Investors know that dividends are one source of positive market returns. One ETF that looks to provide regular dividend income and modest long-term capital growth is the actively managed Horizons Active Global Dividend ETF (HAZ). HAZ invests in some of the attractive dividend-paying stocks and has seen total return up 310% since inception.
On an annualized basis, HAZ’s performance since inception is 11.54% as at November 30, 2023.
*The indicated rates of return are the historical annual compounded total returns including changes in per unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution, or optional charges or income taxes payable by any securityholder that would have reduced returns. The rates of return shown in the table are not intended to reflect future values of the ETF(s) or future returns on investment in the ETF(s). Only the returns for periods of one year or greater are annualized returns.
**Fund performance since inception on July 20, 2010, as at November 30, 2023
Guardian Capital LP (“Guardian Capital”) is the sub-advisor for HAZ. The firm’s i3 Investmentstm team – led by Srikanth Iyer – uses Artificial Intelligence (“AI”) to rigorously screen every stock in HAZ to determine the statistical probabilities of dividend growth, payout and sustainability.
A NEW INTEREST RATE REALITY
From pandemic lows to current highs of around 5% in Canada and the U.S., rising interest rates have adversely impacted dividend stock investing.
Source: Bloomberg as at November 28, 2023
A large number of those dividend-paying stocks are in the Consumer Defensive and Utilities sectors and are also known as bond proxies – equities that replicate the performance of bonds while offering higher levels of income. Amid high interest rates, bond proxy yields when compared to their corporate bond counterparts have fallen to their lowest levels in decades.
Along with higher interest rates come higher financing costs for companies in cash-intensive sectors such as Utilities. Part of HAZ’s recent strategy is that it isn’t holding bond proxies due to these limitations.
HAZ’s edge: dividend growth probability
Dividend growth predictions are on the rise in late 2023 and into 2024.
Patterns identified by the i3 Investmentstm team’s AI model suggest the Information Technology, Consumer Discretionary and Energy sectors showing strong dividend growth forecasts.
“When you begin factoring in this level of statistical probability on stocks in the portfolio, we believe it’s hard to lose on a relative basis versus other strategies over time,” says Guardian Capital LP’s Sri Iyer.
Two names within HAZ – Broadcom and ASML – have returned 97% and 45% over the last year respectively (Source: Bloomberg from October 31, 2022 to November 30, 2023).
Source: Broadcom Inc. (https://investors.broadcom.com/news-releases/news-release-details/broadcom-inc-announces-third-quarter-fiscal-year-2023-financial)
Broadcom Inc. (AVGO) is a global technology leader that designs, develops, and supplies semiconductor and infrastructure software solutions.
Source: ASML (https://www.asml.com/en/news/press-releases/2023/q3-2023-financial-results)
ASML is a leading supplier to the semiconductor industry. The company provides chipmakers with hardware, software and services to mass produce the patterns of integrated circuits (microchips).
Capital Appreciation
Active ETFs such as HAZ combine portfolio management with cost-effective fees to help generate better risk-adjusted returns. Horizons ETFs Management (Canada) Inc.’ (“Horizons ETFs”) actively managed ETFs trade like stocks on an exchange, but with lower management fees than standard mutual funds, and provide the intra-day liquidity of an ETF.
HAZ is currently focused on modest capital appreciation as the strategy used by the i3 Investmentstm team currently estimates strong earnings growth across the global equity market in other areas – most notably technology – which is a sector that currently has attractive valuations.
Generally, a company with high and sustainable earnings growth will eventually start to return more of that to investors as shareholder yield which results in dividend growth.
Employing a proprietary AI model to search for anticipated dividend growth is just one of the advantages of the actively managed Horizons Active Global Dividend ETF (HAZ). To find out more visit https://horizonsetfs.com/ETF/haz/.
