Product Strategy

That depends on what ETF you’ve purchased, how many units of it, and at what price. The yield percentage on the day you purchased your units should be indicative of the percentage return you will receive in cash income over a 12-month period. To work out how much cash income you will receive each month it is worthwhile to look at the cash distribution for that ETF, announced each month via press release, and multiply that distribution by the number of units you hold of that ETF.

Understanding Current Yield with an Example

The current yield is an annualized percentage that reflects the income generated by an ETF relative to its market price. In this example, it is calculated based on the fund's fixed monthly distributions.

Example Calculation (Using Evergreen Numbers)

Let’s consider a scenario where an ETF pays a monthly distribution of $0.0708:

1. Annualized Distribution: Multiply the monthly distribution by 12 months:
2. $0.0708 × 12 = $0.8496 (annualized amount).
3. Market Price: Assume the ETF's market price is $7.32.
4. Current Yield: Divide the annualized distribution by the market price:
5. $0.8496 ÷ $7.32 = 11.61% (current yield).

Impact of Market Price Changes on Current Yield

• If the market price falls below $7.32, the current yield increases.
• If the market price rises above $7.32, the current yield decreases.

Key Point

Regardless of the market price, unitholders receive $0.0708 per unit monthly, ensuring a steady income stream

Even for investors focused primarily on income, yield alone should not be the sole consideration. Some investments in Canada might offer yields upwards of 20%, but a range of factors go behind that number which investors should be aware of.

While yield is important, investors may want to consider the underlying securities in an investment, as well as the risk-return rating, past performance, and the frequency and means of that investment’s income distribution. Learn more about factors to consider here.

All Harvest Equity Income ETFs are eligible for the Harvest Distribution Reinvestment Program (DRIP). If you hold units of one of those ETFs, you may opt into the DRIP program through your financial advisor or by contacting your brokerage firm, provided your investment dealer supports participation in the Harvest DRIP program. You can see the list of Harvest DRIP eligible ETFs and learn more about the program here.

Currency-hedged Harvest ETFs will substantially hedge all of the value of their portfolios attributable to the Class A Units’ non-Canadian currency exposure back to the Canadian dollar at all times. As it is substantially—but not 100%—hedged at all times, the impact from currency market fluctuations is generally immaterial. You can learn more about currency hedged ETFs here.

Setting up a Pre-Authorized Contribution (PAC) is a straightforward way to invest regularly and systematically. Here’s a general guide to setting up a PAC, which can be applied to investing in mutual funds, ETFs, or other investment accounts:

1. Choose Your Investment Account

• First, decide where you want your regular contributions to go. This could be a Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP), or a general investment account.
• If you’re planning to invest in ETFs, ensure the account is capable of holding ETFs (such as a brokerage or self-directed investment account).

2. Select Your Contribution Amount and Frequency

• Decide how much you want to contribute and how often (e.g., weekly, bi-weekly, monthly).
• It’s generally best to set an amount that aligns with your budget and long-term goals.

3. Authorize Your Bank or Investment Institution

• Contact your bank or investment provider to set up the PAC. Most institutions allow you to do this online, over the phone, or in person at a branch.
• You’ll typically need to provide your bank account details and authorize the automatic transfer.

4. Specify the Investments

• Designate which investments you want the PAC to purchase. This could be a specific ETF, a mix of ETFs, or a balanced fund, depending on your goals.
• For ETFs, your provider may help automate purchases at a set frequency or deposit cash into the account, where you’ll manually buy the ETFs.

5. Set Up Any DRIP (Dividend Reinvestment Plan) if Desired

• If you’re investing in dividend-paying funds, you may want to set up a DRIP along with your PAC. This reinvests any dividends, allowing for compounding growth.

6. Monitor and Adjust as Needed

• Regularly check that your PAC is contributing as expected and that it aligns with your goals. You can adjust the contribution amount, frequency, or investment allocation over time.

By setting up a PAC, you create a habit of investing regularly, leveraging dollar-cost averaging to mitigate market volatility and build your portfolio steadily over time.

How Interest Rates Impact Covered Call ETFs with Treasury Bonds

The performance of a covered call ETF holding long-duration Treasury bonds is influenced by interest rates in several ways:

1. Bond Yields and Prices: Rising rates typically decrease long-duration bond prices, but the ETF adjusts as bonds mature and are replaced, maintaining its yield potential.
2. Call Writing Premiums: Higher rates often increase market volatility, enabling the ETF to generate higher premiums by writing calls on up to 100% of its portfolio.
3. Option Demand: Demand for call options remains stable due to volatility, with strike prices adjusted to align with current bond valuations.
4. Active Management: The ETF’s active strategy optimizes strike levels and timing, mitigating bond price declines while sustaining cash flow.
5. Sustainable Distributions: Fixed monthly distributions are maintained through active management, with adjustments made only in extraordinary market conditions.

This active approach ensures the ETF navigates interest rate changes while delivering consistent income.

Investors should take the time to understand the design and objectives of the ETF, including its income generation and risk management strategies. It is also advisable to seek the guidance of a qualified financial advisor to evaluate whether the ETF aligns with their investment goals. Additionally, investors should consider the reputation and track record of the firm managing the ETF to ensure confidence in their investment.