By Harvest ETFs
Finding steady and predictable income streams has been a challenge for investors over the past decade due to historically low rates and surging inflation.
For many, this has meant turning to equities, particularly global brand leaders with strong businesses. While the share price of these companies rises and fall with the broader economy, they have strengths that allow them to continue to remain profitable in downturns while continuing to pay dividends.
A diversified portfolio of these large capitalization multinationals helps to protect against economic risk and offers shelter and opportunity. The companies have strong cash flow and balance sheets, well-established businesses and a commitment to dividend growth. In downturns, their share prices tend to fall the least and recover first.
This strategy is at the heart of the Harvest ETFs philosophy. Harvest offers simple, transparent, competitively priced Exchange Traded Funds (ETFs) that own the most successful global businesses. Over time these companies generate steady growth and income. The Harvest way can be summarized as: Global leaders = high income + long term growth.
This thinking led Harvest to create a suite of ETFs that combine capital growth opportunity and monthly distributions with tax efficient current yields between 5 and 8.5%.[i]
Harvest achieves this yield in two ways. It chooses global leaders, or the biggest and most dominant companies in their industry. The companies must have a history of profitability and weathering all economic cycles, plus a record of paying dividends that tend to rise over time.
Second, Harvest enriches the returns with a covered call strategy. Harvest is the third largest option writing firm in Canada with eight of its 14 ETF’s having option writing strategies.
The covered call strategy adds to the basic dividend income safely by selling a portion of the potential rise in stock price in exchange for a fee. The fee limits the gain a bit, but it also acts as a cushion if share prices fall, because the fee is kept no matter what.
The fee is also tax advantaged. It is treated as a capital gain for tax purposes which is taxed at a lower rate than investment income.
Here’s a closer look at the six ETFs and their monthly yields[i]:
The ETF holds 20 of the largest global healthcare companies diversified across subsectors such as pharmaceuticals, biotech, healthcare equipment, and healthcare providers.
The ETF invests in an equally weighted portfolio of 30 global utilities, covering telecommunications, oil and gas storage and energy transportation. The portfolio is spread largely between Canada, the U.S., and Europe.
The ETF holds 16 large cap banks and bank like businesses. The ETF is equally weighted so is a diversified way to invest in the US banking system.
The ETF is an equally weighted portfolio of 20 companies selected from the world’s Top 100 Brands. Those 20 companies must have attractive 5-year returns on equity growth, price-earnings multiples, and dividend yields.
The ETF holds 20 of the world’s largest technology companies by market captialization, diversified accross key tech subsectors.
The ETF holds an equal weight portfolio of Harvest Equity Income ETFs, combining their powerful income yields with modest leverage to maximize monthly cashflow for investors.
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[i] As at April 30, 2022