CI Health Care Giants Covered Call ETF: A Dividend Haven in Volatile Markets

The CI Health Care Giants Covered Call ETF Unhedged Units (FHI.B) has announced a regular cash distribution of CAD 0.2409 per unit for June 2025, maintaining its reputation as a consistent income generator for yield-seeking investors. With an 8.12% dividend yield as of June 21, 2025, this ETF offers an intriguing opportunity in an environment where market volatility and low interest rates dominate. However, its appeal hinges on understanding its unique covered call strategy, healthcare sector exposure, and the risks that accompany such investments.

The Covered Call Advantage

The ETF employs a covered call strategy, writing at-the-money call options monthly on 25% of its holdings in large-cap healthcare companies. This approach generates premium income, boosting distributions while capping upside potential. The strategy has historically provided stable cash flows, with the June 2025 distribution reflecting this consistency. The fund's yield—derived from both equity dividends and option premiums—makes it a compelling alternative to traditional fixed-income assets.

Sector Exposure: Stability in Volatility

The ETF tracks healthcare giants, a sector known for defensive characteristics due to steady demand for medical services and pharmaceuticals. This exposure aligns with the current market climate, where sectors with predictable cash flows are favored. The fund benchmarks against the S&P 500 Health Care Index, which has shown resilience in recent years despite broader market swings.

However, healthcare is not immune to volatility. Regulatory changes, patent expirations, and shifts in drug pricing policies could impact performance. Investors should weigh these risks against the sector's long-term growth potential driven by aging populations and innovation in biotechnology.

Cost Considerations: MER and Net Returns

The ETF's Management Expense Ratio (MER) stands at 0.71% for the trailing 12 months ending March 2025, as reported in its Management Report of Fund Performance (MRFP). While this is higher than some broad-market ETFs, it is competitive within its peer group of actively managed income-focused funds. The MER accounts for management fees, taxes, and operational costs but excludes transaction fees.

Investors should note that the MER directly impacts net returns. An 8.12% yield with a 0.71% cost structure leaves a net yield of approximately 7.41%, still attractive for income investors. The fund's historical performance, however, must be evaluated net of fees.

Risk Factors to Consider

1. Healthcare Sector Volatility: Regulatory changes or shifts in drug pricing could disrupt the sector.
2. Capped Upside from Covered Calls: The strategy limits gains if the underlying stocks outperform the strike price of the options.
3. Market Liquidity: While the ETF trades on recognized exchanges, liquidity can vary, affecting execution prices.
4. Dividend Sustainability: The fund's distributions depend on the performance of its holdings and the covered call premiums. A prolonged market downturn could reduce income.

Actionable Timing: The Ex-Dividend Date

The June 24, 2025, ex-dividend date is critical for investors aiming to capture the CAD 0.2409 distribution. To receive this payment, investors must own the ETF shares by the close of trading on June 24. Those who purchase after this date will not be eligible for the dividend, which will instead be paid to existing holders.

Conclusion: A Balanced Approach to Yield

The CI Health Care Giants Covered Call ETF offers a compelling income profile in a low-yield environment, backed by a proven strategy and exposure to stable healthcare giants. Its 8.12% yield and covered call income stream make it a viable option for investors prioritizing cash flow. However, the trade-offs—capped upside, sector-specific risks, and an above-average MER—demand careful consideration.

For income-focused investors with a medium-term horizon, this ETF could serve as a portfolio complement to diversify beyond traditional bonds. Those with a higher risk tolerance might consider dollar-cost averaging or reinvesting distributions via the CI Distribution Reinvestment Plan (DRIP).

Before investing, review the fund's MRFP for updated MER data and risk disclosures. In volatile markets, the ETF's defensive sector exposure and consistent distributions position it as a tool for income generation—but one that requires vigilance toward healthcare sector dynamics and the ETF's evolving costs.

In summary, FHI.B is a yield-driven play with defensive underpinnings, best suited for investors willing to balance income potential against healthcare-specific risks.