Cash Flow ETFs Explained: A Guide to Investing

Cash flow ETFs are a type of exchange-traded fund that focuses on investing in dividend-paying stocks, which can provide a regular income stream for investors.

These funds typically invest in a diversified portfolio of stocks with a history of paying consistent dividends, often from established companies with a strong track record of profitability.

By investing in dividend-paying stocks, cash flow ETFs aim to provide a relatively stable source of income for investors, while also potentially benefiting from long-term capital appreciation.

Investors can benefit from the consistent income generated by these funds, making them an attractive option for those seeking a relatively stable source of returns.

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Let's take a closer look at the performance metrics of cash flow ETFs. The Global X High Interest Savings ETF has an annualized performance of 3.79% since its inception on November 1, 2021.

In terms of annual compound returns, the Brompton Index One U.S. Cash Flow Kings Index has returned 27.7% in the past year, which is significantly higher than the Global X High Interest Savings ETF's 4.47% annualized performance.

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Here are some key performance metrics for the Global X High Interest Savings ETF:

Looking at the calendar year performance, the Global X High Interest Savings ETF has returned 2.32% in 2022, 5.14% in 2023, and 4.47% in 2024. It's worth noting that these returns are based on the ETF's performance over the entire year, rather than just the last month or quarter.

Cash flow etfs offer regular distributions to investors, which can provide a consistent source of income. These distributions are typically made monthly.

The frequency of distributions can vary, but some cash flow etfs make distributions quarterly or annually. For example, the Invesco Nasdaq Free Cash Flow Achievers ETF (QOWZ) makes distributions on a monthly basis.

The amount of each distribution can fluctuate, and it's not guaranteed. According to Example 4, "The payment of distributions, if any, is not guaranteed and may fluctuate at any time."

Here's a breakdown of the distribution metrics for the Invesco Nasdaq Free Cash Flow Achievers ETF (QOWZ):

The Invesco Nasdaq Free Cash Flow Achievers ETF (QOWZ) has a 12-month trailing yield of 4.37%, according to Example 2.

You can purchase or sell CASH anytime throughout the trading day, a key advantage over other high-interest savings vehicles.

This means you have complete control over your investments and can make changes as needed.

Distributions are a crucial aspect of investing in the Global X High Interest Savings ETF. Monthly distributions are designed to provide a consistent monthly income, with the most recent distribution per unit being $0.13600.

The distribution frequency is monthly, and the 12-month trailing yield is 4.37%. This means that if you had held the ETF over the last twelve months, you would have received a yield of 4.37% on the net asset value per unit.

Distributions are not guaranteed and may fluctuate at any time. They should not be confused with the ETF's performance, rate of return, or yield. If distributions paid by the ETF are greater than the performance of the ETF, distributions paid may include a return of capital and an investor's original investment will decrease.

On a similar theme: Dividends in Cash Flow Statement

Here's a breakdown of the most recent distributions:

The distribution details show that the majority of the distributions are ordinary income, with some short-term gains and no long-term gains or return of capital. The distribution frequency is monthly, and the amount distributed per share varies.

It's essential to note that the payment of distributions is not guaranteed and may fluctuate at any time. The payment of distributions should not be confused with the ETF's performance, rate of return, or yield. If distributions paid by the ETF are greater than the performance of the ETF, distributions paid may include a return of capital and an investor's original investment will decrease.

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The Invesco Nasdaq Free Cash Flow Achievers ETF (QOWZ) has a CUSIP of 37964J104, which is a unique identifier for the fund.

Its net assets as of January 3, 2025, are $5,567,419,600. This is the total value of all assets minus liabilities at a particular point in time.

The ETF's management fee is 0.10% per annum, plus applicable sales tax, and the management expense ratio is 0.11% as of June 30, 2024.

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The Global X US Preferred ETF has a CUSIP of 37964J104. This unique identifier helps track the fund's performance and ownership.

The fund's net assets as of January 3, 2025, are a substantial $5,567,419,600. This is the value of all assets minus liabilities at a specific point in time.

The ETF's consolidated prior day volume was 1,708,530, showing a significant amount of trading activity on Canadian exchanges. This volume helps gauge market interest in the fund.

To put this volume into perspective, the average daily trading volume over a 12-month period is approximately 1,419,349. This steady trading activity suggests a consistent level of investor interest.

The fund is eligible for all registered and non-registered investment accounts, making it a versatile investment option. This broad eligibility means investors can choose the account type that suits their needs.

The management fee for this ETF is a reasonable 0.10% (plus applicable sales tax). This fee helps cover the costs of managing the fund's investments.

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The management expense ratio, or MER, is 0.11% as of June 30, 2024. This ratio includes sales tax and other expenses, excluding commissions and portfolio transaction costs.

The trading expense ratio, or TER, is a negligible 0.00% as of June 30, 2024. This indicates that the fund incurs minimal commissions and transaction costs.

The fund is denominated in Canadian dollars, and it offers currency hedging to minimize exchange rate risks.

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Free Yield is a key metric to look at when evaluating a company's financial health. Positive Free Cash Flow indicates that a company is financially strong.

High Free Cash Flow companies can return capital to shareholders through share buybacks and dividends/dividend increases. This can be a major draw for investors.

Companies with High Free Cash Flow Yield are valued attractively relative to their cash generating abilities. This makes them an attractive investment opportunity.

The universe of the U.S. Index is comprised of all NYSE and NASDAQ-listed companies (excluding Financials) that meet a minimum market capitalization requirement.

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Investing in cash flow ETFs carries inherent risks, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks.

Equity values can fluctuate widely in response to company-specific and general market conditions. This can result in significant losses.

Stocks of small and mid-sized companies tend to be more vulnerable to adverse developments and may be more volatile. This can make them riskier investments.

The Fund is considered non-diversified, which means it may experience greater volatility than a more diversified investment.

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Investing in ETFs comes with risks, including the possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements.

Ordinary brokerage commissions apply, which can eat into your returns.

The Fund's return may not match the return of the Underlying Index. This means you might not get the same results as the market as a whole.

Equity values can fluctuate widely in response to company-specific and general market, economic, and political conditions. It's like the stock market can be unpredictable and volatile.

Stocks of small and mid-sized companies tend to be more vulnerable to adverse developments and may be more volatile. If you invest in these companies, you might be taking on more risk than you realize.

Investments focused in a particular industry are subject to greater risk and are more greatly impacted by market volatility. This means if the industry has a bad day, your investments might suffer too.

The Fund is considered non-diversified, which means it may experience greater volatility than a more diversified investment. This can make your investments more unpredictable.

Not all ETFs are created equal, and the performance of the Fund and the underlying index of certain underlying ETFs may vary due to underlying expenses and trading costs. This can affect your returns and make it harder to predict what will happen.

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ETFs are not a get-rich-quick scheme, and their values can change frequently.

Commissions, management fees, and expenses are associated with investing in ETFs, which can eat into your returns. These fees can add up quickly, so it's essential to understand what you're paying for.

Past performance is not a guarantee of future results, and there's no assurance that your ETF will repeat its past performance.

Certain ETFs use leveraged investment techniques, which can magnify gains and losses, making them riskier investments.

The Global X Money Market Funds are not insured by any government agency, so you may not get your full investment back if the fund experiences difficulties.

You should always read the prospectus before investing in an ETF, as it contains important information about the fund's risks, fees, and performance.

The indicated rates of return in an ETF's performance data are historical and do not account for sales, redemption, distribution, or optional charges that can reduce your returns.

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Distributions are not guaranteed and may fluctuate at any time. This means that the amount of money you receive from an investment can change unexpectedly.

The payment of distributions should not be confused with an investment's performance, rate of return, or yield. This is an important distinction to make, as a high distribution rate does not necessarily mean the investment is performing well.

If distributions paid by an investment are greater than its performance, they may include a return of capital, which will decrease your original investment. A return of capital is not taxable, but it will reduce the adjusted cost base of the securities held for tax purposes.

Distributions are paid as a result of capital gains realized by an investment, and income and dividends earned by an investment are taxable to the investor in the year they are paid. This means you'll need to keep track of your tax obligations carefully.

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The characterization of distributions for tax purposes, such as dividends or capital gains, will not be known for certain until after the investment's tax year-end. This can make it difficult to plan your taxes.

You'll be informed of the tax characterization after year-end, not with each distribution. For tax purposes, these amounts will be reported annually by your broker on official tax statements.

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Investing in a money market fund like the Global X Funds comes with some important disclaimers. Commissions, management fees, and expenses are associated with these investments.

The Global X Funds are not guaranteed and their values can change frequently. This means that past performance may not be repeated. It's essential to read the prospectus before investing to understand the risks involved.

The performance data provided assumes reinvestment of distributions only and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder. This is crucial to understand because it affects the actual returns on your investment.

The annualized historical yield is based on the return over a seven-day period and does not represent an actual one-year return. This is calculated net of fees and expenses payable by the fund.

Here's a summary of the key points:

Cash flow ETFs offer a unique way to invest in companies with strong financial health, but they may not be the best fit for every investor.

Some investors may prefer to invest in traditional dividend-focused ETFs, which have historically provided stable income.

For those looking for more flexibility, total return ETFs can be a good alternative, as they aim to maximize returns through a combination of dividends and capital gains.

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Alternative Funds are alternative investment funds that can use strategies generally prohibited by conventional mutual funds, such as investing more than 10% of their net asset value in securities of a single issuer.

These funds can also borrow cash, short sell beyond conventional mutual fund limits, and employ leverage of up to 300% of net asset value, which can accelerate the risk of a decrease in investment value during certain market conditions.

The Alternative ETFs will comply with all requirements of NI 81-102, as such requirements may be modified by exemptive relief obtained on behalf of the ETF.

Investors should consult their professional advisors prior to implementing any changes to their investment strategies, as these investments may not be suitable to their circumstances.

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If you're considering the Brompton Cash Flow Kings ETF, you may also want to explore other funds in the Cash Flow Kings Suite.

The Brompton Canadian Cash Flow Kings ETF is part of this suite, offering exposure to a diversified portfolio of Canadian dividend-paying stocks.

The Brompton International Cash Flow Kings ETF is another option within the suite, providing access to a global portfolio of dividend-paying stocks.

Here are some of the other ETFs in the Cash Flow Kings Suite: