HCA: A Steady Hand in Volatile Waters – Why This ETF's 5.37% Yield is a Must-Have for Income Investors

Investors seeking reliable income in a choppy market environment need look no further than the Hamilton Canadian Bank Mean Reversion Index ETF (HCA). With its rock-solid CAD 0.096 monthly dividend, a 5.37% trailing yield, and a strategy designed to profit from volatility, HCA isn't just a play on Canadian banks—it's a masterclass in smart income investing. Let's dive into why this ETF is primed to outperform in 2025.

The Mean Reversion Play: Outsmarting the Crowd

HCA's secret sauce is its mean reversion strategy, which rebalances quarterly to favor underperforming Canadian banks. Here's how it works: when a bank's stock lags behind its historical average, HCA buys more of it—betting that prices will eventually bounce back. Meanwhile, it trims positions in overperformers, which often correct downward. This contrarian approach has historically outperformed equal-weight bank indices by double digits, according to Solactive data.

The results speak for themselves. While equal-weight strategies passively hold all banks equally, HCA's dynamic weighting has capitalized on short-term volatility, turning dips into buying opportunities. In a sector where fear and uncertainty often dominate, this ETF is a volatility-hungry machine.

A 5.37% Yield in a Starving Market

Income investors are starving for yield. Bonds are yielding next to nothing, and even high-dividend stocks are under pressure. HCA's 5.37% trailing yield (as of July 2024) is a feast by comparison—and it's backed by 25 straight months of consistent CAD 0.096 monthly payouts.

Even better, the fund's May 2025 announcement confirmed the dividend will remain at CAD 0.096, with no cuts on the horizon. This stability is rare in a world where dividends are often the first casualty of market stress. While some might worry about Canadian bank performance, HCA's strategy actively seeks undervalued banks, shielding investors from prolonged slumps.

Why Canadian Banks? The Volatility Play

The “Big Six” Canadian banks—RBC, TD, BMO, Scotia, CIBC, and National—have long been pillars of stability. But stability doesn't mean stagnation. Their stocks occasionally get knocked around by rate cuts, geopolitical noise, or sector-specific headlines. That's where HCA's mean reversion magic kicks in.

Take the recent dip in bank stocks due to slowing mortgage demand: HCA would have snapped up shares at cheaper prices, setting up for gains when the sector rebounded. This isn't guesswork—the fund's track record shows it's done this repeatedly. In fact, its strategy has turned Canadian bank volatility into a reliable income generator, with payouts unchanged despite market ups and downs.

A Safety Net for Income Hunters

Critics might argue that ETFs tracking banks carry risk. But HCA's low 0.29% management fee and focus on the “Big Six” (which dominate Canada's banking sector) keep risk in check. Plus, the fund's rebalancing ensures it's never overexposed to any single bank for too long.

Meanwhile, the 12% payout ratio of HCA's underlying banks (vs. their earnings) means dividends are well-covered. This isn't a “stretch yield” situation—these banks can afford to pay.

The Bottom Line: Buy Now, Collect Later

With bond yields stuck in the mud and dividend cuts looming elsewhere, HCA offers a rare combination: high yield, low cost, and a strategy built to thrive in volatility. Its CAD 0.096 monthly checks add up to over CAD 1.15 annually per unit, and the fund's outperformance over equal-weight indices proves it's not just a dividend play—it's a growth play too.

Don't wait for the next dip to buy in. With CAD 71.1M in assets under management and a track record that speaks for itself, HCA is a no-brainer for income investors.

Action Items for Investors:
1. Buy HCA now to lock in the 5.37% yield.
2. Enroll in the DRIP to compound your gains.
3. Set a watchlist alert for the next ex-dividend date (June 30, 2025) to ensure you're eligible for payouts.

In a market where yield is scarce and volatility is inevitable, HCA is the ETF that turns risk into reward—and pays you to wait it out.

Past performance does not guarantee future results. Always conduct your own research before investing.