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Freehold Royalties Ltd. (FRU)
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Global X Canadian Oil and Gas Equity Covered Call ETF (ENCC)
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Hamilton Energy YIELD MAXIMIZER TM ETF (EMAX)
Q: Continuing with Adding Core Portfolio holdings. Energy Sector has EMAX (3.54), ENCC (1.23) & FRU (2.93) for 7.73% of my portfolio. (FRU I have traded many times). Any comments on the Energy Sector holdings?
5i Research Answer:
Both EMAX and ENCC are covered call funds, providing high income but likely to lag in a sector rally. We have no real concerns with them, but investors are trading capital gains for income, and we would note that there is asset value decay here. For example, ENCC pays a 13.42% distribution, but total one year return is only 6.18%. FRU we are comfortable with. Depending on one's goals, we might take the income from the ETFs and start adding positions in CNQ and TOU for some potentially greater long term upside.