Income |
| Horizons US Large Cap Equity Covered Call ETF CAD | USCC | 16.21 | 9.71 | US Equity |
| CI Energy Giants Covered Call ETF Common (CAD Hedged) | NXF | 6.66 | 9.69 | Energy Equity |
| Hamilton Enhanced Multi-Sector Covered Call ETF | HDIV | 15.4 | 9.58 | Alternative Equity Focused |
| Evolve US Banks Enhanced Yield Fund Hedged | CALL | 15.45 | 9.57 | Financial Services Equity |
| CI Gold+ Giants Covered Call ETF Common | CGXF | 9.37 | 9.46 | Natural Resources Equity |
| Horizons Canadian Large Cap Equity Covered Call ETF | CNCC | 6.44 | 9.43 | Canadian Equity |
| Evolve Global Materials & Mining Enhanced Yield Index ETF Unhedged | BASE.B | 24.41 | 9.32 | Sector Equity |
| Harvest Tech Achievers Growth & Income ETF | HTA | 11.38 | 9.30 | Sector Equity |
Data from morningstar.ca as of 6 November 2022.
When investing in the stock market, one can adopt various investment styles. Growth investing is focused on companies which are likely to grow very fast. Value investing is focused on investing in companies trading well below their intrinsic value. Dividend stock investing is focused on companies that pay out sizable dividends.
A dividend investor is interested in companies with high dividend yields. But care must be exercised to avoid a dividend yield trap. A dividend yield trap refers to a scenario where one invests in a stock with a high dividend yield but soon after faces a cut in the dividend. To avoid falling into a dividend yield trap, one should consider the sustainability of the dividend payments.
Dividend Yield
You can consider trailing or forward dividend yield. To derive the trailing dividend yield, the sum of all dividends paid over the past 12 months is divided by the stock price. To drive the forward dividend yield, the last declared dividend is annualized and divided by the stock price. The definition for trailing dividend yield is extended to and used for ETFs as well.
To investigate the sustainability of the dividend, one might look at the dividend payout ratio. A high payout ratio is a sign that the dividend is likely unsustainable. But a reasonable dividend payout ratio does not guarantee dividend sustainability because adverse developments in a company's position are likely to show themselves in the stock price before financial statements.
During the Covid pandemic and after the 2008 financial crisis, western central banks, including the federal reserve, European Central Bank, Bank of England, Bank of Japan and Bank of Canada, engaged in financial repression. They artificially suppressed interest rates so that safe fixed-income assets (bonds) virtually earned nothing.
As a result, some investors had to substitute dividend funds for bond funds and dividend stocks for bonds. But over the past year, inflation reached levels not seen in 40 years. This rise in inflation forced all major central banks except the Bank of Japan to raise interest rates. As a result, most assets, including dividend ETFs, have been repriced.
Interest rate affects asset prices because the financial value of any asset is a result of that asset’s ability to generate cash flow. More specifically, the value of any investment is the present value of the cash flows that the investment will generate. Future money is less valuable than present money. As a result, money that will be received in the future should be discounted to its present value.
The appropriate discount rate would depend on the certainty of future cash flows. A risk-free interest rate is used as the discount rate for a security that provides guaranteed future payments, like a 10-year bond, a 5-year bond, or a Canada savings bond. A risk premium should be added to the risk-free rate for securities that do not guarantee future cash flows.
At the top of this page, there is a list of 14 Canadian ETFs with the highest dividend yields at the time of writing. More information is provided about the top 10 of them below.
Dividend Payout Ratio
The sum of all dividends paid over the past 12 months is divided by the reported income over the same period. A dividend payout ratio greater than one is most likely unsustainable. The lower the dividend payout ratio, the more sustainable it should be.
CI Tech Giants Covered Call ETF Common Units - TXF
| CI Tech Giants Covered Call ETF Common Units-TXF | 1 Year Annualized Return | -38% |
| 3 Years Annualized Return | 2.6% | |
| 5 Years Annualized Return | 3.81% | |
| 10 Years Annualized Return | 11.86% | |
| Manager Tenure (Yrs) | 11 | |
| Fund Size (Mil) | $536.85 | |
| Average Market Cap (Mil) | $242,630 | |
| 3 Year Alpha | -2.67 | |
| 3 Year Beta | 1.46 | |
| 3 Year R-Squared | 88 | |
| 3 Year Standard Deviation | 22.7 | |
| 3 Year Sharpe Ratio | 0.3 | |
| Management Expense Ratio | 0.71% |
Data from morningstar.ca as of 6 November 2022.
As its name suggests, this fund invests in US companies active in the technology sector. It offers quarterly dividend distributions. This is an actively managed fund which strives to invest in more than 25 very large tech companies which are listed on a North American stock exchange. This fund strives to reduce its volatility and enhance its returns by writing and selling call options on its holdings. This strategy would increase the fund's income in exchange for limiting the upside which could be realized. This fund has had a very rough year because of the rising interest rates. Rising rates have caused steep declines in the tech sector stock prices.
CI Tech Giants Covered Call ETF
Top holdings of TXF
| Company | Sector | Allocation |
|---|---|---|
| Oracle Corp | Information Technology | 4.66% |
| IBM (International Business Machines Corp) | Information Technology | 4.51% |
| Salesforce Inc | Information Technology | 4.45% |
| Adobe Inc | Information Technology | 4.43% |
| Cisco Systems Inc | Computer Electronics | 4.34% |
| Accenture PLC Cl A | Information Technology | 4.28% |
| Micron Technology Inc | Computer Electronics | 4.26% |
| NVIDIA Corp | Computer Electronics | 4.22% |
| Intuit Inc | Information Technology | 4.22% |
| Apple Inc | Computer Electronics | 4.21% |
| Applied Materials Inc | Computer Electronics | 4.10% |
| Texas Instruments Inc | Computer Electronics | 4.07% |
| Lam Research Corp | Computer Electronics | 4.04% |
| Intel Corp | Computer Electronics | 4.02% |
| Analog Devices Inc | Computer Electronics | 4.01% |
Standard Deviation
Standard deviation is a statistical measure of the spread in a data set. In investment and finance, standard deviation often refers to the standard deviation of returns. Standard deviations reported in tables of each section are derived using ETF's last 36 monthly returns. The reported values are annualized. So the larger the fund's standard deviation, the more variable the fund's return. Also, the smaller the fund's standard deviation, the more reliable the fund's returns. Thus, larger standard deviation values show a greater risk associated with that fund.
Accelerate Enhanced Canadian Benchmark Alternative Fund - ATSX
| Accelerate Enhanced Canadian Benchmark Alternative Fund-ATSX | 1 Year Annualized Return | 5.83% |
| 3 Years Annualized Return | 10.7% | |
| Manager Tenure (Yrs) | 3.5 | |
| Fund Size (Mil) | $2.88 | |
| Average Market Cap (Mil) | $26,999 | |
| 3 Year Standard Deviation | 23.7 | |
| 3 Year Sharpe Ratio | 0.52 | |
| Management Expense Ratio | 2.8% |
Data from morningstar.ca as of 6 November 2022.
ATSX is an interesting combination of an index fund and a hedge fund. It is mainly holding S&P/TSX 60 index. It overlays smaller long and short equity positions on top of its main holding, the S&P/TSX 60 index. An attractive point about this fund is that management is so confident in its performance that instead of a management fee, it charges a performance fee. Management would claim half of the fund's return, which is made above the total return of the S&P/TSX 60 index.
Accelerate Enhanced Canadian Benchmark Alternative Fund
| Top Long Positions of ATSX | Top Short Positions of ATSX | ||
|---|---|---|---|
| S&P / TSX 60 Index Futures | 96.7% | Shopify Inc | -1.1% |
| IShares S&P TSX 60 Index ETF | 2.8% | Maxar Technologies Inc | -1.1% |
| Celestica Inc | 1.2% | Canaccord Genuity Group Inc | -1.1% |
| Mullen Group Ltd | 1.2% | TC Energy Corp | -1% |
| Canadian National Railway Co | 1.2% | CAE Inc | -1% |
| Element Fleet Management Corp | 1.2% | Open Text Corp | -1% |
| iA Financial Corp Inc | 1.2% | Canada Goose Holdings Inc | -1% |
| Canadian Natural Resources Ltd | 1.2% | Ceridian HCM Holding Inc | -1% |
| Aritzia Inc | 1.2% | Canadian Western Bank | -1% |
| Gildan Activewear Inc | 1.2% | Canadian Pacific Railway Ltd | -1% |
As of October 31.
Horizons Gold Producer Equity Covered Call ETF - GLCC
| Horizons Gold Producer Equity Covered Call ETF-GLCC | 1 Year Annualized Return | -14.2% |
| 3 Years Annualized Return | -1.76% | |
| 5 Years Annualized Return | 4.53% | |
| 10 Years Annualized Return | -2.37% | |
| Manager Tenure (Yrs) | 11.6 | |
| Fund Size (Mil) | $183 | |
| Average Market Cap (Mil) | $12,000 | |
| 3 Year Alpha | -1.08 | |
| 3 Year Beta | 0.96 | |
| 3 Year R-Squared | 96 | |
| 3 Year Standard Deviation | 32 | |
| 3 Year Sharpe Ratio | 0.03 | |
| Management Expense Ratio | 0.79% |
Data from morningstar.ca as of 6 November 2022.
GLCC invests in the Solactive North American Listed Gold Producers Index, which consists of large North American gold miners. It writes out-of-the-money call options on its holdings to generate some extra return. This fund was formerly called Horizons Enhanced Income Gold Producers ETF and traded with the ticker symbol HEP. GLCC distributes its dividend and call option income every month. As you would expect, the unit price of this ETF is strongly correlated with the price of gold.
Horizons Gold Producer Equity Covered Call ETF
Regional Exposure
| Country | Exposure |
|---|---|
| Canada | 60.63% |
| United States | 17.35% |
| South Africa | 16.87% |
| United Kingdom | 5.21% |
Largest Holdings of GLCC
| Security Name | Weight |
|---|---|
| Agnico Eagle Mines Ltd | 10.17% |
| Franco-Nevada Corp | 10.15% |
| Newmont Corp | 10.00% |
| Barrick Gold Corp | 9.78% |
| Gold Fields Ltd - ADR | 8.35% |
| Royal Gold Inc | 7.41% |
| AngloGold Ashanti Ltd - ADR | 6.49% |
| Kinross Gold Corp | 5.60% |
| Endeavour Mining PLC | 5.22% |
| Yamana Gold Inc | 5.02% |
CI Tech Giants Covered Call ETF Common Units (Unhedged) - TXF.B
| CI Tech Giants Covered Call ETF Common Units (Unhedged)-TXF.B | 1 Year Annualized Return | -32% |
| 3 Years Annualized Return | 4.3% | |
| 5 Years Annualized Return | 6% | |
| Manager Tenure (Yrs) | 11.1 | |
| Fund Size (Mil) | $537 | |
| Average Market Cap (Mil) | $242,630 | |
| 3 Year Alpha | 0.76 | |
| 3 Year Beta | 1.16 | |
| 3 Year R-Squared | 82 | |
| 3 Year Standard Deviation | 19.1 | |
| 3 Year Sharpe Ratio | 0.44 | |
| Management Expense Ratio | 0.7% |
Data from morningstar.ca as of 6 November 2022.
TXF.B is the same as TXF, with one difference. Investing in TXF.B is like exchanging your CAD for USD and using the USD to buy tech company shares. In this case, you can enjoy capital gains either from an appreciation in underlying stock prices or from an appreciation in USD vs. CAD. Investing in TXF is like using your CAD as collateral to borrow USD. Then you buy tech company stocks. In this case, you are only concerned with the performance of underlying stocks and fluctuations in USD vs. CAD would not affect your return.
CI Tech Giants Covered Call ETF (Unhedged)
Horizons Canadian Oil and Gas Equity Covered Call - ENCC
| Horizons Canadian Oil and Gas Equity Covered Call-ENCC | 1 Year Annualized Return | 55% |
| 3 Years Annualized Return | 30% | |
| 5 Years Annualized Return | 6.8% | |
| 10 Years Annualized Return | -2.27% | |
| Manager Tenure (Yrs) | 11.6 | |
| Fund Size (Mil) | $59.2 | |
| Average Market Cap (Mil) | $32,794 | |
| 3 Year Alpha | 3.47 | |
| 3 Year Beta | 1.07 | |
| 3 Year R-Squared | 91 | |
| 3 Year Standard Deviation | 49 | |
| 3 Year Sharpe Ratio | 0.82 | |
| Management Expense Ratio | 0.84% |
Data from morningstar.ca as of 6 November 2022.
ENCC invests in equities underlying the Solactive Equal Weight Canada Oil & Gas Index. It sells out-of-the-money call options on its holding to increase its return and reduce its volatility. ENCC distributes its income from dividends and call options every month. It was formerly called Horizons Enhanced Income Energy ETF and traded under the ticker symbol HEE.
Horizons Canadian Oil and Gas Equity Covered Call
| Largest Holdings of ENCC | |
|---|---|
| Security Name | Weight |
| Imperial Oil Ltd | 11.22% |
| Cenovus Energy Inc | 10.97% |
| Suncor Energy Inc | 10.86% |
| Canadian Natural Resources Ltd | 10.84% |
| ARC Resources Ltd | 10.09% |
| Tourmaline Oil Corp | 9.43% |
| Enbridge Inc | 9.32% |
| Pembina Pipeline Corp | 9.23% |
| Keyera Corp | 9.10% |
| TC Energy Corp | 9.05% |
Mackenzie US TIPS Index ETF (CAD-Hedged) - QTIP
| Mackenzie US TIPS Index ETF (CAD-Hedged)-QTIP | 1 Year Annualized Return | -12.9% |
| 3 Years Annualized Return | 0.37% | |
| Manager Tenure (Yrs) | 4.8 | |
| Fund Size (Mil) | $423 | |
| Average Credit Quality | AAA | |
| Effective Duration | 5.89 Years | |
| 3 Year Alpha | 2.29 | |
| 3 Year Beta | 0.34 | |
| 3 Year R-Squared | 11.6 | |
| 3 Year Standard Deviation | 6.54 | |
| 3 Year Sharpe Ratio | 0.01 | |
| Management Expense Ratio | 0.17% |
Data from morningstar.ca as of 6 November 2022.
Treasury Inflation-Protected Securities (TIPS) are bonds issued by the US government. TIPS have a fixed coupon rate which is paid semi-annually. Their principal is adjusted by the CPI level semi-annually. This adjustment in the principal causes the interest payments to increase with inflation. When your TIPS matures, you would receive the inflation-adjusted principal or the initial face value of the bond, whichever is greater.
Mackenzie US TIPS Index ETF (CAD-Hedged)
Horizons US Large Cap Equity Covered Call ETF CAD - USCC
| Horizons US Large Cap Equity Covered Call ETF CAD-USCC | 1 Year Annualized Return | -9% |
| 3 Years Annualized Return | 7.8% | |
| 5 Years Annualized Return | 8.2% | |
| Manager Tenure (Yrs) | 11.2 | |
| Fund Size (Mil) | $39.2 | |
| Average Market Cap (Mil) | $225,510 | |
| 3 Year Alpha | -0.05 | |
| 3 Year Beta | 0.85 | |
| 3 Year R-Squared | 90 | |
| 3 Year Standard Deviation | 13.2 | |
| 3 Year Sharpe Ratio | 0.73 | |
| Management Expense Ratio | 0.84% |
Data from morningstar.ca as of 6 November 2022.
Horizons US Large Cap Equity Covered Call ETF CAD
CI Energy Giants Covered Call ETF Common (CAD Hedged) - NXF
| CI Energy Giants Covered Call ETF Common (CAD Hedged)-NXF | 1 Year Annualized Return | 49% |
| 3 Years Annualized Return | 11.8% | |
| 5 Years Annualized Return | 6.45% | |
| Manager Tenure (Yrs) | 7.4 | |
| Fund Size (Mil) | $528 | |
| Average Market Cap (Mil) | $141,412 | |
| 3 Year Alpha | -9.5 | |
| 3 Year Beta | 0.8 | |
| 3 Year R-Squared | 95 | |
| 3 Year Standard Deviation | 37.6 | |
| 3 Year Sharpe Ratio | 0.49 | |
| Management Expense Ratio | 0.72% |
Data from morningstar.ca as of 6 November 2022.
CI Energy Giants Covered Call ETF Common (CAD Hedged)
Hamilton Enhanced Multi-Sector Covered Call ETF - HDIV
| Hamilton Enhanced Multi-Sector Covered Call ETF-HDIV | 1 Year Annualized Return | -2.82% |
| Manager Tenure (Yrs) | 1.3 | |
| Fund Size (Mil) | $247 | |
| Average Market Cap (Mil) | $67,763 | |
| Management Expense Ratio | 2.09% |
Data from morningstar.ca as of 6 November 2022.
Hamilton Enhanced Multi-Sector Covered Call ETF
Evolve US Banks Enhanced Yield Fund Hedged - CALL
| Evolve US Banks Enhanced Yield Fund Hedged-CALL | 1 Year Annualized Return | -22% |
| 3 Years Annualized Return | 0.8% | |
| 5 Years Annualized Return | 2.36% | |
| Manager Tenure (Yrs) | 5.1 | |
| Fund Size (Mil) | $42.7 | |
| Average Market Cap (Mil) | $42,027 | |
| 3 Year Alpha | -1.89 | |
| 3 Year Beta | 1.52 | |
| 3 Year R-Squared | 81 | |
| 3 Year Standard Deviation | 31.4 | |
| 3 Year Sharpe Ratio | 0.22 | |
| Management Expense Ratio | 0.68% |
Data from morningstar.ca as of 6 November 2022.