Brompton Global Healthcare ETF Maintains Steady Dividend Amid Healthcare Sector Growth

The Brompton Global Healthcare Income & Growth ETF (HIG) has reaffirmed its commitment to consistent income generation with its April 2025 dividend announcement of CAD 0.055 per unit. This marks the fourth consecutive monthly distribution at this rate in 2025, signaling stability for investors seeking steady returns in an evolving healthcare landscape.

Dividend Details: Consistency Amid Sector Volatility

The CAD 0.055 monthly dividend, paid in USD as well (HIG.U), is set to be distributed on May 14, 2025, following the April 30 record date. Investors must own shares by the ex-dividend date of April 15, 2025, to qualify. While the amount remains unchanged since January 2025, the tax treatment of these distributions is critical to note: all 2025 payouts are classified as Return of Capital (ROC), reducing investors’ adjusted cost base but deferring taxable income. Final tax allocations will be finalized by February 2026, with no capital gains or dividends reported in 2025.

Fund Strategy: Covered Calls and Quality Healthcare Exposure

Brompton’s ETF employs a dual-income approach: investing in large-cap global healthcare firms and using covered call writing to enhance yields while dampening volatility. Top holdings as of February 2025 included Eli Lilly, Boston Scientific, and Johnson & Johnson, which collectively represent nearly 98% of the portfolio. This concentration in stable, dividend-paying giants aligns with the fund’s income-focused mandate.

The fund’s 0.75% management fee, while slightly higher than some passive healthcare ETFs, reflects the active overlay of its covered call strategy. This approach aims to generate premium income from option sales, providing a buffer against market downturns.

Performance: Resilience in a Challenging Market

Year-to-date (YTD) through March 2025, the CAD-hedged HIG returned 7.7%, while its USD counterpart (HIG.U) gained 8.1%. These figures outperform the S&P Global 1200 Healthcare Index’s 5.3% YTD return, underscoring the fund’s active management.

Longer-term results are mixed: the fund’s CAD units posted a -0.3% annualized return over one year but a 6.9% five-year annualized return, highlighting its reliance on sustained sector growth. The covered call strategy likely softened losses during periods of volatility, such as the 2022 market correction.

Tax Considerations and Risks

While ROC distributions avoid immediate tax liability, they erode the cost basis of units, potentially increasing future capital gains taxes. Investors in taxable accounts should monitor their adjusted cost base carefully.

Risks include sector-specific headwinds, such as regulatory changes, pricing pressures on pharmaceuticals, or shifts in biotech innovation. Additionally, the fund’s high concentration in a few top holdings could amplify losses if any major position underperforms.

Conclusion: A Reliable Income Stream, but Mind the Trade-offs

The Brompton Global Healthcare ETF offers a compelling income proposition for investors prioritizing steady monthly payouts. Its 7.7% YTD return (CAD) and disciplined covered call strategy demonstrate resilience in volatile markets, while top-tier healthcare holdings provide a stable foundation.

However, the ROC tax treatment demands careful planning, and the fund’s 0.75% fee may deter cost-sensitive investors. Those seeking pure income growth might favor lower-fee alternatives, but for those willing to accept the trade-offs, HIG’s blend of healthcare exposure and options-driven income makes it a viable option.

In a sector where innovation and regulation constantly shift, Brompton’s focus on large-cap stability and income-enhancing strategies positions it as a conservative yet opportunistic play in global healthcare.