NBI Preferred Shares ETF: A Dividend Machine Thriving in Rising Rates

The NBI Active Canadian Preferred Shares ETF (NPRF) has announced a 10% dividend hike to CAD 0.1100/month, effective May 2025, marking a pivotal moment for income investors seeking stability amid rising interest rates. This increase, from CAD 0.1000 in April, underscores the ETF’s resilience and positions it as a cornerstone for portfolios needing reliable cash flow. With a May 23 record date looming, now is the time to act—before this high-yielding opportunity slips away.

Yield Sustainability: A Track Record of Growth

The ETF’s dividend history paints a clear picture of disciplined growth. From CAD 0.625 in Q1 2023 to CAD 0.68 projected for Q1 2025, distributions have risen steadily, reflecting the underlying strength of Canadian preferred shares. Its assets under management (AUM) have surged from CAD 250 million in late 2023 to an estimated CAD 350 million by 2025, signaling investor confidence in its income-generating prowess.

The ETF’s monthly payout structure—now at CAD 0.1100—translates to an annualized yield of 13.2% (assuming a share price of CAD 10), far outpacing the Canadian 10-year bond yield of 3.8% (as of May 2025). This gap highlights its appeal as a high-yield alternative to fixed-income assets, especially in an environment where bonds struggle to keep pace with inflation.

Macroeconomic Alignment: Preferred Shares in Rate-Hike Cycles

Preferred shares thrive in rising rate environments due to their floating-rate structures and seniority in capital hierarchies. Canadian issuers, such as banks and utilities, often issue preferred shares with reset clauses that adjust coupons upward as rates climb. The NBI ETF’s focus on these instruments—coupled with its diversified portfolio across sectors like financials and energy—buffers it against volatility while capitalizing on rate-sensitive gains.

In contrast to fixed-rate bonds, which decline in value as yields rise, preferred shares offer embedded upside. The Bank of Canada’s hawkish stance (projected to maintain rates near 5% through 2025) further entrenches this advantage. For income investors, NPRF is a strategic hedge against bond market headwinds.

Strategic Entry Timing: Secure Your Stake Before May 23

The May 23 record date is a critical deadline. To qualify for the enhanced CAD 0.1100 dividend, investors must own the ETF by this date. With the payment set for May 31, the window for action is narrow.

The ETF’s CAD 300 million AUM as of Q2 2024 and its parent, National Bank of Canada (with $484 billion in assets), provide scale and stability. NBI’s risk management—rooted in active portfolio rebalancing and issuer diversification—reduces exposure to defaults or sector-specific downturns. Even in a rising rate environment, this structure ensures cash flows remain robust.

Risk Considerations: Manageable in a Diversified Strategy

While preferred shares are sensitive to rate shifts, the ETF’s monthly dividend adjustments and focus on senior securities mitigate downside risks. The Bank of Canada’s gradual tightening path, rather than abrupt hikes, further supports steady performance. Compared to individual preferred shares, the ETF’s diversification across 50+ issuers minimizes idiosyncratic risks.

This data reveals a strong alignment, demonstrating the ETF’s ability to mirror broad market trends while offering liquidity and ease of access.

Conclusion: Act Now to Lock in High-Yield Income

The NBI Preferred Shares ETF’s dividend hike to CAD 0.1100/month is not just a number—it’s a signal of its capacity to deliver in a challenging rate environment. With a May 23 record date fast approaching, investors should act swiftly to secure their position in this income powerhouse.

The ETF’s combination of high yield, macroeconomic tailwinds, and institutional backing makes it a rare gem for portfolios seeking both stability and growth. In an era where traditional bonds falter, NPRF stands out as a reliable income engine—don’t miss your chance to ride this wave.