Stock price when the opinion was issued
Utilities are a very low-volatility sector, so the premiums are lower compared to oil/gas. He suggests holding both this and XUT-T. Utilities are a top sector, because valuations are so reasonable (hard to find that in this market). ZWU will give you covered calls, but XUT will give you upside. So, own both, half and half.
That's a very specific question about one investor and their financial circumstances, risk tolerance, etc.
If we're going into an environment of slower economic conditions, then ZWU is likely to do a bit better. This would be due to the Canadian banks pulling back. He loves them both, great exposures. A bit concerning if all a retiree's portfolio is in just those two vehicles; there's not much diversification either within or outside of Canada.
Consider adding ZPAY, which gives you some US exposure to big banks and tech, and with a lower risk profile.
Very good yield. Just remember that the utilities sector is very vulnerable to interest rate changes. If rates go up, high regulation means they can't increase prices to consumers. Great way to earn tax-enhanced income.
He likes covered calls, but the big tradeoff is that you can give away upside. The option premium boosts the return.
Remember that a GIC and dividend stock have different levels of risk. Consider preferred shares and covered call ETFs like ZWC which gives broad exposure to Canadian dividends with a covered call overlay. ZWU, too, which is an alternative to fixed income, but gives equity market risk.
In the area of the market that's quite stable, mainly because utilities are regulated by government. They do become interest-rate sensitive. Recently got caught up in the AI hype and all the power that will be needed, so got a bit ahead of themselves. Low beta. About as safe as it gets in the stock market.
When the sector outperforms, that's a warning signal. And we've had a couple of those days. Great place to hide, good yield, getting the covered writing premiums. Challenge is that because utilities are so low volatility, that premium is less.
70% Canadian utilities, 30% US. Includes companies such as pipelines, telcos, and traditional utilities in the energy creation and delivery space like ENB. Holds about 15-20 stocks, but with the option overlay to get the extra yield. So it's a combination of that that makes up your 60 holdings. Not a lot of turnover.
He recently trimmed exposure. Very interest-rate sensitive. So as bond yield go up in the short term in the US, there are headwinds in front of us. The pipeline component is more sensitive to the energy space, which is coming under a bit of short-term pressure. Hurting performance in recent years has been the likes of BCE, formerly a $60 company but now $45.
A basket of really good companies, high yielder. A range trader, not a bond alternative.