Investing for monthly income has become a top priority for many Canadians, especially those looking to stretch every dollar in retirement, or just build consistent cash flow. And while many turn to individual stocks or broad index exchange-traded funds (ETF), there’s another option that combines sector diversification, higher yield, and hands-off income. That’s the Hamilton Enhanced Canadian Dividend ETF (TSX:HDIV).
About HDIV
HDIV isn’t your run-of-the-mill dividend fund. In fact, it’s designed to act like a personal ATM, paying out consistent cash each month with a yield that’s hard to ignore. As of writing, HDIV offers a massive 11.5% yield. That’s not a typo. That’s an over 11% annualized yield, paid out monthly. For those who want passive income that shows up regularly, this is one ETF worth a closer look.
So how does HDIV deliver such a high payout? The secret lies in its structure. HDIV is what’s called a fund-of-funds ETF. Rather than investing in individual stocks, it holds a basket of Canadian covered call ETFs. These ETFs generate premium income by selling call options on their holdings, which boosts the overall yield. But what makes HDIV different is that it enhances these holdings with 25% modest leverage, increasing both yield potential and growth exposure without being overly risky.
This is where the ATM metaphor starts to make sense. Investors get the income benefits of a covered call strategy, which includes regular premium payouts and dividends. Yet HDIV adds just enough leverage to magnify returns without overdoing it. On a total return basis since inception, it has delivered 11.5%, comfortably ahead of the TSX benchmark.
Considerations
Now, let’s not pretend leverage is risk-free. When markets drop, leverage can magnify losses, too. But with HDIV’s diversified exposure across sectors and its use of option strategies, it’s not exactly a wild ride. Its sector mix mirrors the S&P/TSX 60, which means exposure to financials, energy, industrials, and telecoms, all with stable dividend histories. So while it has higher income potential, it doesn’t stray too far from a typical Canadian blue-chip portfolio.
The ETF is a strong fit for investors who want a higher yielding alternative to basic index ETFs or individual covered call funds. Buying and managing your own options is complicated and risky if you don’t know what you’re doing. HDIV offers a convenient, packaged version with professional management and the bonus of monthly distributions.
That monthly payout is also a huge selling point. Most dividend ETFs pay quarterly, and waiting three months between payments can be a drag, especially for retirees using that money for bills or travel. HDIV makes it simple: invest once, and start collecting monthly income.
Foolish takeaway
So who’s HDIV best suited for? It’s ideal for those in the “income phase” of investing. That includes retirees, semi-retirees, and anyone building a passive income stream. It’s also attractive for younger investors who want to reinvest dividends monthly for compounding.
HDIV combines high monthly income, sector diversification, and enhanced returns in one easy-to-own package. With an 11.5% yield, it’s hard not to call it an income investor’s dream, or at least their favourite ATM. Just be sure you’re investing for the right reasons: steady income and long-term performance, not chasing fast gains. Because if used right, HDIV could very well be your ticket to monthly financial freedom.
