FTHI.TO: Safeguarding High Dividends Through Diversification and Resilient Sectors

In a market rattled by rate hikes and volatility, the Fidelity Tactical High Income Fund ETF (FTHI.TO) stands out for its ability to sustain a robust CAD 0.0282 monthly dividend. Anchored in Fidelity’s global investment expertise, the fund’s strategy of diversifying across high-income securities—from energy infrastructure to investment-grade bonds—positions it to thrive even as economic headwinds loom. Let’s dissect how its portfolio composition, historical performance, and macroeconomic resilience make it a compelling income play.

A Portfolio Built for Stability: Diversification in Action

The fund’s sector allocation reflects a deliberate balance between risk and reward. While its top holdings include technology giants like Microsoft and NVIDIA, its energy and infrastructure exposure is a key defensive pillar.

Energy infrastructure is embedded in holdings like Capital Power and TransAlta Corporation, Canadian utilities with stable cash flows from long-term power contracts. Meanwhile, shipping firms like DHT Holdings and Scorpio Tankers benefit from global energy demand, offering income resilience. These holdings, combined with high-yield bonds (38.2% of the portfolio) and convertible securities (14.05%), form a diversified income machine.

Even the fund’s bond allocations are strategic. Exposure to U.S. Treasury bonds (e.g., USTB 1.25% 05/15/50) provides ballast during volatility, while corporate debt like EchoStar Corp’s 10.75% bonds boosts yield. This mix ensures income streams remain intact even if one sector falters.

Historical Performance: Outlasting Cycles

FTHI.TO’s track record underscores its ability to deliver consistent dividends. Since its 2014 inception, it has grown its NAV at a 6.64% annualized rate (as of May 2025), outpacing broad-market benchmarks like the S&P 500.

Even in 2022’s bear market, its 12-month distribution rate remained healthy at 9.47% (as of April 2025), supported by a 7.28% one-year return. While its YTD performance dipped to -2.44% in early 2025, this mirrors broader market turbulence, and its 30-day SEC yield of 1.09% remains steady.

Navigating Rate Hikes and Volatility: The Macro Edge

The fund’s resilience in rising-rate environments stems from its tactical asset allocation. Fidelity’s co-managers—experts in income-focused strategies—rebalance holdings to mitigate interest-rate sensitivity. For instance:
- High-yield bonds are offset by short-duration maturities, limiting exposure to rate-induced price drops.
- Energy infrastructure firms benefit from inflation-linked contracts, shielding cash flows from cost pressures.
- Global diversification (including international bonds like PEMEX’s Mexican government debt) reduces dependency on any single economy.

Moreover, the fund’s option strategy—writing covered calls on the S&P 500—adds a layer of income generation while capping downside risk. This is a testament to Fidelity’s active management, which adapts to macro shifts without compromising yield.

Why Act Now?

With central banks pausing rate hikes and energy demand surging post-pandemic, now is a pivotal moment to capitalize on FTHI.TO’s strengths. Its low expense ratio (0.76%) ensures more of the yield reaches investors, while its 448-holding portfolio offers unmatched diversification.

Final Call: For income seekers seeking stability without sacrificing yield, FTHI.TO offers a rare blend of diversification, expertise, and proven resilience. With its dividend stream anchored in Fidelity’s tactical prowess and its exposure to infrastructure and energy—sectors critical to global recovery—this ETF is poised to outlast the current volatility.

Invest now to lock in CAD 0.0282/month with the confidence that FTHI.TO’s strategy is built to weather any storm.