Why HDIF has become a standout ETF for Canadian investors


March 13, 2023

By Harvest ETFs

The Harvest Diversified Monthly Income ETF (HDIF:TSX) has passed its one-year mark, and the ETF has spent that year delivering on the high income yield it promised. HDIF was among the most popular Canadian ETFs launched in 2022—collecting well over $200 million in assets—and so much of that popularity has come down to its blend of leading companies, broad diversification, and high income.

HDIF holds six underlying Harvest ETFs on an equal weight basis, each of which employ an active and flexible covered call strategy to earn high equity income yields. Those ETFs follow Harvest’s investment philosophy: buy the leading companies of a sector or market area and hold them for the long term while generating income. HDIF combines those six portfolios with the addition of modest leverage to enhance overall income yield. It’s a package that has proven its value to investors over the past year.

“The Harvest Diversified Monthly Income ETF has already paid its unitholders over $12 million in monthly cash distributions during its first year,” said Michael Kovacs, President & CEO of Harvest ETFs. “That income has helped so many investors, whether they used it to support their lifestyles or to contribute to their total investment returns.”

Underlying ETFs within HDIF

HDIF holds six Harvest Equity Income ETFs in its portfolio. They are: 

Each of those ETFs holds a portfolio of large-cap leaders from within its sector or market area. They bring exposure to specific tailwinds, whether it’s the long-term stability and growth prospects of Healthcare in HHL, or the highly growth-oriented tech companies held in HTA. The underlying portfolios combine to well over 110 large-cap companies, with exposure to US, Canadian, and global markets.

The underlying ETFs also employ actively managed covered call option strategies to earn their own high income yield. That active management allows the ETFs to be opportunistic about upside capture, while monetizing options premiums from volatile markets. Because each ETF is managed by Harvest, HDIF also does not charge an additional management fee beyond the fees of its underlying holdings.           

Greater than the sum of its parts

While each ETF has its own attractive qualities, their combination in HDIF does more than just aggregate their portfolios, growth prospects, and income yields. As any investment professional will say, more diversification is better. A more diversified portfolio offers more ways to grow, and more ways to offset potential losses.

However, the final key component that HDIF uses is its leverage. Applied at a modest rate of 25%, HDIF borrows money and invests in its underlying holdings, generating a higher income yield and enhanced growth prospects, along with a commensurate increase in the ETF’s risk-return profile.

“I think that HDIF’s simplicity is some of what makes it successful,” said Kovacs. “It starts with portfolios of leading businesses. It adds a set of active covered call options strategies to earn income. It caps that with modest leverage to enhance yield and growth prospects.

“In a market where investors have sought yield and exposure to business leaders, HDIF has delivered on both.”


Diversified Monthly
Income ETF


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