Benefit from an Innovative Way to Invest in Dividend Stocks

Positive stock market returns come from two sources: price appreciation and dividends. Unfortunately, many investors tend to focus on one or the other, and miss out on potential opportunities.

Fortunately, Horizons ETFs’ family of equity dividend ETFs, which is sub-advised by Guardian Capital LP (“Guardian”), brings together a focus on both price appreciation and dividend yield in their investment strategies. 

The following chart illustrates how both price appreciation and dividend returns (total return = price appreciation plus reinvested dividends) are crucial components to a dividend equity strategy.


Source: Source: Bloomberg, between December 31, 1987 and November 30, 2018. The chart assumes that the MSCI World Total Return Index reinvests all dividends and is not intended to reflect future values of the indices shown. Past performance is not a guarantee of future results. The indices are not directly investable and the returns shown do not contemplate commissions, fees, expenses, optional charges or taxes which would have impacted an investor’s return. 

Guardian Capital LP’s (“Guardian”) goal is to outperform the market in both price appreciation and dividend yield through:

1. Yield carry: Guardian targets 1-2% of additional yield per year over the relevant index.

2. Stock selection: Finding the right stocks across all industry sectors to actively position the portfolio through all market cycles.

Guardian’s GPS Investment Approach

Guardian’s GPS investment approach focuses on three key fundamental drivers: Growth of dividends, Payout of cash flow and Sustainability of the payout profile. Having a portfolio of stocks that offers a combination of these three factors is the core of what makes the GPS strategy such an effective way to invest in dividend stocks.


Different Types of Dividend Stocks

Paying attention to both dividend yield and dividend growth ensures that opportunities can be captured along the growth spectrum, from lower-yielding, high-growth companies in sectors such as technology, all the way through to mature, slower-growing companies in sectors such as utilities and telecoms.

Eligible stocks fall into three different dividend stock categories: Dividend Achievers, Dividend Growers and Dividend Payers.




The GPS Stock Selection Process

The Systematic Strategies Team at Toronto-based Guardian is a recognized leader and technological innovator in the dividend stock investing landscape. Lead by Srikanth Iyer, Managing Director, the team utilizes a hybrid approach to investing in equity markets that combines a systematic stock selection discipline with a team-refined approach to portfolio construction and risk management.

Through rigorous quantitative research, Guardian has discovered a set of intuitive fundamental criteria (see table below) for evaluating and comparing dividend-paying stocks. All stocks in each global sector are ranked on a daily basis. This quantitative screen can be applied to the dividend stock universe of any geographic sector.

The highest-ranked stocks comprise the BUY list. Lower-ranked stocks may be designated as SELLs and will likely be sold from the portfolio, or avoided completely.

Guardian’s experienced team of portfolio managers use the stock rankings as the primary driver of buy/sell recommendations for the portfolio, but ultimately make the final decision in what stocks will be added or removed from the portfolio.

Growth Efficiency Credit Risk Valuation Payout Validation
Sales Growth Return on Capital Debt Levels Price / Book Dividend Yield Stock Performance
Cash Flow Growth Profit Margins Interest Coverage Price / Sales Payout Ratio Stock Volatility
Earnings Growth - - Price / Cash Flow Dividend Growth -
Earnings Revisions - - Price Earnings Earning Quality -
- - - EV / EBITDA Payout Sustainability -

GPS helps investors access the full breadth of the target dividend stock universe and allows them to capitalize on different market growth cycles. Guardian believes this should lead to superior risk-adjusted returns when compared to traditional dividend strategies, and to the broader stock market.

Horizons ETFs proudly offers four ETFs that use the GPS strategy

ETF Name Ticker Symbol Management Fee*
Horizons Active Emerging Markets Dividend ETF HAJ 0.65%1
Horizons Active Cdn Dividend ETF HAL 0.55%2
Horizons Active Global Dividend ETF HAZ 0.65%1
Horizons Active US Dividend ETF HAU3 0.55%2
Horizons Active Global Dividend ETF HADM 0.80%

*Plus applicable taxes.
1 Annual management fee reduced from 0.80% to 0.65%, effective December 1, 2018.
2 Annual management fee reduced from 0.70% to 0.55%, effective December 1, 2018.
Trades in U.S. dollars

Horizons Actively Managed ETFs

• Experienced Portfolio Management
• Higher Income Potential
• Focus on Outperformance

About Guardian Capital LP (www.guardiancapital.com)
Guardian Capital LP is one of Canada’s leading asset managers which has been managing institutional assets since 1962. In partnership with Horizons ETFs, it has successfully implemented its “GPS” approach that focuses on three key fundamental drivers: Growth of dividend payout; payout of cash flow; and sustainability of the payout. Having a portfolio of stocks that offers a combination of these three factors gives Guardian an excellent track record and future in dividend investing.

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Commissions, management fees and expenses all may be associated with an investment in exchange traded products managed by Horizons ETFs Management (Canada) Inc. (the "Horizons Exchange Traded Products"). The Horizons Exchange Traded Products are not guaranteed, their value changes frequently and past performance may not be repeated. Certain ETFs may have exposure to leveraged investment techniques that magnify gains and losses and which may result in greater volatility in value and could be subject to aggressive investment risk and price volatility risk. Such risks are described in the prospectus. The prospectus contains important detailed information about the ETF. Please read the relevant prospectus before investing.

The Horizons Exchange Traded Products include our BetaPro products (the “BetaPro Products”). The BetaPro Products are alternative mutual funds within the meaning of National Instrument 81-102 Investment Funds, and are permitted to use strategies generally prohibited by conventional mutual funds: the ability to invest more than 10% of their net asset value in securities of a single issuer, to employ leverage, and engage in short selling to a greater extent than is permitted in conventional mutual funds. While these strategies will only be used in accordance with the investment objectives and strategies of the BetaPro Products, during certain market conditions they may accelerate the risk that an investment in shares of a BetaPro Product decreases in value. The BetaPro Products consist of our Daily Bull and Daily Bear ETFs (“Leveraged and Inverse Leveraged ETFs”), Inverse ETFs (“Inverse ETFs”) and our BetaPro S&P 500 VIX Short-Term Futures™ ETF (the “VIX ETF”). Included in the Leveraged and Inverse Leveraged ETFs and the Inverse ETFs are the BetaPro Marijuana Companies 2x Daily Bull ETF (“HMJU”) and BetaPro Marijuana Companies Inverse ETF (“HMJI”), which track the North American MOC Marijuana Index (NTR) and North American MOC Marijuana Index (TR), respectively. The Leveraged and Inverse Leveraged ETFs and certain other BetaPro Products use leveraged investment techniques that can magnify gains and losses and may result in greater volatility of returns. These BetaPro Products are subject to leverage risk and may be subject to aggressive investment risk and price volatility risk, among other risks, which are described in their respective prospectuses. Each Leveraged and Inverse Leveraged ETF seeks a return, before fees and expenses, that is either up to, or equal to, either 200% or –200% of the performance of a specified underlying index, commodity futures index or benchmark (the “Target”) for a single day. Each Inverse ETF seeks a return that is –100% of the performance of its Target. Due to the compounding of daily returns a Leveraged and Inverse Leveraged ETF’s or Inverse ETF’s returns over periods other than one day will likely differ in amount and, particularly in the case of the Leveraged and Inverse Leveraged ETFs, possibly direction from the performance of their respective Target(s) for the same period. For certain Leveraged and Inverse Leveraged ETFs that seek up to 200% or up to or -200% leveraged exposure, the Manager anticipates, under normal market conditions, managing the leverage ratio as close to two times (200%) as practicable however, the Manager may, at its sole discretion, change the leverage ratio based on its assessment of the current market conditions and negotiations with the respective ETF’s counterparties at that time. Hedging costs charged to BetaPro Products reduce the value of the forward price payable to that ETF. Due to the high cost of borrowing the securities of marijuana companies in particular, the hedging costs charged to HMJI are expected to be material and are expected to materially reduce the returns of HMJI to unitholders and materially impair the ability of HMJI to meet its investment objectives. Currently, the manager expects the hedging costs to be charged to HMJI and borne by unitholders will be between 10.00% and 45.00% per annum of the aggregate notional exposure of HMJI’s forward documents. The hedging costs may increase above this range. The manager publishes on its website, the updated monthly fixed hedging cost for HMJI for the upcoming month as negotiated with the counterparty to the forward documents, based on the then current market conditions. The VIX ETF, which is a 1x ETF, as described in the prospectus, is a speculative investment tool that is not a conventional investment. The VIX ETF’s Target is highly volatile. As a result, the VIX ETF is not intended as a stand-alone long-term investment. Historically, the VIX ETF’s Target has tended to revert to a historical mean. As a result, the performance of the VIX ETF’s Target is expected to be negative over the longer term and neither the VIX ETF nor its target is expected to have positive long-term performance. BetaPro Bitcoin ETF (“HBIT”), and BetaPro Inverse Bitcoin ETF (“BITI”), which are a 1X ETF, and an up to -1X ETF, respectively, as described in the prospectus, are speculative investment tools that are not conventional investments. Their Target, an index which replicates exposure to rolling Bitcoin Futures and not the spot price of Bitcoin, is highly volatile. As a result, neither ETF is intended as a stand-alone investment. There are inherent risks associated with products linked to crypto-assets, including Bitcoin Futures. While Bitcoin Futures are traded on a regulated exchange and cleared by regulated central counterparties, direct or indirect exposure to the high level of risk of Bitcoin Futures will not be suitable for all types of investors. An investment in any of the BetaPro Products is not intended as a complete investment program and is appropriate only for investors who have the capacity to absorb a loss of some or all of their investment. Please read the full risk disclosure in the prospectus before investing. Investors should monitor their holdings in BetaPro Products and their performance at least as frequently as daily to ensure such investment(s) remain consistent with their investment strategies.

Horizons Total Return Index ETFs (“Horizons TRI ETFs”) are generally index-tracking ETFs that use an innovative investment structure known as a Total Return Swap to deliver index returns in a low-cost and tax-efficient manner. Unlike a physical replication ETF that typically purchases the securities found in the relevant index in the same proportions as the index, most Horizons TRI ETFs use a synthetic structure that never buys the securities of an index directly. Instead, the ETF receives the total return of the index through entering into a Total Return Swap agreement with one or more counterparties, typically large financial institutions, which will provide the ETF with the total return of the index in exchange for the interest earned on the cash held by the ETF. Any distributions which are paid by the index constituents are reflected automatically in the net asset value (NAV) of the ETF. As a result, the Horizons TRI ETF receives the total return of the index (before fees), which is reflected in the ETF’s share price, and investors are not expected to receive any taxable distributions. Certain Horizons TRI ETFs (Horizons Nasdaq-100 ® Index ETF and Horizons US Large Cap Index ETF) use physical replication instead of a total return swap. The Horizons Cash Maximizer ETF and Horizons USD Cash Maximizer ETF use cash accounts and do not track an index but rather a compounding rate of interest paid on the cash deposits that can change over time.

*The indicated rates of return are the historical annual compounded total returns including changes in per unit value and reinvestment of all dividends or distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. The rates of return shown in the table are not intended to reflect future values of the ETF or returns on investment in the ETF. Only the returns for periods of one year or greater are annualized returns.