Q: I have been invested into the two ETF’s: HCAL and HUTS. I understand that this is a leverage play i.e. 25%. What I do not understand is why are the monthly distributions so high? I did the math on both ETF’s added all the yields up added 25% and it should not be yielding at current percentage. This is not a covered call ETF. Is there return on capital? What am I missing here?
5i Research Answer:
For HCAL, we are seeing monthly distributions of $0.127, which annualized to $1.524 ($0.127 X 12 months), which brings the distribution yield to 7.7% ($1.524 / $19.75 price per unit).
HUTS issues $0.079 distributions per month ($0.948 per year), bringing its yield to 8.2% ($0.948 / $11.60 price per unit).