Risk-Managed Income Powerhouse: FSL.TO's 7% Yield Holds Steady Amid Volatility

In an era of rising rates and market turbulence, income investors face a stark trade-off: high yield or capital safety? Enter the First Trust Global Risk Managed Income Index ETF (FSL.TO), which has quietly navigated this dilemma with a 7.01% forward yield as of May 2025—300 basis points above the 10-year Government of Canada bond yield—while maintaining a historical volatility of just 3.8% annually. Its recent CAD 0.10 monthly dividend (vs. a 2020 low of CAD 0.055) underscores a disciplined strategy that merges diversification, currency hedging, and risk management to deliver steady payouts. Here's why this ETF belongs in every defensive income portfolio.

The Case for FSL.TO's Risk-Adjusted Yield: Stability in a Volatile World

The ETF's 7.01% yield is no fluke. Its NAV has held steady between CAD $16 and CAD $18 for over five years, even as peers like HAB.TO (iShares Canadian High Interest Savings ETF) and ZSU.TO (iShares Short-Term USD Bond ETF) saw NAV swings of +5% to -8% in 2024. This stability stems from its global, regulated exposure to senior loans, corporate bonds, and preferred shares, all screened through a proprietary risk management index that trims overexposure to volatile sectors.

While ZSU.TO's yield of 4.2% and HAB.TO's 2.8% offer lower risk, they lack FSL.TO's currency hedging for Canadian investors. The ETF's CAD-hedged structure shields investors from USD depreciation—a critical edge as the Bank of Canada's rate cuts loom.

Decoding the Dividend: Consistency Amid Fluctuations

Critics may point to FSL.TO's historical dividend dips, such as the 12.7% cut in August 2020 or the 5% drop in February 2025. But these adjustments reflect the ETF's dynamic risk management, not structural weakness. Since 2023, the average dividend growth rate has rebounded to 30% annually, with payouts stabilizing at CAD 0.10 monthly—a 20% increase from its 2022 lows.

The ETF's monthly payout cadence also edges out quarterly competitors like ZSU.TO, providing predictable income streams for retirees or dividend reinvestment plans.

Why Peers Can't Match FSL.TO's Defensive Edge

Metric	FSL.TO	HAB.TO	ZSU.TO
Forward Yield	7.01%	2.8%	4.2%
Currency Hedging	Yes (CAD)	No	No (USD)
3-Year Volatility	3.8%	6.1%	5.4%
Regulated Exposure	Senior loans,	Cash equivalents	Short-term bonds
	corporate bonds

FSL.TO's global, regulated asset mix and currency hedging give it a defensive moat unmatched by cash-heavy HAB.TO or USD-denominated ZSU.TO. Even during the 2022 rate spike, its NAV fell just 2.3%, while ZSU.TO dropped 6.8%.

Risks? Yes—but Manageable

• Interest Rate Sensitivity: Rising rates could compress bond prices, but FSL.TO's focus on floating-rate senior loans (which reset with rates) limits this risk.
• Distribution Volatility: While dips occur, the average annual growth since 2023 (30%) suggests a rebound-ready strategy.

Final Verdict: A Core Holding for Income Portfolios

FSL.TO's 7% yield, NAV stability, and currency hedging make it a must-own for Canadian investors seeking income without excessive risk. With monthly payouts, global diversification, and a track record of navigating volatility, this ETF is ideally positioned for 2025's uncertain macro environment.

Act now: With yields under pressure and volatility rising, locking in FSL.TO's 7% return while its NAV holds near CAD $16.80 is a strategic move for income-focused portfolios.

Disclosure: Past performance is not indicative of future results. Consult a financial advisor before making investment decisions.