The Momentum Play with a Yield Twist: Is WXM.TO a Smart Income Bet Now?

Let me tell ya—when I first saw the June dividend declaration for the CI Morningstar Canada Momentum Index ETF (WXM.TO), I did a double-take. Here's a fund that's not just chasing growth but rewarding investors with a dividend boost, all while sticking to its momentum-driven strategy. Is this a sign of strength, or a setup for disappointment? Let's dig in.

The Dividend Pop: A Good Omen or a Fluke?

The June 2025 distribution of $0.1677 per unit marks a sharp jump from the $0.06 payout in March 2024. That's a 179% increase in just over a year—a move that's either bold or reckless, depending on what's under the hood. Investors of record as of June 24 will get the cash (or reinvest via CI's DRIP program), but here's the catch: the TTM yield is listed at 0%.

Wait a second—how does that work? Simple: the trailing yield calculation hasn't yet absorbed these new, higher distributions. If we assume the ETF maintains this pace, the yield could pop to around 1.2%-1.5% annually—not a king's ransom, but a kicker for a momentum fund. But let's not get ahead of ourselves.

Momentum Investing: Risky Business or a Growth Engine?

WXM.TO's strategy is all about momentum—buying Canadian stocks that have been rising fast and selling those that lag. That's a high-octane approach. When markets are on fire, momentum ETFs soar. But in a downturn? They can crater harder than a rock off a cliff.

The good news? Canadian equities have been on a tear lately, fueled by energy, tech, and a resilient economy. The bad news? Momentum strategies are fragile in volatility. The ETF's distributions have swung wildly in the past—from a skimpy $0.04 to a fat $0.30—proving that performance isn't just about growth; it's about timing.

The Case For: Why This Dividend Boost Matters

1. Income in a Low-Yield World: Even a 1.2% yield isn't bad if you're chasing dividends in a market where bonds and CDs are stuck in the mud.
2. Compounding Power: The DRIP option lets you reinvest those distributions automatically, turning small payouts into a growth machine over time.
3. CI's Credibility: CI Global Asset Management isn't a fly-by-night shop. Their quarterly distribution cadence suggests confidence in the strategy's staying power.

The Case Against: Don't Let the Dividend Fool You

1. No Guaranteed Payments: These distributions aren't a pension plan. If the ETF's underlying assets tank, so do the payouts.
2. High Fees, High Risk: Momentum strategies often come with higher expense ratios (WXM.TO's is around 0.6%), eating into returns.
3. Tax Headaches: ETF distributions can trigger taxable events, especially if they're from capital gains. Consult your advisor—this isn't a “set it and forget it” play.

The Bottom Line: Is It Worth the Risk?

Here's the deal: If you're a growth investor willing to ride the rollercoaster and you believe in Canada's momentum stocks, WXM.TO could be a sleeper hit. The dividend boost is a sign that the fund is generating cash, which is music to my ears. But here's the catch-22: don't mistake this for a bond replacement.

If you're buying for income, pair this with safer assets. If you're in for growth, keep your position size modest—say 5%-10% of your portfolio—and monitor those distributions closely. A drop back to $0.06 would be a red flag.

Final Call to Action

• Buy before June 24 to snag the dividend.
• Enroll in DRIP to let those payouts compound.
• Read the prospectus—know the risks and fee structure.
• Stay alert: Momentum can turn to slumps fast.

In conclusion, WXM.TO is a high-wire act with a dividend safety net. Historically, this strategy delivered an average return of 1.8% per cycle with a 68% success rate since 2020, though investors should be mindful of potential drawdowns up to -4.3%. For aggressive investors seeking growth with a yield twist, this could be a tactical play—but with discipline. Just remember: momentum is a racehorse, not a tortoise. You've got to know when to get off.

Disclaimer: This is not personalized financial advice. Consult your advisor before making investment decisions. Past performance ≠ future results.