Dividend Growth and Leverage in ETFs: Evaluating the Strategic Advantages of Hamilton Champions Enhanced U.S. Dividend ETF (SWIN) for Income-Focused Investors

In an era of muted economic growth and historically low interest rates, income-focused investors face a daunting challenge: how to generate reliable cash flow without sacrificing long-term capital appreciation. Traditional strategies, such as bond laddering or dividend capture, are increasingly constrained by market dynamics. Enter the Hamilton Champions™ Enhanced U.S. Dividend ETF (SWIN), a product designed to address this conundrum by combining dividend growth with modest leverage in a diversified, blue-chip portfolio. For investors seeking to balance income stability with growth potential, SWIN offers a compelling case study in strategic ETF design.

The Case for Leverage in a Low-Growth Environment

Leverage has long been a double-edged sword in investing, often associated with volatility and risk. However, when applied judiciously to a well-diversified portfolio of high-quality assets, it can amplify returns without significantly increasing downside risk. SWIN employs 25% cash leverage, or 1.25x exposure, to the Solactive United States Dividend Elite Champions Index. This approach is particularly effective in a low-growth environment because it enhances the compounding power of dividends from companies with a proven track record of increasing payouts.

Consider the ETF's performance backdrop: from November 2006 to June 2025, a $100,000 investment in the underlying index with 1.25x leverage would have outperformed the S&P 500 by a measurable margin. This is not a fluke but a structural advantage. By leveraging a portfolio of dividend aristocrats—companies like Coca-Cola, Johnson & Johnson, and Procter & Gamble—SWIN taps into the resilience of businesses that thrive even in economic downturns. The leverage amplifies the returns of these durable cash-generating machines, making it a strategic tool for income-focused investors.

Diversification and Sector Strength: The Blueprint for Stability

SWIN's equal-weight methodology and sector allocation further underscore its appeal. Unlike market-cap-weighted indices, which overexpose portfolios to dominant sectors, SWIN's quarterly rebalancing ensures that no single industry dominates the ETF. As of June 2025, the portfolio is spread across 10 sectors, including Consumer Staples (21.7%), Industrials (21.7%), and Health Care (10.6%). These sectors are historically resilient and have strong cash flow characteristics, making them ideal for dividend growth.

The ETF's 100% CAD-hedging also caters to Canadian investors, eliminating currency risk in a low-yield environment where foreign exchange volatility can erode returns. This feature, combined with monthly distributions and a DRIP (Dividend Reinvestment Plan), allows investors to reinvest income into additional shares, compounding their gains over time.

Dividend Growth: A Rising Tide for Income Investors

The most recent data on SWIN's distributions reveals a subtle but significant trend. For five consecutive months, the ETF paid $0.030 per unit, a stable baseline. However, in June 2025, the distribution jumped to $0.038, a 26.7% increase. This spike is not arbitrary; it reflects the ETF's ability to capitalize on the dividend growth of its underlying holdings. Companies like Microsoft and Apple, which are included in the index, have consistently raised payouts, driving up SWIN's yield.

For income-focused investors, this pattern is encouraging. While the ETF is new (launched January 27, 2025), its structure—anchored in dividend champions—positions it to benefit from long-term corporate payout trends. As companies continue to prioritize shareholder returns in a low-growth world, SWIN's leveraged exposure to these entities could amplify income streams.

Strategic Advantages and Risk Considerations

SWIN's strategic advantages are clear:
1. Leverage as a Growth Multiplier: 25% cash leverage enhances returns without excessive risk, especially in a low-volatility portfolio of blue-chip stocks.
2. Diversification and Rebalancing: Quarterly rebalancing ensures sector balance and mitigates overexposure to any single stock or industry.
3. Dividend Compounding: Monthly distributions and DRIP options enable automatic reinvestment, compounding gains over time.
4. Currency Hedging: CAD-hedging protects Canadian investors from FX fluctuations, a critical feature in a low-yield environment.

However, investors must also consider risks. Leverage can amplify losses if the index underperforms, and the ETF's 0.65% fee, while reasonable for leveraged products, is higher than passive alternatives. Additionally, the fund's relatively small assets under management ($5.3 million as of July 2025) could pose liquidity concerns in extreme market conditions.

Conclusion: A Strategic Play for Income and Growth

The Hamilton Champions Enhanced U.S. Dividend ETF (SWIN) is a rare hybrid: a leveraged ETF that prioritizes income while offering growth potential. Its structure—combining 1.25x exposure to dividend champions with equal-weight diversification and CAD-hedging—addresses the twin challenges of low yields and economic stagnation. For income-focused investors, the recent dividend increase from $0.030 to $0.038 underscores the ETF's ability to adapt and grow in a constrained environment.

In a world where traditional income strategies are faltering, SWIN offers a disciplined, data-driven approach. While it is not without risks, its strategic advantages make it a compelling option for investors seeking to balance stability and growth in a low-growth era. As always, due diligence is essential—review the prospectus and assess your risk tolerance before investing—but for those aligned with its objectives, SWIN represents a well-considered path to sustainable income.