High Dividend ETF Canada

This Page's Content Was Last Updated: December 07, 2022
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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

NameSymbolUnit Price ($)Dividend Yield (%)Category
CI Tech Giants Covered Call ETFTXF12.8813.63Sector Equity
Accelerate Enhanced Canadian Benchmark Alternative FundATSX22.9111.41Alternative Equity Focused
Horizons Gold Producer Equity Covered Call ETFGLCC21.6911.2Precious Metals Equity
CI Tech Giants Covered Call ETF (Unhedged)TXF.B15.4711.16Sector Equity
Horizons Canadian Oil and Gas Equity Covered CallENCC12.4510.51Energy Equity
Mackenzie US TIPS Index ETF (CAD-Hedged)QTIP86.5610.23Global Fixed Income
Horizons US Large Cap Equity Covered Call ETF CADUSCC16.219.71US Equity
CI Energy Giants Covered Call ETF Common (CAD Hedged)NXF6.669.69Energy Equity
Hamilton Enhanced Multi-Sector Covered Call ETFHDIV15.49.58Alternative Equity Focused
Evolve US Banks Enhanced Yield Fund HedgedCALL15.459.57Financial Services Equity
CI Gold+ Giants Covered Call ETF CommonCGXF9.379.46Natural Resources Equity
Horizons Canadian Large Cap Equity Covered Call ETFCNCC6.449.43Canadian Equity
Evolve Global Materials & Mining Enhanced Yield Index ETF UnhedgedBASE.B24.419.32Sector Equity
Harvest Tech Achievers Growth & Income ETFHTA11.389.30Sector 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-TXF1 Year Annualized Return-38%
3 Years Annualized Return2.6%
5 Years Annualized Return3.81%
10 Years Annualized Return11.86%
Manager Tenure (Yrs)11
Fund Size (Mil)$536.85
Average Market Cap (Mil)$242,630
3 Year Alpha-2.67
3 Year Beta1.46
3 Year R-Squared88
3 Year Standard Deviation22.7
3 Year Sharpe Ratio0.3
Management Expense Ratio0.71%

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

CompanySectorAllocation
Oracle CorpInformation Technology4.66%
IBM (International Business Machines Corp)Information Technology4.51%
Salesforce IncInformation Technology4.45%
Adobe IncInformation Technology4.43%
Cisco Systems IncComputer Electronics4.34%
Accenture PLC Cl AInformation Technology4.28%
Micron Technology IncComputer Electronics4.26%
NVIDIA CorpComputer Electronics4.22%
Intuit IncInformation Technology4.22%
Apple IncComputer Electronics4.21%
Applied Materials IncComputer Electronics4.10%
Texas Instruments IncComputer Electronics4.07%
Lam Research CorpComputer Electronics4.04%
Intel CorpComputer Electronics4.02%
Analog Devices IncComputer Electronics4.01%

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-ATSX1 Year Annualized Return5.83%
3 Years Annualized Return10.7%
Manager Tenure (Yrs)3.5
Fund Size (Mil)$2.88
Average Market Cap (Mil)$26,999
3 Year Standard Deviation23.7
3 Year Sharpe Ratio0.52
Management Expense Ratio2.8%

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 ATSXTop Short Positions of ATSX
S&P / TSX 60 Index Futures96.7%Shopify Inc-1.1%
IShares S&P TSX 60 Index ETF2.8%Maxar Technologies Inc-1.1%
Celestica Inc1.2%Canaccord Genuity Group Inc-1.1%
Mullen Group Ltd1.2%TC Energy Corp-1%
Canadian National Railway Co1.2%CAE Inc-1%
Element Fleet Management Corp1.2%Open Text Corp-1%
iA Financial Corp Inc1.2%Canada Goose Holdings Inc-1%
Canadian Natural Resources Ltd1.2%Ceridian HCM Holding Inc-1%
Aritzia Inc1.2%Canadian Western Bank-1%
Gildan Activewear Inc1.2%Canadian Pacific Railway Ltd-1%

As of October 31.

Horizons Gold Producer Equity Covered Call ETF - GLCC

Horizons Gold Producer Equity Covered Call ETF-GLCC1 Year Annualized Return-14.2%
3 Years Annualized Return-1.76%
5 Years Annualized Return4.53%
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 Beta0.96
3 Year R-Squared96
3 Year Standard Deviation32
3 Year Sharpe Ratio0.03
Management Expense Ratio0.79%

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

CountryExposure
Canada60.63%
United States17.35%
South Africa16.87%
United Kingdom5.21%

Largest Holdings of GLCC

Security NameWeight
Agnico Eagle Mines Ltd10.17%
Franco-Nevada Corp10.15%
Newmont Corp10.00%
Barrick Gold Corp9.78%
Gold Fields Ltd - ADR8.35%
Royal Gold Inc7.41%
AngloGold Ashanti Ltd - ADR6.49%
Kinross Gold Corp5.60%
Endeavour Mining PLC5.22%
Yamana Gold Inc5.02%

CI Tech Giants Covered Call ETF Common Units (Unhedged) - TXF.B

CI Tech Giants Covered Call ETF Common Units (Unhedged)-TXF.B1 Year Annualized Return-32%
3 Years Annualized Return4.3%
5 Years Annualized Return6%
Manager Tenure (Yrs)11.1
Fund Size (Mil)$537
Average Market Cap (Mil)$242,630
3 Year Alpha0.76
3 Year Beta1.16
3 Year R-Squared82
3 Year Standard Deviation19.1
3 Year Sharpe Ratio0.44
Management Expense Ratio0.7%

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-ENCC1 Year Annualized Return55%
3 Years Annualized Return30%
5 Years Annualized Return6.8%
10 Years Annualized Return-2.27%
Manager Tenure (Yrs)11.6
Fund Size (Mil)$59.2
Average Market Cap (Mil)$32,794
3 Year Alpha3.47
3 Year Beta1.07
3 Year R-Squared91
3 Year Standard Deviation49
3 Year Sharpe Ratio0.82
Management Expense Ratio0.84%

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 NameWeight
Imperial Oil Ltd11.22%
Cenovus Energy Inc10.97%
Suncor Energy Inc10.86%
Canadian Natural Resources Ltd10.84%
ARC Resources Ltd10.09%
Tourmaline Oil Corp9.43%
Enbridge Inc9.32%
Pembina Pipeline Corp9.23%
Keyera Corp9.10%
TC Energy Corp9.05%

Mackenzie US TIPS Index ETF (CAD-Hedged) - QTIP

Mackenzie US TIPS Index ETF (CAD-Hedged)-QTIP1 Year Annualized Return-12.9%
3 Years Annualized Return0.37%
Manager Tenure (Yrs)4.8
Fund Size (Mil)$423
Average Credit QualityAAA
Effective Duration5.89 Years
3 Year Alpha2.29
3 Year Beta0.34
3 Year R-Squared11.6
3 Year Standard Deviation6.54
3 Year Sharpe Ratio0.01
Management Expense Ratio0.17%

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-USCC1 Year Annualized Return-9%
3 Years Annualized Return7.8%
5 Years Annualized Return8.2%
Manager Tenure (Yrs)11.2
Fund Size (Mil)$39.2
Average Market Cap (Mil)$225,510
3 Year Alpha-0.05
3 Year Beta0.85
3 Year R-Squared90
3 Year Standard Deviation13.2
3 Year Sharpe Ratio0.73
Management Expense Ratio0.84%

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)-NXF1 Year Annualized Return49%
3 Years Annualized Return11.8%
5 Years Annualized Return6.45%
Manager Tenure (Yrs)7.4
Fund Size (Mil)$528
Average Market Cap (Mil)$141,412
3 Year Alpha-9.5
3 Year Beta0.8
3 Year R-Squared95
3 Year Standard Deviation37.6
3 Year Sharpe Ratio0.49
Management Expense Ratio0.72%

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-HDIV1 Year Annualized Return-2.82%
Manager Tenure (Yrs)1.3
Fund Size (Mil)$247
Average Market Cap (Mil)$67,763
Management Expense Ratio2.09%

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-CALL1 Year Annualized Return-22%
3 Years Annualized Return0.8%
5 Years Annualized Return2.36%
Manager Tenure (Yrs)5.1
Fund Size (Mil)$42.7
Average Market Cap (Mil)$42,027
3 Year Alpha-1.89
3 Year Beta1.52
3 Year R-Squared81
3 Year Standard Deviation31.4
3 Year Sharpe Ratio0.22
Management Expense Ratio0.68%

Data from morningstar.ca as of 6 November 2022.

Evolve US Banks Enhanced Yield Fund Hedged

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