Opinions
Richard Orrell
BMO Europe High Dividend Covered Call Hedged to CAD ET
ZWE-T
DON'T BUY
Jan 20, 2025
Stock price when the opinion was issued
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Likes exposure to Europe, of which many Canadians have minimal exposure. ZWE looks at the dividend yields of its holdings. Plus, it does some covered writing, which gives you income along the way in tradeoff for upside. Attractive yield, but consider also owning some European stocks on their own. Nice piece of diversification for your portfolio, good bit of income.
Right now, this is his preference. Going over the history of this ETF, the extreme was $1.50-1.60 CAD to euro. So anything above $1.50-1.55, you'd want to be hedged. Anything lower than $1.35-1.40, you want to be exposed to the foreign currency.
Recently we got back above $1.50. If it keeps going higher, that's fine. When you're hedging the CAD relative to Europe, their interest rates are lower than ours, and so you actually earn extra doing it.
If you like high-dividends with a covered call in Europe, this is a hold and buy on weakness. Most of the return comes from income, mostly international companies. It's tax efficient to get dividends with international exposure. A good diversifier. Likes it very much. ZWE is currency-hedged.
There has been no growth for a number of years in Europe and this is not likely to change in the near term. Stick to the North American market for growth including dividends.