Mike Philbrick
BMO US High Dividend Covered Call ETF
ZWH-T
WEAK BUY
Jun 01, 2020
ZWE-T vs. ZWH-T. With covered calls, when you are in a slightly up or down or sideways market, the call brings in a premium and dampens the volatility. But when it is in a very strong uptrend, the covered write lops off the top of the uptrend. The upside is capped. In a sharp declined followed by a snap-back rally, the same thing applies. You should have both for covered write portfolios to increase diversification if you are going to have them.
There is space for these ETFs for yield seekers. One of the challenges in 2020 was that dividend paying stocks did terrible relative to technology that does not pay dividends. Still likes them for conservative investors.
The yield is in the 5.5%-6% range. A covered call strategy that is pretty sustainable. A group of good quality high dividend paying companies with covered call for yield enhancement. If you are bullish, you could miss out on some returns but in a sideways to down market, a prudent choice.
A good quality holding. Depends what you are holding out of an investment. Provides more income with the covered calls. In a high growth market, you do underperform. Good for income investors.
BMO has the biggest suite of covered call strategies around the world. For US high-dividend covered-call strategies, ZWS or ZWH are really good (one hedged, one not).
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