HMAX's 15% Yield in Uncertain Markets: A Covered Call Play for Income Investors

The Canadian financial sector has long been a bastion of stability, but with interest rates in flux and global markets teetering between optimism and caution, income-seeking investors face a dilemma: how to maximize yield without overexposure to volatility. Enter the Hamilton Canadian Financials YIELD MAXIMIZER™ ETF (HMAX), which just announced a CAD 0.165 monthly dividend, maintaining its 15.07% annualized yield as of May 2024. For investors who act before the May 30 ex-dividend date, this ETF offers a rare combination of high income, diversification, and a risk-mitigation strategy that could be a lifeline in rocky markets.

The Power of Covered Calls: A Hedge Against Volatility

HMAX's secret sauce is its dynamic covered call strategy, which involves holding a portfolio of Canadian financial stocks—70% in the “Big-5” banks (Royal Bank, TD, Scotia, BMO, CIBC) and the rest in insurers and asset managers—and selling call options on those holdings. This generates premium income while capping potential losses if the market declines. The result? A steady stream of payouts (like the June 6 dividend) that are not tied to the ETF's net asset value (NAV) fluctuations.

This strategy has been a winner: as of June 2024, HMAX's NAV was CAD $13.64, with a 12.58% one-year return, all while avoiding leverage. The 0.65% management fee is reasonable for an actively managed ETF, especially given its income-focused mandate.

Why Now? The Case for HMAX in 2025

1. High-Yield Environment: With bond yields depressed and stock dividends uneven, HMAX's 15.07% yield—among the highest in its category—is a rare find. The CAD 0.165 monthly payout (equivalent to CAD 1.98 annually per share) provides a reliable cash flow.
2. Portfolio Stability: The ETF's heavy weighting in blue-chip banks and insurers offers ballast in turbulent markets. These institutions have weathered past crises well, and their dividends remain robust.
3. Ex-Dividend Deadline: Investors must own shares by May 30 to qualify for the June 6 payout. Missing this date means waiting another month for the next distribution.

Risks? Yes—but Mitigated by Design

No investment is risk-free. HMAX's “Medium” risk rating accounts for its exposure to Canadian financials, which could underperform if interest rates rise sharply or economic growth stalls. However, the covered call strategy reduces downside risk by locking in premiums, while the ETF's diversification across banks and insurers limits sector-specific blows.

The Bottom Line: Act Before the Deadline

For income investors, HMAX's blend of high yield, diversification, and volatility dampening makes it a compelling option, especially with the June 6 dividend on the horizon. The May 30 ex-dividend date is a clear deadline to secure this opportunity.

Action Steps:
- Buy shares before May 30 to qualify for the June payout.
- Consider enrolling in the Dividend Reinvestment Plan (DRIP) to compound gains.
- Monitor HMAX's yield sustainability: While past distributions have fluctuated (e.g., dipping to CAD 0.165 in May / June 2025 from higher 2024 levels), the strategy's flexibility allows managers to adjust premiums in changing markets.

In a world where safety and yield are at odds, HMAX is one of the few tools that lets you have both. Don't let this month's 15%+ income opportunity slip away.

This article is for informational purposes only. Past performance does not guarantee future results. Always conduct your own research or consult a financial advisor before making investment decisions.