Turning a $15,000 Tax-Free Savings Account (TFSA) into $150,000 might sound like a lofty goal. Yet with disciplined investing and a well-chosen strategy, it’s definitely achievable. One standout option to consider is the Hamilton Enhanced Multi-Sector Covered Call ETF (TSX: HDIV). This exchange-traded fund (ETF) offers a unique blend of high monthly income and diversification across some of the strongest sectors in Canada, thus making it an appealing choice for both income-focused and growth-oriented investors.
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About HDIV
HDIV is designed to provide investors with a consistent monthly income while also offering long-term capital appreciation. The fund achieves this by leveraging a portfolio of covered call ETFs that are primarily focused on Canadian sectors. To enhance returns, HDIV employs modest cash leverage of approximately 25% – thusly giving investors the opportunity to benefit from a slightly amplified yield and growth potential.
Recent performance numbers for HDIV are compelling. As of October 31, 2024, the ETF has outperformed the S&P/TSX 60 by an annualized 3.7% since its inception in July 2021. Even more attractive is its yield, currently sitting at an impressive 11.8%. This translates into substantial monthly income for investors. And the high yield is a key feature for anyone looking to grow their TFSA steadily while enjoying periodic payouts.
The ETF’s portfolio is thoughtfully diversified across sectors such as financials, utilities, technology, energy, and gold, ensuring balanced exposure to the Canadian economy. Financials take the lead, representing a significant portion of the portfolio. Other sectors, like technology and energy, are well-represented too. This blend offers a unique balance of stability and growth potential.
Future outlook
One of HDIV’s standout features is its ability to deliver high monthly income, a characteristic that makes it especially attractive for investors who value consistent cash flow. By utilizing covered call strategies, the ETF generates income from premiums while still providing exposure to capital appreciation. This approach not only cushions against market volatility. It also ensures that investors receive a steady stream of income, which can be reinvested to accelerate growth within the TFSA.
Looking to the future, HDIV’s strategy of diversifying across sectors and leveraging covered calls positions will help it weather market fluctuations. Its modest use of leverage enhances returns, but it’s worth noting that leverage can magnify losses as well as gains. For this reason, HDIV is best suited to investors with a medium-to-high risk tolerance who are comfortable with occasional dips in exchange for the long-term potential of amplified returns.
While HDIV does come with management fees, these are largely offset by the high yield and growth potential of the ETF. The current economic outlook for Canada, combined with the fund’s exposure to sectors like financials and technology, provides a strong foundation for future performance. This makes HDIV a viable option for those looking to achieve significant growth within their TFSA over time.
Bottom line
In conclusion, turning a $15,000 TFSA into $171,000 requires patience, strategy, and the right investment choices. HDIV offers a compelling mix of high income, diversification, and growth potential. In fact, here is how long it would take to reach that $171,000 amount with dividends reinvested, and shares rising by 3% each year and dividends by 9.7%.
| Year | Share Price | Shares Owned | Share Value | Annual Dividend Per Share | Annual Dividend | New Shares Purchased | New Balance |
| 1 | $17.77 | 844 | $14,997.88 | $2.05 | $1,730.20 | 0 | $15,445.20 |
| 2 | $18.30 | 844 | $15,445.20 | $2.25 | $1,899.00 | 101 | $17,813.25 |
| 3 | $18.85 | 945 | $17,813.25 | $2.47 | $2,334.15 | 120 | $20,682.30 |
| 4 | $19.42 | 1,065 | $20,682.30 | $2.71 | $2,886.15 | 144 | $24,180.00 |
| 5 | $20.00 | 1,209 | $24,180.00 | $2.97 | $3,590.73 | 174 | $28,489.80 |
| 6 | $20.60 | 1,383 | $28,489.80 | $3.26 | $4,508.58 | 212 | $33,845.90 |
| 7 | $21.22 | 1,595 | $33,845.90 | $3.58 | $5,710.10 | 245 | $42,835.20 |
| 8 | $23.28 | 1,840 | $42,835.20 | $3.93 | $7,231.20 | 302 | $51,365.16 |
| 9 | $23.98 | 2,142 | $51,365.16 | $4.31 | $9,232.02 | 374 | $62,145.20 |
| 10 | $24.70 | 2,516 | $62,145.20 | $4.73 | $11,900.68 | 439 | $80,080.50 |
| 11 | $27.10 | 2,955 | $80,080.50 | $5.19 | $15,336.45 | 516 | $103,192.83 |
| 12 | $29.73 | 3,471 | $103,192.83 | $5.69 | $19,749.99 | 605 | $132,959.12 |
| 13 | $32.62 | 4,076 | $132,959.12 | $6.24 | $25,434.24 | 711 | $171,326.73 |
By reinvesting the substantial monthly income and staying disciplined in your approach, your $15,000 could be well on its way to becoming a robust $171,000 over 13 years. As always, it’s wise to consult a financial advisor to ensure your investment aligns with your goals and risk tolerance.
