BMO CDN HIGH DIV COVERED CALL ETF (ZWC.TO)

Banks insurance and so on – high yielding stocks. Late in the cycle you will get a bit higher yield. It is limited to Canadian companies so there is no global diversification there. Sometimes it pays to have financial advice.

Great quality dividend paying stocks with a covered call overlay. He loves the strategy. It owns banks, energy companies and insurance companies. The TSX could fall 3-5% over the next months and that is another place to come into it.

XDV-T vs. ZWC-T. Most stocks in those two indexes are similar. ZWC-T has a covered call overlay. XDV-T is more sector concentrated. He advocates that if you are in the market late in the investment cycle you want to be in a covered call strategy. It gives you a smoother ride.

ZWC vs. ZWE vs. ZWU. ZWC has a lot of the good dividend payers with a covered call overlay. ZWU is lower risk than ZWC, as it doesn’t have exposure to energy and financials. If interest rates go up in a big way, ZWU will underperform, and could easily go down 3-5%. The dividends for these are safe. ZWU is attractive from a defensive standpoint. ZWE has exposure to the 3 biggest country markets, very few financials, a currency hedge, little Italy exposure. It could fall 5-7% in the next months, and then it would be a pretty decent buy.

He has been reducing it recently because of relative risk in Canada compared to the rest of the world. This ETF has the best dividend players in Canada. There is very low risk of cutting, and they are very likely to grow dividends. They have a covered call overlay to increase yield. There is also ZDV-T without the covered call strategy and this will give you more growth rather than yield.

Getting so popular, could they have trouble in the future consuming too much of the option market? High dividend in the last couple of years hasn’t necessary been the best strategy. Momentum and growth have been doing better. You want to be buying this strategy on flat markets. We are not seeing this.

You are going to find less volatility in a high dividend fund. But it can go down like anything else.

6.49% yield. You aren’t getting your own money back. It is dividends plus covered call exposure.

He likes it and other covered calls on the banks and some of the others in the US. He doesn’t have much faith in Ottawa these days. He thinks policies are ill conceived. We seem to be in the direction of greater regulation and greater taxation. He sees companies retracting from Canada.

Covered call high dividend ETF. The volatility is picking up so this is not a bad place to be because of the covered calls earning bigger premiums. It has come back to its September lows.

The dividend paying stocks average about 4% in dividends. The premium above that is coming from the covered call strategy and there is no return of capital in that model. There are capital distributions from mergers and acquisitions only. There is a high correlation to financials in Canada. It is kind of like the weighting of the TSX.

BMO Canadian High Dividend Covered Call (ZWC-T) or BMO Canadian Dividend (ZDV-T) for a TFSA? This is a broad based diversified fund that writes covered calls against the securities in the fund. It gives you the dividends plus the premiums from the options on top of that. Interest rates are probably going higher, but doesn’t expect it to happen this year. Wouldn’t be surprised to see a couple of hikes next year. He would be inclined to go with this one, because you’re getting 2 sources of income. You could actually own both and be fine.