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The ETF Lab
ETF spotlight: MHDC & MHDU: Income today, growth tomorrow
The strategy – A three-layer portfolio
- Equity portfolio selection: A portfolio of dividend companies is selected using a proprietary factor approach that combines a forward-looking analytical model with a factor optimizer.
- Call and put writing: Rules-based approach to write up to 30% of the portfolio out-of-the-money call and/or put options on individual securities or indexes.
- Leverage: A 20% cash leverage to enhance both yield and return potential.
The strategic objective behind the launch of MHDC and MHDU
- Meet the cash flow demand: A growing number of investors increasingly rely on their portfolios to generate consistent, reliable monthly distributions.
- Overcome income strategy pitfalls: Traditional dividend mandates often deliver insufficient yields or suffer from long-term underperformance. On the other hand, while conventional covered call strategies offer high immediate payouts, they frequently do so at the expense of long-term capital growth.
- Deliver a balanced solution: MHDC and MHDU are engineered to provide an attractive yield (4%–6%) while preserving upside potential, effectively eliminating the compromises inherent in traditional dividend and covered call funds.
Covered calls versus Mackenzie’s high dividend strategy
Covered call strategies: Understanding the income and return trade-off
The high yields offered by covered call strategies should not be viewed as a ‘free lunch’. Rather, they represent a trade-off: investors exchange potential future capital appreciation for incremental yield today.
To demonstrate how covered call ETF yields are generated at the expense of upside participation, the charts below compare the performance of a standard S&P 500 ETF with an S&P 500 Covered Call ETF. The total return comparison reflects the reinvestment of distributions, a scenario that is largely counterintuitive for these strategies as capping upside potential makes little sense if cash income is not required. Meanwhile, the price return chart illustrates the true performance when those distributions are taken in cash.
Source: Morningstar, As of April 30, 2026.
S&P 500 ETF: SPY – S&P 500 with covered calls ETF: XYLD
Source: Morningstar, As of April 30, 2026.
S&P 500 ETF: SPY – S&P 500 with covered calls ETF: XYLD
Mackenzie’s high dividend approach
To overcome the upside capping of covered calls and still deliver an attractive yield, the Mackenzie Canadian High Dividend Yield ETF (MHDC) and Mackenzie US High Dividend Yield ETF (MHDU) employ a differentiated approach:
- Opportunistic options strategy (as opposed the covered call’s systematic call writing): By actively writing both call and put options, the ETFs can generate premium income in both rising and falling markets, effectively preserving greater upside participation.
- Amplified returns: Modest leverage is applied strategically to enhance both the yield and the total return potential of the underlying dividend portfolio.
ETF news & notes
Prediction markets like Polymarket are creating new opportunities for ETF investors. Recent filings from U.S. issuers such as Bitwise and Roundhill for election-linked ETFs could soon allow investors to trade the probabilities of real-world events directly through brokerage accounts, pending regulatory approval.
These ETFs would primarily invest in “event contracts,” which pay out based on the outcome of specific events, such as political elections. Contracts settle at $1.00 if the event occurs and $0.00 if it does not. Unlike traditional derivatives, these contracts are fully funded upfront, eliminating margin call risk.
Regulatory approval remains uncertain, as oversight responsibilities between financial and gaming regulators are still evolving. However, approval could pave the way for a broader range of event-driven investment products, including those tied to sports and other real-world outcomes.
ETF flows update
- On a year-to-date basis, as of May 15, 2026, total ETF inflows have reached $80.6 billion. Equity ETFs lead the way with $46.2 billion, followed by asset allocation ETFs at $15.9 billion, and fixed income at $14.8 billion.
- Canada focused ETFs have attracted the largest inflows of $25.6 billion.
- The total AUM for Canadian ETFs reached $830 billion.
- The number of listed ETFs: 1,998.
Source: Bloomberg and TD. As of May 15, 2026.
Source: Morningstar, As of April 30, 2026.
Mackenzie ETF top performers
Equity ETFs
Fixed Income ETFs
Source: Mackenzie investments, data as of May 15, 2026.
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Commissions, brokerage fees, management fees, and expenses all may be associated with Exchange Traded Funds. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns, including in share or unit value and reinvestment of distributions and does not take into account sales, redemption, distribution, or optional charges or income taxes payable by any securityholder that would have reduced returns. Exchange Traded Funds are not guaranteed, their values change frequently, and past performance may not be repeated.
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