The author advises retirees with maturing Guaranteed Investment Certificates (GICs) to consider alternatives, as current renewal rates are significantly lower than previous highs. While GIC rates have seen a slight uptick recently, economic uncertainties, particularly around employment and inflation, may keep the Bank of Canada from raising rates soon, unlike the U.S. Federal Reserve's aggressive stance.
For those weighing GIC renewals, the article suggests exploring higher-yielding investments, though this comes with added risk, especially if interest rates rise and affect dividend stocks. The Hamilton Enhanced Canadian Covered Call ETF (TSX: HDIV) is highlighted as a compelling option, offering a 9.8% annual yield paid monthly. This ETF combines a covered call strategy with 25% cash leverage to boost returns, though leverage also amplifies potential losses during market downturns.
The author acknowledges the risks of leverage but argues that HDIV's modest leverage could be beneficial in a stable rate environment, providing a unique investment profile with lower correlation to tech-heavy markets like the S&P 500. The article concludes by noting that while leverage is often criticized, in this case, it may serve as a useful tool to enhance yield without excessive speculation.