HAZ: Dividend Growth In A Changing Interest Rate Environment

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 Global X Active Global Dividend ETF (“HAZ”) (formerly Horizons Active Global Dividend ETF). HAZ invests in some of the attractive dividend-paying stocks and has seen total return up 310% since inception.

Guardian Capital LP (“Guardian Capital”) is the sub-advisor for HAZ. The firm’s i³ Investments^tm 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.

From pandemic lows to current highs of around 5% in Canada and the U.S., rising interest rates have adversely impacted dividend stock investing.

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.

Dividend growth predictions are on the rise in late 2023 and into 2024.

Patterns identified by the i3 Investments^tm 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).

Broadcom Inc. (AVGO) is a global technology leader that designs, develops, and supplies semiconductor and infrastructure software solutions.

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).

Active ETFs such as HAZ combine portfolio management with cost-effective fees to help generate better risk-adjusted returns. Global X Investments Canada Inc.’s (“Global X”) 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 Investments^tm 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 Global X Active Global Dividend ETF (HAZ). To find out more visit www.globalX.ca/ETF/haz/.

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Published December 14, 2023