Don’t get me wrong—the TSX energy sector is fantastic. We’ve got plenty of high-yielding pipelines, explorers, and producers gushing free cash flow and paying out tax-efficient eligible dividends. It’s a cornerstone for Canadian investors.
But why stop there? Looking south of the border gives you exposure to the titans of “Big Oil”—the supermajors that frankly dwarf our industry in scale and reach. These companies are global giants in the energy sector, offering diversification you can’t get from sticking solely to Canadian stocks.
Here’s a unique energy exchange-traded fund (ETF) from Hamilton ETFs that provides exposure to these stocks—along with an impressive 10% yield and monthly payouts.
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The ETF to watch
Hamilton Energy YIELD MAXIMIZER ETF (TSX:EMAX) is a unique offering, currently holding an equal-weighted portfolio of 17 North American energy stocks.
With 83% of its holdings in U.S. companies and 17% in Canadian ones, it’s a great way to diversify beyond the Canadian energy sector.
What makes EMAX stand out is its use of covered calls on up to 30% of the portfolio. These calls are written at-the-money to maximize premium income, and thanks to the high volatility of energy stocks, EMAX delivers a hefty 10.64% distribution yield as of December 10.
Better still, with only 30% of the portfolio covered by calls, the remaining 70% is free to capture upside price appreciation, giving investors the potential for both income and growth.
Things to understand with EMAX
The 10.64% yield is impressive, but it’s not set in stone. The yield can fluctuate based on market conditions and the overall outlook for the energy sector. Remember, energy stocks are inherently volatile, so you should be prepared for price swings while holding this ETF.
For tax efficiency, EMAX is best held in a Tax-Free Savings Account (TFSA). In a non-registered account, the distributions are a mix of eligible and non-eligible dividends, capital gains, and return of capital, which may complicate your tax filings.
Also, note that EMAX typically goes ex-dividend on the last Friday of each month, with payouts arriving on the first Friday of the following month.
