Investment Q&A

In regard to the safety of HMAX’s high dividend yield, this is largely tied to the banking sector as over 75% of the ETF’s exposure is to the big-6 banks. In the event of a recession, HMAX’s units could decline due to its high exposure in the financial sector. But banks have a very solid record of dividends, and did not cut payments in the financial crisis. Call option premium could decline in a recession, though, and the dividend could still decline in such a scenario. We would not deem it likely, but if one bank had to cut dividends then we think share prices would see a sharp drawdown. Most banks currently look very attractive today, though, from a valuation standpoint, and display good growth potential which benefits HMAX. We are comfortable with HMAX from an income perspective, but another option that we would recommend is ZWB for its upside potential.