By Ambrose O’Callaghan
What makes an iconic brand? World-renowned brands are typically characterized by a concrete identity. They provoke an emotional connection with the audience. Brands like Apple, McDonald’s, and Coca-Cola have built global recognition. From an investing standpoint, top brands and companies stand out as bellwethers. Large cap companies like these can dominate the markets they compete in. These companies have demonstrated the ability not only to survive through various economic cycles but often have the capacity to take advantage of down cycles to invest and come out even stronger on the other side.
These companies are trendsetters and market leaders.
The Harvest Brand Leaders Plus Income ETF (HBF:TSX) targets the world’s biggest brands that possess global reach, strong financials, and dominant market shares. HBF offers three crucial elements that provide value to unitholders: Quality, Growth, and Income. In this piece, I want to explore how HBF targets equities that fit within this framework. Let’s dive in.
Quality | The brands you can trust
The top brands in the world have built trust with a worldwide consumer base by delivering on their value proposition. Moreover, these companies have built and maintained a reputation of consistent quality. In selecting securities for HBF, the portfolio management team seeks to quantify this quality by focusing on three factors: Dividend yield, return on equity (ROE), and value.
Dividend yield
HBF targets companies with attractive dividend payouts. As at June 30, 2025, the average dividend yield in HBF was 2.17%.
In a previous piece on HBF, I’d pinpointed why lengthy dividend growth streaks for a stock are a sign of strength and quality. A “Dividend King” is a company that has increased its dividend payouts for at least 50 consecutive years. HBF contains companies that have some of the longest and most impressive dividend growth streaks on the US market:
5 Longest Dividend growth streaks in HBF:
- Procter & Gamble – 69 years
- The Coca-Cola Company – 63 Years
- PepsiCo – 53 Years
- Walmart Corporation – 52 Years
- McDonalds Corporation – 48 Years
ROE and improving profitability
ROE is used to measure a company’s financial performance. In order to calculate ROE, you divide the company’s net income by the shareholder’s equity. Shareholders’ equity is equal to a company’s assets subtracting debt. Because of that, ROE is another way to show a company’s return on net assets.
Our portfolio management team uses the ROE growth metric to reflect a company’s improvement in profitability over time. The average portfolio constituent in HBF has to demonstrate consistent improvement in profitability.
Value
To evaluate the strength of the companies’ value theme, our team uses forward price-to-earnings. HBF possesses an average P/E ratio of 23.4x as at June 30, 2025.
Growth | Big names deliver big growth
HBF is allocated into growth sub-sectors like Information Technology and Financials, which comprise just over 50% of the total portfolio at the time of this writing.
Alphabet and the AI revolution
Alphabet is one of the equal-weight holdings within HBF. The company has achieved impressive annual earnings growth over the past decade. This has been driven by core businesses like advertising, cloud, and its burgeoning AI businesses.
The AI revolution continues to be an exciting area of growth for major tech firms. In its April earnings report, Alphabet revealed that AI Overviews – the summaries that appear for searches above traditional hyperlinks – now boasts over 1.5 billion users every month. That is within a year after its launch.
JP Morgan Payments | A growth machine
JPMorgan Chase is one of the largest banks in the United States, having delivered solid growth since the 2010s. One of the most exciting growth engines for JPMorgan Chase going forward is its JP Morgan Payments division.
This financial sector giant is covered in the Harvest US Bank Leaders Income ETF (HUBL:TSX) investor brochure where we highlighted the potential of digital banking going forward. Tearsheet describes JP Morgan Payments as a sort of “fintech plus”. The payments arm processes nearly $10 trillion every day, contributing $4.7 billion to revenue. Meanwhile, it has continued to advance tech upgrades, AI integration, and other innovations.
Income | A time tested strategy
HBF uses an active covered call of up to 33% on its portfolio of securities to generate enhanced monthly cashflows while allowing the portfolio to capture the opportunity for market growth. Further, the covered call strategy also serves to lower the portfolio’s overall volatility.
The latest monthly distribution by HBF was $0.0650 per unit (investors on record as of June 30, should receive the payment around July 9). On July 2, 2025, that represents a current yield of 7.75%, which presents a good buying opportunity for investors. For over a decade, HBF has paid out consistent monthly cash distributions and has raised its monthly per unit distribution twice since inception, in 2014.
Annual Performance
As at August 31, 2025
| Ticker | 1M | 3M | 6M | YTD | 1Y | 2Y | 3Y | 4Y | 5Y | 7Y | 8Y | 10Y | 11Y | SI |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| HBF | 2.33 | 8.27 | 4.81 | 7.30 | 10.65 | 12.64 | 10.13 | 4.53 | 9.21 | 8.59 | 9.50 | 10.03 | 8.51 | 8.42 |
| HBF.B | 1.59 | 8.85 | 0.44 | 3.75 | 14.50 | 14.95 | 13.07 | 7.79 | 11.29 | - | - | - | - | 12.50 |
| HBF.U | 2.49 | 8.77 | 5.81 | 8.60 | 12.36 | 14.02 | 11.40 | 5.52 | 10.15 | 9.75 | 10.63 | 11.16 | 9.57 | 9.45 |
Summary | 3 HBF factors – Quality, growth, & income
The balance of quality, growth, and value used in constructing HBF is an investment approach that emphasizes long-term investment in great companies. The success of legendary companies like McDonald’s and Coca-Cola illustrate why, as an investor, it is often more prudent to stick with a great business for the long haul.
HBF invests in the world’s biggest and best brands. It offers investor access to the top 20 dominant global brand leaders and provides value to unitholders on three fronts:
- Quality: Globally trusted brands that adhere to three factors; strong ROE, dividend yields, and value. Annual ROEs that show steadily improving profitability, dividend yields boast a solid average with long histories of dividend growth, and forward P/E ratios demonstrate better-than-average value. The emphasis on these three factors ensures exposure to reliable, long-term quality
- Growth: Allocations to sectors like Information Technology and Financials fuel portfolio growth, driven by companies like Alphabet and JPMorgan Chase, and the trends powering these companies like AI adoption and digital banking
- Income: HBF employs an active covered call strategy to boost monthly income and reduce volatility, all while retaining market upside. The fund offers a solid 7.75% yield, backed by over a decade of steady monthly distributions and multiple distribution increases since inception
Disclaimer
The information is meant to provide general information for educational purposes. Commissions, management fees and expenses all may be associated with investing in Harvest Exchange Traded Funds (managed by Harvest Portfolios Group Inc.). Please read the relevant prospectus before investing. The funds are not guaranteed, their values change frequently, and past performance may not be repeated. The indicated rates of return are the historical annual compounded total returns (except for figures of one year or less, which are simple total returns) including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. The current yield represents an annualized amount that is comprised of 12 unchanged monthly distributions (using the most recent month’s distribution figure multiplied by 12) as a percentage of the closing market price of the Fund. The current yield does not represent historical returns of the ETF but represents the distribution an investor would receive if the most recent distribution stayed the same going forward.
