Well it depends on what you mean by 'a better bet'. The two are...

Well it depends on what you mean by 'a better bet'. The two are implemented quite differently with different outcomes and both are rules based, so its really a question of which set of rules you prefer.

HVST should (and has to date) experienced lower volatility than VHY and the ASX300 because of the derivative strategy being used as a risk management tool. However, as the dividend generation will frequently only come from 14 stocks, it has a higher exposure to a shock dividend cut and higher concentration risk during the dividend periods. Index re-balancing is don every two months.

VHY tends to have around 35-40 holdings but as the index is only re-balanced every 6 months, it runs the risk of 'stale data'. Like HVST, as there is no analysis of the sustainability or quality of dividend, you also run the risk of surprise cut.


Personally, I wouldn't invest in either of them if I was seeking an equity income strategy. Both of these will typically deliver income at the expense of capital growth. While the income yield might look great, the value of your capital tends to get heavily eroded. HVST for example returned an 11.8% yield in FY16 but the total return was only 4.32%. Therefore your capital return component was -7.48%. To me, that is an inferior product design compared to other equity income strategies in the market imo.