A Growth & Income ETF That Benefits from the Tech Boom

The technology sector has attracted considerable attention in the opening months of 2024. There is good reason for that, as several key growth drivers have made this space a lightning rod for growth and investment interest. Some of the latest technology trends include artificial intelligence, cybersecurity, virtual reality, the growth of the Internet of Things (IoT), cloud computing, and others. These are projected to fuel substantial growth in the tech market in 2024 and beyond.

With that in mind, investors may feel the need to take advantage of this burgeoning space. So, today, I want to zero-in on an exchange-traded fund (ETF) that offers a blend of growth and steady monthly cash distributions. This ETF is poised to benefit from the ongoing tech boom in the near term, while also providing protection from potential long-term volatility due to one special factor. Let’s jump in.

Tech earnings have dominated market attention in early 2024

The technology sector has been dominated by the performance of the so-called “Magnificent 7” stocks. These stocks are Apple, Amazon, Alphabet, Meta Platforms, Microsoft, Nvidia, and Tesla. Some of these top companies unveiled earnings that spurred market action over the past two months.

Meta Platforms released its fourth quarter (Q4) and full year fiscal 2023 earnings in early February 2024. Revenue rose to US$40.1 billion in Q4 2023 – up from $32.2 billion in the previous year. Meta reported 2.11 billion Facebook daily active users (DAUs) in fiscal 2023, while ad impressions rose 21% compared to fiscal 2022.

Nvidia made waves when it released its final batch of fiscal 2023 results on February 21. Its graphics processors have become a key piece of the puzzle in enabling accelerated computing and generative artificial intelligence (AI). That means demand for its products will remain high in the years ahead. The company delivered record quarterly revenues of US$22.1 billion in Q4 FY2023 – up 22% from the third quarter and 265% compared to the previous year. Full-year revenues shot up 126% to US$60.9 billion.

This ETF holds tech titans to deliver income and growth opportunities

The Harvest Tech Achievers Growth & Income ETF (HTA:TSX) offers exposure to dominant players in the burgeoning technology sector. This ETF holds leading companies to deliver both income and the growth opportunities that investors seek in tech. Units of HTA have delivered annualized growth of 16% since inception as at March 31, 2024. Meanwhile, HTA is up 43% over a 1-year period, 15% over a 3-year period, and 20% over a 5-year period. This ETF has a risk rating of medium to high.

This ETF has also delivered a distribution increase for three consecutive years. It currently offers a monthly distribution of $0.1200 per unit. That represents a current yield of 7.95% as at April 9, 2024.

HTA’s award-winning portfolio manager James Learmonth, who has taken home a coveted Lipper award for two consecutive years, recently gave his take on the recent slate of promising tech earnings.

“Tech companies have generally managed to report solid earnings so far this
quarter,” said James Learmonth. “That highlighted continued strength in spending on artificial intelligence initiatives. In the shorter term, there has been a significant run in the sector over the past year and while there exists some potential for a consolidation period, momentum has continued, and growth drivers remain in place.”

For investors who are hungry for even monthly cash distribution, there is the Harvest Tech Achievers Enhanced Growth & Income ETF (HTAE:TSX). This is part of Harvest’s enhanced equity income ETFs stable. The ETF is built to deliver enhanced cashflow and growth opportunities by applying modest leverage to an investment in HTA, which gives it a slightly higher risk rating than HTA. It offers access to the same portfolio of large-cap tech companies with enhanced monthly cashflow.

HTAE currently offers a monthly distribution of $0.1300 per unit. That represents a current yield of 9.51% as at April 9, 2024.

Conclusion
The technology space has delivered impressive growth in the near term. AI,
cybersecurity, VR, and other exciting growth drivers should keep this sector on the radar for those seeking growth in the middle of this decade. HTA offers exposure to these leading large-cap companies, while delivering monthly distributions through its covered call writing strategy. Fortunately, for those looking for even more cash distribution, there is the option to pick up HTAE, which employs 25% leverage and has a slightly higher risk rating.

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Disclaimer
Commissions, management fees and expenses all may be associated with investing in Harvest Exchange Traded Funds (managed by Harvest Portfolios Group Inc.). Please read the relevant prospectus before investing. The funds are not guaranteed, their values change frequently, and past performance may not be repeated. The content of this article is to inform and educate and therefore should not be taken as investment, tax, or financial advice.

Distributions on the units, if any, may consist of income, including foreign source income and dividends from taxable Canadian corporations, and capital gains, less the expenses and may include return of capital.