Hamilton Enhanced Canadian Financials ETF: A Dividend Powerhouse in a Resilient Sector

The Hamilton Enhanced Canadian Financials ETF (HFIN.TO) has once again proven why it's a standout in the income-investing space. With its recent dividend increase to $0.0800 CAD in August 2025, the ETF isn't just delivering on its promise of monthly payouts—it's signaling the resilience of Canada's financial sector in a volatile global economy. For investors seeking both stability and growth, this move is a green light to take a closer look.

A Dividend That Keeps Rising

Let's start with the numbers. From January 2022 to September 2024, HFIN.TO paid a steady $0.0725 CAD monthly dividend. That consistency was a hallmark of its strategy, but in October 2024, the ETF raised the payout to $0.0750 CAD—a 3.47% increase. Then, in July 2025, it surged again to $0.0800 CAD, a 6.67% jump from the prior month. This isn't just a one-off adjustment; it's a calculated move to reflect the ETF's growing confidence in its underlying holdings.

The current annualized yield of 4.41% (as of July 31, 2025) is no small feat, especially in a low-interest-rate environment. For context, that's higher than the average yield of the bottom 25% of Canadian dividend payers and competitive with top-tier financials. The key here is sustainability. HFIN's portfolio is heavily weighted in Canada's largest banks and insurers—companies like Bank of Montreal (BMO), Toronto-Dominion Bank (TD), and Royal Bank of Canada (RY). These institutions have weathered the pandemic, inflation, and interest rate hikes with strong balance sheets and disciplined lending practices.

Sector Resilience: Why the Dividend Rise Matters

The Bank of Canada's 2025 Financial Stability Report paints a clear picture: Canadian financials are in robust shape. Banks have maintained 13.3% common equity Tier 1 capital ratios, well above the 2019 average of 11.3%. Even with the trade war's headwinds, Canadian banks have kept loan losses in check and maintained liquidity buffers. This strength is a direct tailwind for HFIN, which leverages a 25% cash leverage strategy to amplify returns.

The ETF's equal-weighting of the top 12 Canadian financials also plays a role. Unlike market-cap-weighted funds, which can be skewed toward a few giants, HFIN's structure ensures that smaller but stable performers like Canadian Imperial Bank of Commerce (CM) and Manulife Financial (MFC) contribute meaningfully to the portfolio. This diversification reduces the risk of a single underperformer dragging down the fund.

The Leverage Factor: A Double-Edged Sword?

HFIN's use of 25% cash leverage is a strategic choice. By borrowing to amplify exposure, the ETF can generate higher yields without overextending its risk profile. The leverage isn't speculative—it's designed to enhance returns in a sector where earnings and dividends are predictable. For example, the ETF's total return in Q2 2025 was 13.99% year-to-date, outpacing the broader Canadian financials index. This performance isn't just about dividends; it's about capital appreciation too.

Critics might argue that leverage increases volatility, but HFIN's focus on high-quality, defensive stocks mitigates that risk. Canadian banks are known for their conservative lending practices and strong regulatory oversight. Even in a downturn, these institutions are less likely to face the kind of liquidity crises that plagued U.S. regional banks in 2023.

A Buy for Income and Growth

For income-focused investors, HFIN's Dividend Reinvestment Plan (DRIP) is a game-changer. Reinvesting dividends allows investors to compound returns without transaction fees, turning a 4.41% yield into a compounding engine over time. And for those who prefer cash, the monthly payouts provide a reliable income stream.

But HFIN isn't just for retirees. The ETF's combination of dividend growth and capital appreciation makes it a versatile tool for investors of all ages. The recent 6.67% dividend increase is a signal that the fund's managers are confident in the sector's ability to sustain payouts even in a challenging environment.

Final Take: A Dividend Signal to Watch

The Hamilton Enhanced Canadian Financials ETF's recent dividend hike is more than a number—it's a vote of confidence in the sector's resilience. With Canadian banks sitting on strong capital buffers, a diversified portfolio of financials, and a leverage strategy that enhances returns without excessive risk, HFIN.TO is a compelling option for investors seeking both income and growth.

For those who missed the initial surge in 2024, now is the time to consider a buy or hold position. The ETF's ability to adapt to market conditions—raising dividends when the sector is strong—proves its long-term viability. In a world where global trade tensions and interest rate uncertainty are the norm, HFIN offers a rare combination of stability and upside potential.

Don't let the 4.41% yield pass you by. In the Canadian financial sector, HFIN.TO is not just surviving—it's thriving.