BMO US High Dividend Covered Call ETF (ZWH.TO)

BMO US High Dividend Covered Call (ZWH-T) or BMO High Yield Corp Bond US Hedge to Cdn (ZHY-T)? Corporate bonds are probably going to be riskier than covered calls. Covered calls gives you the guaranteed income and are more stable with regards to the underlying investments. The corporations are going to be giving a higher return if the market remains benign, but you are taking a risk in case we have a hike or there's a credit crunch with regards to those corporations. You don't need the hedging these days because the Cdn$ is, if anything, dropping. If you could get it with an un-hedged version, it would be better still. If he really had to choose, he would select the Covered Call.

This is a US Covered Call ETF with a higher dividend. He likes this and has quite a bit of it. Pays around a 5% dividend yield. You have to remember that the yields will be treated as income in Canada, but you have the advantage of the Covered Calls being treated as capital gains.

Dividends account for a very big chunk of a portfolio return. There was a double top in June and July. There is good support where it is now. Pays monthly distributions.

This has a lot of the utility and telecom names in it and a lot of those names are pretty richly valued at this time. He would recommend that you look at the BMO DJ Industrial (ZDJ-T) instead. You want to own these types of ETF’s in a relatively flat to sideways moving market. That is when you will collect the dividend along with the option premiums.

High dividend companies in the US, but also has a Covered Call on it. This is getting a yield of roughly 6% of dividends and capital gains. Because this is US dividends, it will be treated as income, but you’ve got the capital gains overlay from the options. This is for people who on one hand want to be a little bit more conservative, but also because it is an income generator.

With this you are getting American companies that pay high dividends, but adding to that you have a Covered Call overlay, which will allow you to get the income from writing the Calls, but maybe not as much as you would get if the markets go up a lot.

Covered Calls tend to seduce investors because of the high yields that are there, but if you look at them they also have very high fees. He tends to dissuade people from using ETF’s that have an active component or leverage using a covered call strategy. There are all sorts of balls in the air. You are taking the risk of US banks and of the option writer as well as the volatility in the market. There is also a tax issue.

Likes this product. Only 50% of the stocks on this have Covered Calls against them, so you still have the upside of the other 50%. You are really doing this one for the income, not growth.

BMO US High Dividend (ZWH-T) or BMO High Yield Corp Bond US Hedge to CAD (ZHY-T)? He would grudgingly prefer the ZWH, but he really doesn’t like any products that are traditional income interest rate sensitive.