By Morningstar Canada | 02/01/18

Purpose Investments Inc. today launched Purpose Enhanced Dividend (symbol: PDIV) on the Toronto Stock Exchange. The new exchange-traded fund will invest in an equally weighted portfolio of about 40 dividend-paying North American stocks. Mutual fund units of this strategy are also available.

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The ETF has absorbed via amalgamation the assets of NexC Partners Corp., a closed-end fund also sponsored by Purpose that was delisted from the TSX on Dec. 29. NexC Partners employed a similar rules-based stock-selection strategy carried out by Toronto-based Breton Hill Capital Ltd., the same firm that manages Purpose Enhanced Dividend. The strategy screens stocks for financial strength and potential for earnings growth, and is broadly diversified by industry sector.

Breton Hill will reconstitute and rebalance the stock portfolio quarterly. In addition, it will invest tactically in covered call options. While covered calls generate premium income, they limit the capital-appreciation potential of the stocks on which call options are written. Unlike the former closed-end fund, the ETF will not employ leverage.

The ETF's management fee is 0.65%, not including expenses, though a cap of 0.05% applies to most expenses. The same management fee also applies to the Series F mutual-fund units for fee-based advisory accounts. The Series A mutual-fund units, which pay trailer commissions of 1% annually to brokers and dealers, have a correspondingly higher management fee of 1.65%.

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