Tag Archives: High Yield

An ETF Strategy with Exposure to High Credit Security and High Monthly Income

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Harvest Premium Yield Treasury ETF (HPYT)

Harvest ETFs this week announced its new Harvest Premium Yield Treasury ETF, now available.

By Michael Kovacs, President & CEO of Harvest ETFs

(Sponsor Blog) 

Canadian investors have been forced to adapt to aggressive interest rate hikes from the Bank of Canada. This was preceded by a prolonged period of low interest rates that continued since the 2007-2008 Financial Crisis.

Some experts and analysts are projecting that interest rates are at or near the peak of this tightening cycle. In this environment, an optimal investment strategy factors in high interest rates while preparing for the eventual downward move that many analysts expect in 2024 or later. When the period of high interest rates subsides, there may be great potential for capital appreciation and income generation with an investment strategy that captures those benefits/opportunities. That is where the brand new HPYT ETF comes into play!

What is it?

HPYT is an ETF that holds several long-duration US Treasury ETFs and actively manages a covered call write position on those ETFs to generate an attractive monthly income.  It has an approximate yield of 15%, representing the highest fixed-income yield in Canada. The approximate yield is an annualized amount comprised of 12 unchanged monthly distributions (the announced distribution of 0.15 cents on Sept. 28 multiplied by 12) as a percentage of the opening market price of $12 on September 28, 2023.   Continue Reading…

Is a higher dividend yield better? Not Always. Learn how to spot the good from the bad to avoid this costly mistake.

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Investors Interested In Dividends Should Only Buy The Highest-Yielding Canadian Dividend Stocks If They Meet These Criteria—And Don’t Have These Risk Factors

Dividend yield is the percentage you get when you divide a company’s current yearly payment by its share price.

The best of the highest-yielding Canadian dividend stocks have a history of success

Follow our Successful Investor philosophy over long periods and we think you’ll likely achieve better-than-average investing results.

Our first rule tells you to buy high-quality, mostly dividend-paying stocks. These stocks have generally been succeeding in business for a decade or more, perhaps much longer. But in any case, they have shown that they have a durable business concept. They can wilt in economic and stock-market downturns, like any stock. But most thrive anew when the good times return, as they inevitably do.

Over long periods, you’ll probably find that a third of your stocks do about as well as you hoped, a third do better, and a third do worse. This is partly due to that random element in stock pricing that we’ve often mentioned. It also grows out of the proverbial “wisdom of the crowd.” The market makes pricing mistakes and continually reverses itself. But the collective opinion of all individuals buying and selling in the market eventually beats any single expert opinion.

Canadian dividend stocks and the dividend tax credit

Canadian taxpayers who hold Canadian dividend stocks get a special bonus. Their dividends can be eligible for the dividend tax credit in Canada. This dividend tax credit—which is available on dividends paid on Canadian stocks held outside of an RRSP, RRIF or TFSA—will cut your effective tax rate.

That means dividend income will be taxed at a lower rate than the same amount of interest income. Investors in the highest tax bracket pay tax of around 29% on dividends, compared to 50% on interest income. At the same time, investors in the highest tax bracket pay tax on capital gains at a rate of about 25%. Continue Reading…

U.S. Fixed Income: Looking at U.S. High Yield, by Default

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Kevin Flanagan, WisdomTree Investments

Special to the Financial Independence Hub

Has the fixed income arena entered a new phase? While the lion’s share of attention has been given to interest rate developments for quite some time now, another topic for discussion has been where we are in terms of the U.S. credit cycle. Specifically, the debate has centered on whether the corporate bond market has entered the bottom of the ninth inning of the current cycle or whether the time frame is more akin to being in the sixth or seventh inning. Interestingly, in sticking with this baseball analogy, there does seem to be agreement that credit is not in the first few innings.

For this blog post, the focus will be on U.S. high yield (HY), particularly because if one was to see the first signs of stress, the argument could be made that this is the sector where investors should turn their attention. Over the last six months, investors have witnessed two episodes where HY spreads have visibly widened. The first of these episodes occurred during late October to mid-November of last year, when spreads rose 53 basis points (bps).1 The second occurrence was more recent, as HY differentials moved from more than a decade low of 311 bps on January 26 up to 369 bps two weeks later, representing a widening of 58 bps.2

U.S. Speculative-Grade Issuer Default Rate vs. Recessions

It is interesting to note that in both cases the widening trends were rather brief (two to three weeks) and of similar magnitudes. In addition, both times the sell-off was short-lived, as buyers re-emerged and compressed spreads back down.

Continue Reading…