New ETF from Harvest brings 8.5% target yield


February 16, 2022


February 16, 2022


February 16, 2022

By Harvest ETFs

This week, Harvest ETFs launched the Harvest Diversified Monthly Income ETF (HDIF:TSX), an enhanced equity income ETF that combines five of the ETF provider’s equity income ETFs into a single portfolio of over 90 underlying securities. Designed to deliver steady monthly income for investors, through Harvest’s industry-leading expertise in covered call writing and the addition of modest leverage, HDIF has a high target yield of 8.5%.

This ETF comes at a time when Canadian investors need a simple income solution. For over a decade, interest rates and income yields from fixed income products have been at or near historic lows. In late 2021, the global economy was hit with a wave of inflation. In Canada, the consumer price index hit 4.8% at the end of December 2021, while fixed income yields tended to pay around or below 2%. That means many Canadians, especially retired and retiring Canadians who need to live on the income generated by their income investments, aren’t keeping pace with the cost of living.

“At Harvest ETFs, we have a record of providing growth prospects and income to Canadian investors through our equity income ETFs,” said 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.”

Kovacs and Harvest Chief Investment Officer Paul MacDonald laid out the portfolio components and strategies in HDIF that can generate this high yield. HDIF, they explained, holds an equal weight combination of five Harvest Equity Income ETFs: the Harvest Healthcare Leaders Income ETF (HHL:TSX), the Harvest Brand Leaders Plus Income ETF (HBF:TSX), the Harvest Tech Achievers Growth & Income ETF (HTA:TSX), the Harvest Equal Weight Global Utilities Income ETF (HUTL:TSX) and the Harvest US Bank Leaders Income ETF (HUBL:TSX). Taken together in HDIF, they form a portfolio of over 90 underlying securities covering 5 key sectors. That means diversified exposure to the high-quality, large-cap, market-leading companies that the Harvest investment philosophy focuses on.

Each of HDIF’s component ETFs is an equity income ETF, generating monthly income yields through a combination of dividends and covered call writing. Harvest ETFs is the third-largest covered call writer in Canada and has a strong history of using this strategy to maximize income from equity portfolios and offset potential volatility. Each of the component funds in HDIF already yields between 4.9% and 8.3%. With the addition of modest leverage at a 25% rate, HDIF can achieve its target yield of 8.5%.

“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.

“This also means in a market pullback, we will continue to maintain some modest leverage for a rebound. Unlike some products that have hard lock ins and far higher rates of leverage, 25% leverage on a portfolio of large-cap companies diversified sub-sectors we think is modest and allows for high income.”

MacDonald noted, as well, that HDIF is registered plan eligible. Retail investors in Canada don’t have many registered plan eligible leveraged investment products to choose from, and HDIF provides efficient access for investors who want to use leverage for either a long-term growth focus or enhanced income.

While the technical details of leverage and covered call writing are key to HDIF’s utility as an income product, they support a fundamentally straightforward product, built around Harvest’s philosophy of owning high-quality companies from key global sectors to generate growth potential and income yield.

“At Harvest we have always wanted our investors to feel comfortable with what they own, with transparency in our portfolios of quality names for long-term performance,” said Michael Kovacs. “With the Harvest Diversified Monthly Income ETF (HDIF), that doesn’t change, you still own the same companies. What is different is that we have enhanced the yield and the exposure to the market by using a modest amount of leverage, 25%, which we believe offers yield seekers who are comfortable with Equity risk an opportunity to receive a higher yield.”

To find out how your clients can benefit from these equity income solutions call 1.866.998.8298.

For more on Harvest Equity Income ETFs click here.

Quoted in this article

Michael Kovacs

President & Chief Executive Officer
Harvest Portfolios Group

Paul MacDonald, CFA

Chief Investment Officer
Harvest Portfolios Group


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