Global X Enhanced S&P/TSX 60 ETF (CANL): A Closer Look at Its Dividend Strategy and Market Position

The Global X Enhanced S&P/TSX 60 Index ETF (CANL), managed by Global X Investments Canada Inc., has drawn investor attention following its April 2025 dividend declaration of CAD 0.075 per unit—a notable increase from its March 2025 distribution of CAD 0.07. This article explores the ETF’s strategy, performance, and implications for income-focused investors.

What Drives CANL’s Dividend Strategy?

CANL tracks the S&P/TSX 60 Index, which comprises Canada’s 60 largest and most liquid companies. The term “Enhanced” suggests an active income-generating approach. While the ETF’s exact methodology isn’t disclosed in detail, its monthly distributions and trailing yield of 3.32% (as of March 2025) imply the use of covered call options—a strategy that involves writing call options on the underlying holdings to collect premiums. This boosts income but caps upside potential.

The April 2025 dividend increase to CAD 0.075 highlights management’s ability to optimize distributions, though investors should note that distributions vary monthly and may include a return of capital, which reduces the adjusted cost base (ACB) for tax purposes.

Cost Structure and Performance

CANL’s fees are a critical factor for investors:
- Management Expense Ratio (MER): 1.65% (as of December 2024).
- Trading Expense Ratio (TER): 0.06%.

While higher than passive ETFs (e.g., the iShares S&P/TSX 60 Index ETF (XIU) has a 0.15% MER), CANL’s MER reflects its active strategy. However, its CAD 3.13 million in net assets (as of April 2025) signals limited scale, potentially impacting liquidity.

Market Liquidity and Pricing

CANL’s average daily trading volume of 1,105 units over the past year (April 2025 data) underscores its relatively low liquidity. On April 24, 2025, it traded at a -1.38% discount to its NAV ($24.68 vs. $25.02 NAV), which could reflect investor caution around its complex strategy or thin trading volumes.

Tax Considerations

CANL’s distributions may include a mix of dividends, capital gains, and return of capital. Investors must track their ACB meticulously to avoid overpaying taxes. Final tax characterizations are disclosed annually in the ETF’s prospectus.

Competitor Landscape

CANL competes with other S&P/TSX 60 ETFs, including:
1. iShares XIU: Offers a 0.15% MER and a trailing yield of 1.85% (March 2025), but lacks CANL’s enhanced income focus.
2. BMO ZLB: Charges 0.12% and yields 1.75%, also passive.

CANL’s 3.32% yield (as of March 2025) outpaces these peers, making it attractive for income seekers willing to accept higher fees and strategy risks.

Risk Factors

• Return of Capital: Distributions may erode principal, affecting long-term growth.
• Covered Call Limitations: Capped upside potential could underperform in bull markets.
• Low Liquidity: Wide bid-ask spreads and trading delays are possible due to thin volume.

Conclusion: Is CANL Worth the Trade-Off?

The Global X Enhanced S&P/TSX 60 ETF (CANL) delivers a compelling 3.32% yield through its income-enhancing strategy, though at a cost: higher fees, potential return of capital, and liquidity risks. Its April 2025 dividend hike to CAD 0.075 signals management’s commitment to income generation, but investors must weigh this against the ETF’s 1.65% MER and -1.38% NAV discount.

For income-focused investors with a medium-term horizon, CANL offers an alternative to passive S&P/TSX 60 ETFs, particularly if they can tolerate volatility and tax complexity. However, those prioritizing low costs or liquidity may prefer XIU or ZLB.

Final Take: CANL’s dividend strategy positions it as a niche income tool, but its success hinges on Global X’s ability to balance covered call premiums with capital preservation. Monitor its distribution consistency and NAV trends closely.

This analysis underscores the importance of aligning an ETF’s strategy with personal risk tolerance and financial goals. While CANL’s enhanced yield is enticing, its fees and structural nuances demand careful evaluation.