HYLD:CA: A High-Yield Dividend Play for Income Investors in Volatile Markets

Investors seeking steady income in a choppy market may want to consider the Hamilton Enhanced U.S. Covered Call ETF (HYLD:CA), which offers a 13.8% annualized yield and consistent monthly distributions. With its defensive sector allocations and leveraged covered call strategy, HYLD positions itself as a compelling tool for income-focused portfolios—even amid economic uncertainty. Here's why the ex-dividend date on May 30 could be your last chance to secure this high yield before June.

The Dividend Machine: 13.8% Yield, No Fluctuations

HYLD's 13.8% annualized yield—calculated based on its most recent $0.145 monthly distribution—is a standout feature in a landscape of dwindling bond yields and volatile equities. Unlike many dividend ETFs, HYLD's payouts have remained exceptionally stable:

The fund's cash-hedged, monthly dividends are paid to investors on a rolling basis, with the next payout set for June 6, 2025. To qualify, investors must own shares by the close of trading on May 30—a critical deadline for income hunters.

How Covered Calls Generate Income—and Mitigate Risk

HYLD's strategy hinges on covered call writing, a low-risk technique where the fund sells call options on its U.S. equity holdings. This generates upfront premiums, boosting income while capping upside exposure. Crucially, the fund uses 25% cash leverage (not derivatives) to amplify returns, a structure that aligns with its medium-risk profile.

The portfolio is broadly diversified, mirroring the S&P 500's sector mix but with a focus on high-yielding sectors:
- Technology (29.4%) and Healthcare (13.8%), which offer stable cash flows.
- Financials (13.2%), a defensive sector with interest rate resilience.

This diversification is underscored by its top holding, the Hamilton U.S. Equity YIELD MAXIMIZER ETF (SMAX), which accounts for 66.3% of HYLD's assets. SMAX itself uses covered calls to enhance income, creating a compound yield effect.

Why HYLD Shines in Volatile Markets

While HYLD's year-to-date return (YTD) dipped to -5.39% as of March 2025, its 1-year return of 7.3% outperforms most fixed-income alternatives. The fund's modest leverage and income-focused strategy act as a buffer against market swings, as seen in its NAV of $12.17 (up 2.18% in a single day on April 24).

Critics may question the 25% leverage, but it's important to note:
- The leverage is cash-based, avoiding the risk amplification of derivative instruments.
- HYLD's medium-risk rating reflects its alignment with the S&P 500's volatility but with a higher yield premium.

Risks and Considerations

HYLD is not without drawbacks:
1. Distribution Volatility: While payouts have been stable, they are not fixed and may drop if underlying ETFs underperform.
2. Leverage Exposure: The 25% boost can magnify losses in severe downturns.
3. Tax Implications: Distributions are taxed as income, requiring careful tax planning.

Act Before May 30: Secure Your Slice of 13.8%

The May 30 ex-dividend date is a make-or-break moment for income seekers. Missing this deadline means forgoing the June 6 payout of $0.145 per share, which translates to an annualized yield of 13.8%—far above the average 4-5% dividend yields of traditional equity ETFs.

With HYLD's NAV rising to $13.10 on May 26 and its forward yield holding steady at 13.28%, now is the time to act. Investors can reinvest dividends via a DRIP or take cash payouts, but the key is to own shares before May 30.

Final Verdict: A Defensive Income Powerhouse

HYLD:CA combines high yield, diversification, and strategic leverage to deliver income that few ETFs can match. While risks exist, its covered call structure and sector allocations make it a must-consider for portfolios needing steady cash flow in turbulent markets.

Investors should act now to secure their position ahead of the May 30 ex-dividend date—before this high-yield opportunity slips away.

Always consult a financial advisor before making investment decisions. Past performance does not guarantee future results.