Hamilton U.S. Equity Yield Maximizer ETF: A High-Yield Play on Tech and Dividends

The Hamilton U.S. Equity Yield Maximizer ETF (SMAX) recently declared a monthly dividend of CAD 0.172, marking its continued focus on delivering income to investors through a blend of equity exposure and options strategies. With an ex-dividend date of April 30, 2025, and a payout on May 7, the fund’s latest distribution underscores its role as a high-yield vehicle in a low-interest-rate environment.

The Strategy: Covered Calls and Tech Dominance

SMAX employs an active covered call strategy, managed by Nick Piquard’s team, which involves holding large-cap U.S. equities and selling call options against them. This approach aims to generate income from premiums while limiting downside risk. The fund’s 0.65% expense ratio (below many actively managed peers) reflects its efficient structure.

Sector allocations highlight a tech-heavy tilt, with 32.5% of assets in technology stocks as of October 2024. Top holdings include NVIDIA, Alphabet, Microsoft, and Berkshire Hathaway—companies with strong balance sheets and consistent dividends. This focus aligns with the fund’s goal of capitalizing on the tech sector’s growth while using options to enhance yield.

Performance: Strong Gains, But Volatility Looms

Since its launch in October 2023, SMAX has delivered a 33.25% total return, with a year-to-date (YTD) gain of 26.17% as of November 2024. Its 1-year return of 33.39% outperformed broad U.S. equity benchmarks, aided by the covered call strategy’s ability to capture upside while cushioning declines.

However, the fund’s returns are not immune to market swings. A 9.94% annual return in mid-2024 highlights the cyclical nature of equity-linked products. Investors should note that distributions are not guaranteed—they depend on the fund’s performance and option-writing outcomes.

Risks and Considerations

1. Equity Exposure: The fund’s tech-heavy portfolio faces risks tied to sector-specific downturns, such as AI-driven volatility or regulatory changes.
2. Option Strategy Limitations: Selling call options caps upside potential, leaving investors exposed if holdings surge sharply.
3. Currency Risk: While listed on the Toronto Stock Exchange (TSX), SMAX invests in U.S. equities, introducing CAD/USD exchange rate fluctuations.

Who Should Invest?

SMAX is suited for income-seeking investors in Canadian tax-advantaged accounts (RRSP, TFSA) seeking to capitalize on U.S. tech leadership. Its 10.79% annualized yield makes it competitive with high-yield bonds, though with higher equity risk.

Conclusion: A High-Yield Tool with Caveats

The Hamilton U.S. Equity Yield Maximizer ETF offers compelling income potential through its covered call strategy and tech-focused portfolio. With a 33.25% return since inception and a 10.79% yield, it has proven effective in volatile markets. However, investors must weigh its equity exposure and capped upside against the steady dividends.

For those willing to accept moderate risk for income and growth, SMAX merits consideration—provided they understand the trade-offs inherent in its strategy. As markets evolve, its ability to balance yield and capital preservation will determine its long-term appeal.

Final Note: Always consult a financial advisor before making investment decisions.