Horizons ETFs has launched a new ETF in Canada providing high-income exposure to locally listed companies operating within the utility services sector.
Steve Hawkins, President and CEO of Horizons ETFs.
The Horizons Canadian Utility Services High Dividend Index ETF (UTIL CN) has been listed on the Toronto Stock Exchange with a management fee of 0.50%.
The fund targets three major segments of the utility services sector – utilities, pipelines, and telecommunications – which have historically functioned as defensive industries, offering relative stability and consistent dividends even during periods of heightened volatility.
Steve Hawkins, President and CEO of Horizons ETFs, commented: “With rising inflation, investors are increasingly looking towards dividend and yield-focused strategies to outpace costs and stay ahead in their portfolios. However, with the specter of a potential recession on the horizon, investors are also looking for these income-producing mandates to provide some protection from a broader market decline. Traditionally, utility services have been regarded as a relatively defensive sector of the stock market as their services – including electricity, oil, and the internet – are always necessary.”
Methodology
The ETF is linked to the Solactive Canadian Utility Services High Dividend Index which selects its constituents from a universe of stocks listed on the Toronto Stock Exchange that have market capitalizations above C$1 billion and average daily trading volumes greater than C$1 million.
The methodology screens for companies that are classified into the following FactSet industries: Electric Utilities, Gas Distributors, Water Utilities, Alternative Power Generation, Oil & Gas Pipelines, Major Telecommunications, and Wireless Telecommunications. To be eligible for index inclusion, constituents must also have a 12-month forward dividend yield of at least 3.0% (2.5% for current index constituents).
The index then selects 12 companies from the eligible universe, choosing the six largest firms within the utilities category and the three largest from each of the pipelines and telecommunications categories.
Constituents are equally weighted with reconstitution and rebalancing occurring on a semi-annual basis.
As of 12 August, the largest index positions were Pembina Pipeline (9.8%), Enbridge (8.9%), Hydro One (8.5%), TC Energy (8.5%), Brookfield Infrastructure Partners (8.4%), Brookfield Renewable Partners (8.4%), Fortis (8.3%), Algonquin Power & Utilities (8.1%), Emera (8.0%), and Rogers Communications (7.8%).
The index’s trailing twelve-month dividend yield was 4.43%, significantly higher than the 3.07% offered by the broad market S&P/TSX Composite Index.