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Hamilton Enhanced Canadian Covered Call ETF (HDIV $21.58)
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Hamilton Canadian Financials YIELD MAXIMIZER TM ETF (HMAX $16.45)
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Hamilton Utilities YIELD MAXIMIZER TM ETF (UMAX $13.26)
Q: It's almost too good to be true. I have owned HMX for 2.5 months and have a 5.82% share price gain on top of the monthly paid12% (annual) dividend. I understand that the underlying sector - financials - has been on a hot roll. Let's assume that banks were suddenly flat. How would that impact the share price performance and their ability to sustain the lofty dividend? i.e. can this potentially be a long term hold or am I just riding a wave?
Secondly how do you feel about the two sister ETFs HDIV and UMAX?
Thank you
Secondly how do you feel about the two sister ETFs HDIV and UMAX?
Thank you
5i Research Answer:
HMAX is a covered call fund. Certainly the strength of the sector has helped performance, but it is a decent fund regardless for investors seeking enhanced income. Option premium is partially influenced by volatility. In a flat sector, premiums might decline a bit but probably not enough to impact the dividend. The fund will underperform in a rally, because call options will be exercised. In a sector collapse, the fund will still decline, but likely by a bit less than the sector (because of the ongoing call premium). We have the same comments for UMAX and HDIV, though HDIV is more diversified and not sector-specific, so should be less volatile overall.