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Opinions Mike Philbrick
Hamilton Enhanced Multi-Sector Covered Call ETF HDIV.TOPARTIAL BUYApr 26, 2024
Mike PhilbrickStock price when the opinion was issued
As of Oct 09, 2026. Market Open.
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This type of structure is designed to create high degrees of current income. In the very long run, and with few exceptions, they'll all underperform buy-and-hold.
If you want tax-efficient income from different places outside Canada, by way of capital gains, then it's something you should probably own. But only if you need current income. If you have a long-term horizon in your registered account, and you don't need current income, these aren't great products.
On average, MERs are high. And you sell away almost all of the upside when markets rally. When markets are more volatile, you get more compensation from higher volatility. But you also have more potential NAV erosion from the way the covered call strategies work over time.
Everyone's drawn to the high current yield. But there's no benefit to that in a registered account, and your capital erodes.
Covered call strategy pays about a 10% yield. Has outperformed the TSX 60. Believes there's some leverage involved, and that makes you do really well in an upswinging market.
However, when the market turns down or flat, you have to be careful with these leveraged plays and their at-the-money call options.
Multi-fund approach. Quite diversified. Adds about 25% leverage. You pay no MER on the whole, but you do on the underlying ETFs. Nice that you have some upside potential because calls aren't written on the whole portfolio. Good play for income too.
Market didn't sell off on today's Canada GDP news, so outlook is bullish.
Investor is holding HDIV, ZWC, SMAX, and ZEB. By holding all of these, it looks as though you're diversified but you're just duplicating a lot of the strategies.
Likes HDIV a lot for yield-seeking investors. A nice strategy, and you probably don't need a whole lot beyond that. The dividend and covered-call strategies are nice defensive ways to stay invested.
If an investor did want to branch out, they should be looking for growth. But he wouldn't add growth-focused now, because we're at all-time highs and he's not sure the multiple is sustainable.
You get the dividend from the underlying securities, that's for sure. If underlying companies cut dividends, then the dividend will be down.
But the enhancement from the options strategy comes from the price of volatility. There's nothing more volatile than the price of volatility. Extra income generated is variable. Right now, it's pretty attractive. But he'd be lying if he said that there's a strategy where you can get 10-11% forever and ever without change.
Right now, probably sustainable. Not a strategy to just buy, without understanding the mechanism of it, and forget about it. Nothing wrong with it, but the income generated is variable, with the biggest swing factor being the price of volatility. If volatility goes down, the fund can't get as much for the call options.
He uses the BMO versions of these because of the funds he runs for BMO.
Covered call option that is food for income oriented investors. MER ratio a little high. Good exposure to Canadian world of index stocks. Leverages product that can present risk. Good on upside, but can be hazardous on downside. Good for small portion of portfolio.