Unlocking Contrarian Yield: Why Mackenzie Core Plus ETF's 13.58% Dividend Surge Signals Opportunity in a Volatile Market

In a Canadian fixed income landscape where interest rates hover near historic highs, investors seeking reliable income often face a paradox: higher yields typically come with greater risk, while safer options offer paltry returns. Enter the Mackenzie Core Plus Canadian Fixed Income ETF (MKB.TO), which recently announced a 13.58% surge in its May 2025 dividend to CAD $0.0649 per unit—a move that underscores its contrarian appeal in a market where many fixed income peers are struggling to keep pace. This ETF is not merely riding the wave of rising rates but actively leveraging them to deliver outsized income growth. Here's why investors should take notice.

The Contrarian Play: Dividend Growth Amid Volatility

While many Canadian fixed income ETFs have seen stagnant or declining distributions in recent quarters—due to market turbulence and fluctuating credit conditions—MKB.TO has defied expectations. Its 13.58% May dividend increase marks a sharp rebound from the $0.0571/unit paid in April, signaling a portfolio rebalancing toward higher-yielding opportunities. This growth isn't an anomaly: the ETF's forward yield of 4.08% as of May 26, 2025, outpaces its three-year average dividend growth rate of 7.78%, suggesting a strategic shift to capitalize on current market conditions.

Why MKB.TO Outperforms Peers: Active Management Meets Credit Discipline

The ETF's success hinges on its active management strategy and A- credit quality mandate, two pillars that set it apart from passive peers like the BMO Canadian Bank Income Index ETF (ZBI.TO) or BMO Discount Bond Index ETF (ZDB.TO). Here's the breakdown:

1. Credit Quality as a Shield:
   Unlike ZBI.TO, which focuses on Canadian bank debt (yielding 3.53% but with volatility risks tied to banking sector headwinds), MKB.TO prioritizes bonds rated A- or higher, reducing exposure to speculative-grade instruments. This discipline ensures stability even as rates rise, a critical advantage in an environment where defaults could rise.

2. Dynamic Portfolio Adjustments:
   The fund's managers actively pivot toward sectors and issuers benefiting from higher rates, such as short-term corporate bonds and floating-rate notes, which adjust yields in sync with market shifts. This contrasts with ZDB.TO, a passive tracker of broad bond indices, which saw its yield dip to 2.36% as its portfolio grappled with duration risks.

3. Yield vs. Volatility Tradeoff:
   While ZBI.TO's 3.53% yield may look tempting, its 2.53% volatility (vs. MKB's 2.75%) reflects its narrow focus on banks—a sector increasingly under pressure from loan losses and regulatory scrutiny. MKB's broader investable universe and active hedging strategies offer a more balanced risk-return profile.

The Contrarian Case: Riding the High-Rate Wave

In a market where fear of rising rates has driven investors toward ultra-short-term bonds or cash—yielding just 2-3%—MKB.TO's 4.08% forward yield represents a compelling middle ground. The ETF's ability to boost distributions by over 13% in a single month highlights its managers' agility in capitalizing on dislocations in the credit markets.

Risks? Yes—but Manageable

No investment is without risk. MKB.TO's yield comes with interest rate sensitivity, as its portfolio includes bonds that could decline in value if rates rise further. However, its average duration of 3.2 years (shorter than ZDB.TO's 6.27%) limits exposure to prolonged rate hikes. Additionally, the fund's ESG integration—including low carbon intensity and exclusion of controversial sectors—aligns with growing investor preferences for socially responsible income streams.

Conclusion: A Contrarian's Income Machine

In a high-rate environment where income is scarce and volatility reigns, the Mackenzie Core Plus ETF stands out as a rare contrarian gem. Its 13.58% dividend surge, A- credit quality discipline, and active management make it a standout choice for investors seeking to capitalize on current market dynamics without overexposure to risk.

For income-focused portfolios, MKB.TO isn't just a bond fund—it's a strategic bet on active management outperforming passive stagnation. With its yield comfortably above peers and its distribution growth trajectory intact, now is the time to act.

Invest Now or Risk Missing the Rally
The ETF's June 9, 2025, distribution date is fast approaching, and with the ex-dividend date already passed (May 1, 2025), investors must act swiftly to lock in this high-yield opportunity. In a market where caution dominates, MKB.TO's contrarian strength offers a path to steady income—and potential capital appreciation—in uncertain times.