Harvest High Income Shares: 16 - 22% Yields on Microsoft, Eli Lilly, Amazon & NVIDIA

Intro [Music] always a great day when one of our favorite income covered call providers in Canada launches four new ETFs actually 16 in total we'll talk about that but Harvest is has launched a brand new suite of single stock ETFs in come obviously so they have covered call writing on them and they have leveraged and non-leveraged versions as well as USD currency and non you know Canadian currency versions as well so let's check them out I am on their website here High income shares by Harvest ETF so these are single stock ETF which means the ETFs will only be investing in one stock they have started with these four stocks Ellie Lily which is a massive Healthcare pharmaceutical company that's been on a tear lately if you look at the the stock chart I mean it's it almost looks looks like Nvidia of course you have Amazon you have Microsoft to you know consumer discretionary giant technology Giant and of course you have Nvidia who's at the Forefront with the chipm so let's check out these products together and what they're all about so if we scroll down ETF Tickers you will actually see hopefully my face is not blocking anything that's why I put it at the top instead of at the bottom here so they started with four uh companies and they're going to have not only unleveraged and leveraged versions of each but also Canadian currency and USD currency versions of each one leverage and non- lever so for example let's just take ell Lily so you're going to have lhy that's just going to be the Canadian currency uh non-leveraged then you have llh so sorry LL YH doou uh this is USD currency right whenever you see a it typically means an USD currency and then you have the same thing for the leverage versions you have LL for uh if you want to trade it in Canadian and you have theu version if you want to trade it in U uh USD dollars however one thing that's interesting is that all of them every single one of them are not going to be hedged to the Canadian dollar which I kind of like because if you feel like the US dollar will do better versus Canada over time you are going to be better off with a non- hedged version so all of these all every single one of them there is no Canadian dollar hedging and that that saves a little bit of costs as well we're going to ask Michael kovax about about it later on but so this is just a something that's I noticed that's different because a lot of harvest cover call ETFs are Canadian dollar hedge these ones are all non hedg I just want to point that out very very important the management fee is 40 basis points on all of these so very nice little management fee of course the leverage one has to pay for leverage cost so the me on those ones are going to be higher obviously but rate Cuts with with interest rates going down in Canada that definitely helps or reduces The Leverage costs on The Leverage version which are these ones here right so an easy way to find them by the way they're going to have enhanced in the name and TSX Listed - 15% Tax? another thing I want to point out is that all of them whether it's a one or not they are all listed on the TSX they're all listed on the Canadian stock market so you do not have to worry about paying that 15% withholding tax on your dividend they Canadian listed that that Ford income uh tax all that is handled within the ETF so you you don't have to worry about that so what is this uh you know these ETFs all about well again they're single stock ETFs they write Covered Call Writing covered calls on it and here's the key on they writing covered calls on up to 50% of the position so by this is the max doesn't mean they're writing up to 50% uh covered calls on the portfolio they could go up to 50% uh writing so what it means that Max if they're writing maximum covered calls you are capturing still at least 50% of the upside of these stocks of of course Tax Efficient Distributions we're going to have tax efficient distributions CU remember when you're writing covered calls in Canada it's considered capital gains so my estimate here this is my opinion is that a very very very high percentage of these distributions will be classified probably over 90% again this is my opinion I'm just estimating here will be classified as either capital gains and rock so very very tax efficient low purchase price as well they all started at about 122 actually they all started at $12 these were launched actually on August 21st so if you look here uh they all launched at $12 but of course some of them are higher than that because they went up and some of them are lower than that because they went the stock went down like the Nvidia so in terms of Yields yields which is the most exciting thing and I almost uh jumped off my seat when I saw that I was very very impressed with the yields which are very very easy to figure out if you're starting the price at $12 if you're actually starting the price at $12 the monthly distribution rate is pretty much the yield on a $12 price so the Ellie Lily one this is non- leverage guys 16% yield the Amazon and Microsoft 14% yield Nvidia 18% yield and if we look at the leveraged ones and again these yields are based on a $12 price if we look at the leverage ones which of course you guys know that I'm a huge fan of uh 18% on ell ly 18% annual yield 16 on Amazon and Microsoft and 20 a whopping 22% yield on the Nvidia one on the enhanc one so very very high yields absolutely fantastic on these if you're looking for high income in your portfolio so I strongly suggest to uh go on the website look at the FAQs uh and so that's basically it guys there it's not really rocket science to figure out obviously these are ETFs that are only going to hold one stock they're writing covered calls on it there's leverage and non- leverage versions Canadian dollar andu versions as well if you want invest in them in USD currency they all have a management fee of 40 basis points identical pretty much to their competition who also has single stock ETFs on the Canadian Market but one thing that's different is that they're all non Canadian dollar hedged and of course Harvest is known for their really reliable and consistent monthly distribution so now what you know the questions you're going to have is how sustainable how really how sustainable are these dividends what exactly is the covered call policy you know do they write at the money out of the money um are there going to be more of these products in the future why did Harvest decide to launch these now so let's ask the man himself Michael kovax all these Why Launch these ETFs? questions right now all right everyone Michael Kovac back on the channel CEO of harvest how are you Michael thanks so much for taking the time to come back on the channel very good thanks for having us we love being here all right glad to hear that so let's get into it right away you got a brand new launch uh you even have like a nice little separate logo I I love that I really like the your graphics did did a good job as usual but my first question of course is why did you guys decide to launch the your the these single stock ETFs now um they were like a natural extension of our product line as you know we've been um we've been in the cover call writing area for over 10 years eight years as an ETF company uh doing cover calls and it just was a natural add-on to what we do already uh and a lot of these stocks all those four they're all constituents in existing portfolios so we're very familiar with the companies we know about their option Trading their the uh the depth of those markets so we were very comfortable launching these first four um as as an introduction to the uh Harvest High income shares makes complete sense and that transition into my next question Why these 4 Stocks? you chose these four very specific stocks so obviously Google sorry Amazon uh Microsoft Ellie Lily and Nvidia so why these four stocks in particular did you guys uh decide to to focus on well aside from the part that we are familiar with the companies uh they are some of the most widely held companies in the United States uh either trading on NASDAQ or the New York Stock Exchange uh a lot of volume on these companies very deep option markets as well United States a lot of different um areas of the option chain and we try to write one or two% out of the money on a one- month basis so you know there's there's a lot there that we can work with and again just getting back to the Comfort level that we're very familiar with these stocks uh and just in sort of some surveying we did as we were looking at launching this product these that were coming up a lot so we decided these would be our first four stocks Covered Call Policy interesting and you kind of already touched touched about it you already know I think what my next question is going to be the covered call policy something obviously that that that very important so you said 1 to 2% out of the money monthly is this on all four of them are tell me a little bit about the the covered call policy that you're going to have on these single stock ETFs I I you know from the website it says up to 50% right coverage so so can you just go into detail about the actual covered call strategy sure so uh when you say up to 50% that means you can be 0 to 50% but to generate those deals you're going to have to be writing um so right now at launch we're about 33 to 35% written on all the positions so in a very comfortable spot to generate those yields um like with our other ETF we write anywhere from at the money to maybe one or two% out of the money and if you write on within a 30day period That's you get your highest premium so your that's where your sort of impli volatility can be the highest so it gives us the ability to write right now at that 33 to 35% range and generate that cash flow so it's a very similar um process to what we have for all of our major uh more Diversified ETFs we're rting 33% but this way we have a little more room to uh to meet that yield that's pretty impressive I mean you're not even close to 50 that's that's the max okay so 50 is the max you're going to go but you're you're not even 50 while initially and the initial yields Distribution Sustainability kind of I was taken aback by them in in a in a really good way I mean so obviously you're going to have you know four but there's leverage versions there's non- leverage versions and from uh by looking at the yields of you know the launch prices we're talking between 14 and 18% yield on the non-leveraged and 16 to 22% obviously the higher one is going to be the Nvidia on The Leverage version so how how are are you know these high high yields uh sustainable were did you guys perform back tests I know you always do that so tell me a little bit about your mindset be behind or or how can you assure investors yes these yields are sustainable well well you're right first of all about the back test uh we back test everything um whether it's one of our Diversified portfolios or these individual stocks uh we've got some very complex models where we actually run scenarios where you've got big declines or big or fast moving up markets and and how that affects the option so uh to answer your first question yeah we will back test everything before we uh decide what those yields are and then you know Harvest has the has has a sort of reputation for trying to deliver consistent yields over the long term so we're not trying to be the highest paying uh but for that point we want to be conser we want to be uh competitive out there in the marketplace but writing at 33 to 35% really gives us a lot of cushion to generate those yields easily I mean you could see yields much higher you could literally double the yields on some of these portfolios if they went right to the max of 50% but then you give yourself very little wiggle room if you get into say a market drop and then the volatility levels fall apart you're going to be paying out these big yields that you can't really meet so we'd rather be in the middle and feel comfortable with those levels just like we do in our other portfolios yeah that that makes perfect sense that's something I keep telling people about Harvest for me when I see anything Harvest it's the specialty of your firm this is just my opinion you you said it it's the reliable consistent distributions that rarely rarely change month to month they're typically very even a lot of investors especially income investors who are relying on that income who are living off that income are very appreciative for for sure for sure for sure so um yeah pretty cool I mean near 33% not even close to that 50 but you have that room there and let's just say you let's just say you get to 50 you're still capturing 50% of The Upside if that's the case that's if you're doing 50% at money that's like you know big big Max but even at that you're still capturing half of the upside of of the stocks which is pretty cool so right um and just you know sticking on the distributions what would Distribution Increases or Decreases? cause you or what would be a reason why you would either increase or decide to decrease uh the monthly distribution maybe we'll start with what would make you increase the distribution um if you think about uh good questions when you think about HTA our we we've increased that five times now since we've started that fund once fairly recently and what happens in a scenario like that or it would be the same with these stock ETFs if this price is rising generally over time yeah uh and our right level to meet that that commitment is actually dropping so say we said 33% but let's say I'm just going to throw a number six months from now we're writing at 25% we could probably increase that right level and bump that yield higher so it's really a matter of if that stock is slowly moving higher over time and our right level declines that allows us to uh generate higher yields by writing more or or increasing the yield so the opposite and this is probably more what people have to think about is there's really for for yields to be cut a couple there's a few different things that have to happen number one we'll just won't name any particular stock name but say a stock drops considerably like 33 35 40% but if it rebounds back up quickly you're fine but if it drops and then stays down what happens is your volatility levels start to drop and down too so yeah so more than the price of the of the fund moving around to but to cut the yield you'd have to see the volatility levels drop and remain low for for a large period of time and in that case you got sort of got two things working against you and if that were the case we would have to uh cut the yield we're fortunate that we haven't had to do that but you know you never know what's going to happen in the markets but so there is a scenario where prices fall they stay down and volatility flattens out then you're probably going to be forced to cut the yield if you if you're 50 if you can take your yield that you're writing up to 50% still that then you're okay but if if it falls that much and that's considerable and stays there that would lead to a yield cut yeah oh it makes perfect sense and I like the fact that you mentioned we have the cushion we're not starting at 50 we're starting at 33 so we have the room but uh it's good that people understand that it is a possibility increases are a possibility decreases are a possibility so I always say my personal opinion here if you're investing in any single stock ETF type product you really got to like the stock cuz you're really investing in that only in one particular stock versus for example HTA or htae which is a group of you know 20 technology stocks this is only one stock here so uh when it comes to so you you guys have leverage non-CAD Hedged... Why? versions non leverage version and then within each you haveu so you could trade it in USD currency the regular one or the the non. is traded in Canadian currency but both are listed on the Canadian uh exchanges so one thing I noticed is that uh all of these are non-canadian currency hedged so theu one and even the the the Canadian listed one they're not hedged to Canadian currency a lot of your ETFs are you're cover call ETFs why did you guys decide not to hedge the the non. versions to Canadian currency any particular reason for that well the reason why some of the other ones are hedged it comes back to the history because sometimes they were the various versions were launched at different times so a lot of the initial uh ETFs that we launched in Canadian dollars we did hedge them uh in the case of these ETFs as you mentioned this there's technically four of each one of each stock there's four um so if somebody's feeling more compelled about the US dollar they like the prospects of it then they've got the US dollar version they can buy if someone feels more comfortable and their money's in Canadian dollars you've got the Canadian version you can buy both edged I'm sorry both leveraged and non-leveraged yeah also hedging does add a cost to the underlying structure so it simplifies the structure somewhat as well and because we have the two different categories people can choose where they want to be what we were trying to be with these uh stocks is is sort of agnostic as to we're not necessarily making a call on the stock or on the currency it's you as an investor you make the decision as to what you like do you want to use leverage and get the higher yield and potentially higher returns do you want something that's not currency hedge really you've got to make that decision as the investor so launching four which seems like a lot gives the options yeah no that that's great I Leveraged Versions personally you know me already you know I love the leverage version if there's a leverage version of something I would always personally invest in that one and we're not talking about much we're still talking about your your your you know class 25% leverage correct this is not uh and with rates going down can you just confirm of course this is true that it actually lowers your leverage costs on The Leverage ETFs not only these ones but your entire lineup because you are borrowing at the pr prime rate I think it is right for that leverage yeah so just in the last number of months in Canada we've seen our our cost drop 50 basis points and let's hope we see another 50 before the year's up so we think rates are going to continue to fall so uh that that's will definitely benefit all leverage products excellent that's great to hear and um you know Harvest vs the Competition there there are there's other providers out there that have these single stock ETFs with leverage with with covered calls you do have some competition so what what are the main differences would you say between the Harvest ones and and your competition what sets you apart well I I think I've sort of talked about it already uh I think I know the competitor you're talking about but they they basically provide um a US dollar leveraged uh hedge product it is Canadian currency hedge yeah oh canadi and so and I believe it's leverag and it's in US Dollars it's it's in Canadian you could trade it in Canadian dollars but it is leveraged yeah right okay whereas we have really the four different options none of them are currency hedged um they're all priced at $12 so they're actually a cheaper entry point as well which I think is important uh to take a position in and uh like I said you've got four different options so and your cost is about the same but uh they're un they're hedge and you've got four different variations Canadian and US dollars I love choices as a do-it-yourself investor that that's what I want to see I I I like to make my own decision so if a provider has multiple choices for me that that that's a slam More ETFs to come? dunk so last question I know you I always have to try with this one I know you guys can never talk about future products but I have to try are are you planning to launch more of these in the future are you or maybe I'll ask it in a different way did you launch these four to begin with to gauge the reaction of the market uh what can you say about I can't I can't answer that question the our objective is to launch more of them okay good and you're and you're I mean I'm not going to say names right now but we that's our objective so you're right this is our uh initial launch uh and launching four of each we can also gauge where the flows are uh if if the majority of the flows are going to US dollar leverage then we'll probably uh continue to keep that class if zero goes into say the Canadian dollar unleveraged we'll keep these ones but in future ones we may not have that class so it's really it gives us when you talk to a lot of people you get a lot of opinions as to what they want for sure so what you do is you bring out four so technically four funds sorry four different stocks in 16 versions um and we'll see where the flows go to those so to answer your question our objective is to launch more as time goes on excellent I'm pretty excited about that another thing just to wrap up that I saw on your website how to use these ETFs you How to use these ETFs actually you know I'm going to go on your website and and and do my portion of the video earlier but you say why would someone invest in in these it's it's really there's a couple of reasons and I we agree with the I agree with you on that it's really to hedge let's say you own go you own uh Amazon you own Microsoft you own Ellie Lily you could purchase something like this in parallel to hedge the risk because adding covered calls to something actually Hedges risk it lowers risk so is that the the primary reason you think most investors are going to get these or you you know I I also feel like maybe as an income investor these could be added you know just to boost the overall yield of the portfolio so in your opinion and what you've been hearing because you guys got a lot of feedback what's the number one or top reasons why an do-it-yourself investor would would purchase these well the reasons you mentioned individuals that own the stock already yeah uh that maybe they want to take and and they've all done well uh maybe they want to take some of the uh position off the table and buy it back in a in a different vehicle with a high cash level um there's also individuals that uh that have um portfolios where they want to like you're saying sort of hedge or or balance off some of the uh the growth side with the inam side so there's it really comes down to I'd say individual investors what you're really looking at is the uh the desire to have income on widely held stocks uh you've got all kinds of like we have them and there's all kinds of providers that have uh great Diversified baskets of uh income generating products we see this as a natural extension not only of our product line but I think Canada too the Market's now ready for more and more products and I think the etm vehicle is a fantastic vehicle uh to bring these out because they're Market traded they're open uh so they trade and they have flows going back and forth every day and we're seeing more of these products in the states and I think we'll see more in Canada as we go forward I hope so yeah ETFs are are awesome they're they're easy to buy EAS you could buy and sell them like a regular stock they they're they're lower fee they're easy to understand they're open-ended like like you mentioned so it's just fantastic so um and you're not dealing with costly structures to get in and out of these things so so they give they give that flexibility to investors I think it's a great product and has brought a lot sort of democratized investing it's helped to democratize and bring more investors into the market yeah yeah for sure and I mean uh the Low Fee for Professional Management management fee are all 40 basis points on these they're they're they're very very low very very competitive I would definitely not want to do the run a cover call strategy myself that that that scares me I don't even have options enabled in my broker account I'd rather leave it to the professionals like you guys who first of all live and breede these stocks every day because you know these by heart you have them in your other portfolios you're already writing calls on on them in your other portfolios and uh you know I probably cannot do better than than your you know Paul and your Traders there there's no way so uh well well you make a good point you make a good point even for uh like advisers um the world's becoming much more complicated uh and it's much easier to have somebody take care of that for you and if you can do it at 40 basis points it's it's it's a pretty good offer it's a very good offer yeah in my opinion for sure for sure for sure consistent monthly so guys I'm talking to my audience here this pretty much sums it up so you have the classic Harvest way here you have a in the-middle approach with the cover call you're still capturing most of the upside if you're writing at 3335 you got multiple options on which ones you want to choose leverage non- leverage and you have that classic Harvest Advantage which are typically super super stable monthly distribution so Mike that's it for the questions I I have nothing further I appreciate your time and looking forward to the new launches I'm my audience is always looking forward to new and new products to to to choose from we we absolutely love them so thanks for taking the time and we'll have you back soon I hope thank you and thank you to you and your audience we appreciate all the support appreciate it take care take care thank you