Harvest ETFs launches high income shares ETFs with covered call strategies

Harvest Portfolios Group Inc. has announced the launch of six new Harvest High Income Shares ETFs, with trading on the Toronto Stock Exchange (TSX).

According to the company, these new additions to its existing lineup of single-stock ETFs build on its 15-year strategy of holding stocks long-term while generating income through covered calls.

The initial offering includes six Class A Units listed under the following TSX ticker symbols:

Harvest states that its High Income Shares ETFs aim to provide long-term capital appreciation through holding single common stocks while distributing high monthly cash income. The enhanced series adds a modest leverage component to increase yield.

The Harvest Diversified High Income Shares ETF (HHIS) combines investments in these single-stock ETFs to provide diversified exposure with monthly income.

The initial monthly variable distributions, payable on March 7, to unitholders of record on February 28, are as follows:

According to Wealth Professional, Harvest ETFs has also introduced their first suite of single-stock ETFs in August of 2024, which also applied covered call strategies to single stock exposures. Those ETFs accessed Eli Lilly, Amazon, Microsoft, and NVIDIA.

Paul MacDonald, chief investment officer at Harvest ETFs, noted that these ETFs are designed for investors seeking monthly cash flow while limiting some upside potential by writing covered calls on up to 50 percent of their positions.

MacDonald highlighted that the high valuations of these companies—Eli Lilly trading at over 115x earnings, Amazon at over 40x, Microsoft at over 35x, and NVIDIA at over 70x—are justified by their earnings growth.

The enhanced series includes a 25 percent leverage component to boost income, but this also increases the risk ratings of these ETFs.

“The high-level point is that if you own the stock and you want to have some income on it, you can now buy this on the TSX. It pays an attractive cash flow and is tax-efficient,” MacDonald explained.

The introduction of the Harvest High Income Shares ETFs represents a notable expansion in Canada’s ETF market.

This series, following Purpose’s earlier yield shares series, combines covered call strategies with modest leverage, offering investors a unique approach to high-income investments.

In its press release, Harvest stated that it aims to cater to investors who prefer long-term holds with cash flow or tactical exposure to major names such as NVIDIA or Amazon.