The Income Investor's Secret Weapon: Why the First Trust Senior Loan ETF (CAD-Hedged) is a Must-Have in Rising Rate Markets

Canadian investors in search of steady income are facing a crossroads: yields are climbing, but so is volatility. With interest rates at multi-decade highs, the hunt for reliable dividends has never been more critical. Enter the First Trust Senior Loan ETF (CAD-Hedged) (FSL.TO)—an under-the-radar gem that's quietly delivering a 7.01% forward yield while shielding investors from currency chaos. Let's dive into why this ETF is primed to thrive in today's environment—and why you should act before it's too late.

The Dividend Story: Stability Amid Shifting Rates

First Trust's Senior Loan ETF has a unique superpower: its floating-rate structure. Unlike traditional bonds, the ETF's income stream adjusts monthly with interest rates, locking in higher payouts as the Bank of Canada continues its tightening cycle. Let's look at the numbers:

Over the past year, the ETF's dividends have fluctuated—but never collapsed. For example:
- In late 2024, distributions dipped slightly (e.g., a 0.11 CAD payout in December 2024, down 8.33% from prior months).
- Yet by January 2025, it rebounded to 0.10 CAD, and its forward yield remains a robust 7.01%—well above the 5.5% average for Canadian dividend ETFs.

Crucially, the three-year dividend growth rate of 30% (see below) underscores its ability to capitalize on rising rates.

Why CAD Hedging Matters Now More Than Ever

Canadian investors face a double whammy: soaring rates and a currency that's tied to global turmoil. The CAD-hedged feature of this ETF acts as a financial force field, insulating investors from exchange-rate swings. For instance:
- In 2024, the ETF's adjusted prices stayed remarkably stable (hovering around $16.80–$17.00), even as the Canadian dollar gyrated.
- A CAD-hedged ETF ensures that foreign income (like U.S. dollar-denominated loans) converts back to Canadian funds without currency risk—a lifeline for retirees and income-focused portfolios.

The Volatility Myth: This ETF Isn't a Roller Coaster

Critics might point to the recent dip to 0.0975 CAD in April 2025 (a 2.63% drop) as a red flag. But here's the truth:
- Floating-rate loans inherently adjust to market conditions. The ETF's monthly payout structure means it can recalibrate quickly to reflect new rate environments.
- Even in 2024, the average dividend was 0.10 CAD, with only two months seeing drops exceeding 4%. The consistency here is key—no sudden zero payouts or suspensions.

The Bottom Line: A 7.01% Yield Isn't a Fluke

This ETF isn't just about today's yield—it's about future-proofing your income. With the Bank of Canada signaling potential further hikes, FSL.TO's floating-rate loans will keep ratcheting up payouts. Add in CAD hedging to neutralize currency risks, and you've got a bulletproof combo for 2025 and beyond.

Act Now—Before the Crowd Catches On

The writing is on the wall: in a world of 5% GICs and shaky fixed-income markets, a 7.01% yield with inflation-protected dividends is a rarity. The ETF's $16.64 closing price as of May 2025 is still within striking distance of its 2023 highs, offering a buy point with room to grow.

Don't let short-term dips fool you—this is an income machine designed for this exact moment. Lock in your position now, and let FSL.TO do the heavy lifting while you sleep soundly.

Final Call to Action:
This isn't just an ETF—it's an income insurance policy in turbulent markets. For every Canadian investor seeking yield without the heartburn, FSL.TO is your ticket to 7%+ dividends, CAD protection, and a front-row seat to rising rates. Buy it today.

Past performance does not guarantee future results. ETF investing involves risk, including possible loss of principal. Hedging strategies may not always be effective.