Opinions Cole Kachur
BMO Europe High Dividend Covered Call Hedged to CAD ETZWE.TODON'T BUYJun 10, 2025
Stock price when the opinion was issued
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Loves these questions, because the answer is why not both?
Nothing wrong at the moment with high-dividend covered calls in Europe. Better for a registered account, as it has more growth potential.
As well, nothing wrong with utilities (predominantly in Canada). If you put a gun to his head, you're in a taxable account, and it's for up to 10 years, pick this one.
Dividend plus covered calls for additional income. Very attractive, but (as with all covered call strategies) if you like the underlying security then you're most often better off just owning that. Unless you really need the income.
In a market that's moving higher you get called away from your stocks, missing out on upside. A good return over 3 years, but the return for the index holding just the underlying securities was almost double. Yield looks to be ~6.6%.
He likes what's going on in the rest of the world. Seeing a rewiring of some of these trade relationships such as with India and EU. He likes Europe.
There's more fiscal spending going on in Europe. Historically Europe has had less growth, but that might be part of the change we're seeing on trade relationships. Companies might have to move to other places and spend a bit more money to protect themselves.
As to whether to plunk down $$ right now, his crystal ball is no better than anyone else's. But he does like the opportunity in international markets.
One of his favourite ways to extract income from Europe, plus get a bit of growth in your portfolio. A bit more efficient, as about half the distribution is a capital gain. In general, European stocks are higher dividend payers than the US. Remember that a dividend from a foreign corporation is treated as income in taxable accounts, so it's much more ideally suited to registered accounts.
ZWE is better in the long run, but don't expect much growth. You're selling calls, but you collect a high dividend. Loves them both. This is hedged to the CAD. ZWE is more suited for the retail investor than the ZWP; don't worry about the currency exposure to the Euro.
The answer is both, because the securities holdings underneath them are identical. ZWE is currency hedged, ZWP is not. The choice depends on your view of the CAD relative to the euro. If you don't want to trade, buy the hedged version; it'll be your better holding in the long run. Huge distribution (from selling calls), but not a lot of growth (as calls sell some of the upside).
Loves them both, uses them in his sleep-at-night portfolios. He goes back and forth, depending on his view of CAD vs. euro.
If you're really looking for enhanced yield out of Europe, he really likes ZWP (high dividend payers, covered call, currency exposure) or ZWE (high dividend payers, covered call, currency hedged). The charts don't show a lot of gains, but that's because they pay out a pretty significant dividend (much bigger than ZDI, which is just dividends without the covered calls).
If you're conservative and you want more tax-efficient income in a taxable account, he likes these ETFs with the covered calls a lot better than ZDI.
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.
These covered-call ETFs have an underlying strategy of generating more income. What differentiates them is how much leverage is or isn't used. Doesn't know that for ZWE. He's never seen great returns outside North America and avoids foreign stocks. He prefers the hedge version.