Mike PhilbrickBMO Covered Call Utilities ETFZWU.TOWEAK BUYSep 26, 2025

It's much more interest rate sensitive, so rising rates will mean underperformance. He'd be fine selling some of ZWB to buy ZWU.

Utility sector is starting to slowly matter again. Used to be defensive. Now getting attention because power demand is growing, especially in US with AI and data centres.

She's invested more selectively -- CEG and NRG in the States, and CPX in Canada.

Covered calls are more popular now in utilities for dividend investing. Has a 6.9% yield. He feels it is better to own the underlying securities since there is more upside and covered call strategy ETF's limit the upside. The BMO Utilities index ETF had a much better return.

Good questions. This ETF will hold a bunch of utility stocks. The likelihood of you losing everything is very, very small -- all the companies within the ETF would have to go to zero. This is not going to happen to your major companies like FTS and ENB.

It'll swing along with the markets. Utilities tend to have a bit more sensitivity to interest rates. In Canada rates probably aren't going anywhere, so that's not much of a worry. Gives you a bit of a yield.

He wouldn't put your whole TFSA in this one vehicle. Good income component as part of a larger portfolio. There's lots of power demand going forward. Some of these companies have projects such as data centres in the US, so that's a benefit. Sector has lots of tailwinds.

He's long recommended this. It's diversified and tax-efficient and exposed to Canadian stocks in utilities, telcos and pipelines. It pays over a 7% dividend. Is lower-risk. A winner for most investors.

Over the long run, has delivered 7+%. A basket of underlying stocks has probably been less than that. The covered call makes the difference. Loves it for dividend seekers. Diversified and tax-efficient.

BMO is coming out with targeted, higher-yield ETFs, but you give up growth and capital gain. You often see the NAV eroded.

Utilities are one of four sectors making new highs in the U.S. and are making new highs in Canada. ZWU is in an uptrend. He likes utilities. The chart just took out $11 and will face resistance around $13. Don't sell.  The current sharp will likely see a pullback, but he likes this chart.

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.

99 times out of 100, he's going to say don't try to pick one or two winners but diversify instead. Likes this one. You get all the telcos, utilities, and pipelines. The variability you see in this is due to the poor performance of the telcos in recent years, but many of those have already corrected in a significant way.

Potential benefit of pipelines. Utilities do well with falling interest rates. Tax-efficient, with a lot of capital gains being generated. A great group of companies in this basket.

It is different from a bond, in that it's equity risk. He wouldn't take your very safe bank bond and replace it with this just because it's a better return. But he would if you can handle the volatility of the return. Timing is pretty decent here.

For income seekers, he's recommended this one with its covered call exposure. You get a big percentage of that return coming by way of capital gain, which is your most efficient way of paying tax. The chart shows only the price, and not the total return (which is ~7% annually, and very tax-efficient). 

Utilities, mostly in Canada -- 30% US, 70% Canada. Pipelines and telcos. A lot less market sensitive. More defensive in theory; unless oil prices collapse, pipelines go down, and telcos go down further. If interest rates shoot up, utilities go down. He doesn't think any of those things are going to happen. So he'd pick this one as a more defensive way to make the shift to defense.

ZPAY is all US exposure. Uses optionality to generate significant income. There's a lot less risk to the overall market. However, it's all equity risk and it's US large-cap stocks. So if you're taking profits on riskier, growth-oriented investments, you're getting back into the same thing albeit with a better yield and risk/reward profile.

You don't need both. Pick one or the other.

Is a good time to be defensive. Utilities are not crazily overvalued, yet generate a dividend for income seekers.

Generates very nice yield in the range of 6-8%, depending on what's going on in the market. Exposure to utilities, telcos, pipelines, and with a covered call overlay. Really likes this way of getting tax-efficient income in Canadian portfolios.

Rule of thumb:  look at what an ETF owns. This one owns utilities (interest-rate sensitive), but it also owns pipelines and telcos. If the economy's weakening, then telcos and pipelines probably soften up. In that case, utilities might rally because interest rates are falling. There's no simple answer, but generally ZWU will perform better in a downturn because it's less economically sensitive to an overall market correction driven by economic weakness.

If the economy weakens, then banks are going to fall. If you had ZWB, you'd want to take $$ out of there and put it in ZWU. Doesn't mean ZWU won't go down (as it largely depends on what's driving market weakness), but it'll go down less. 

For those investors who want/need the income, ZWU is the most defensive way to extract that high yield. One of his favourites.