BMO Covered Call Utilities ETF (ZWU.TO)

Consists of good dividend paying companies with a covered call overlay. It is pushing an 8% yield. It has been a bad performer because pipelines have performed poorly. It is a diversified way to get income from Canada in a tax efficient way. There will be volatility. It is not a fixed income replacement.

This holds a basket of utilities mainly as well as some of the telecoms. It applies a covered call strategy to extract some additional income. His issue with the utility space is that if and when interest rates begin to move upwards, these dividend paying type of stocks will be under pressure to a certain extent. Telecoms have done quite well, but he is not a big fan of utilities.

He has looked at this Covered Call, but the problem is that it is utilities. It covers pipelines, telcos as well as some of the gas utilities. A bit too broad for him. You have a situation here where the telcos are going up and the pipelines are going down. As an investor he would rather pick his spots, i.e. invest directly in the pipelines or the telcos, rather than having them all mixed into one ETF.

The issue with utilities is always interest rates. He doesn’t see the rates going up significantly in the next little while, and this is a very nice overlay on top of the utilities, which are generally pretty sluggish. Likes the 5.5% yield on this.

Utilities, pipelines, telcos, big dividend players with a covered call overlay. Quite an interest rate sensitive sector. This is a time to look at this. If you are a total return investor, this is not necessarily going to give you a lot of growth. If you are a yield investor, it is a great, great holding for a nice yield and lower volatility in the broader markets.

He has a full position. It is a great holding. The covered call gives you an enhanced yield. He would look to sell if it went over $15.

He likes this. Remember that utilities are a little bit like REITs and are interest sensitive. However on this one the indicated yield was about 6% including covered calls and dividends. He would be a little bit on the cautionary side when interest rates start to move, but in the interim buy it.

Caller was at 10%. He feels this is okay for an ETF and so the caller should not add to or reduce his position.

Covered Call Utilities. Loves it as part of a holding. Has a 6-7% position. Utilities, telcos and pipelines, 20% in the US. Not without risk. It is interest rate sensitive. 5.5-6% yield.

Has been a good name to own. The Covered Call nature helps mitigate an “interest rate hike” risk. The only concern that he has is that it is about 35% energy, and that is always going to cause a little bit of grief. Believes this has both Canadian and US exposure, and this is probably a good entry point.

Utility stocks are the lowest end of the spectrum in terms of volatility. There is some energy exposure so this one really isn’t a risk free dividend. It will be less volatility than pure energy. We should have a bottom in the energy sector in the next couple of months.

(A Top Pick June 7/13. Up 13.53%.) This got hit when there was the tapering tantrum, but has come back quite nicely. Has a fairly reasonable yield if you are looking for that. Prefers ZLB-T. The Call aspect, where they get called away in a rising market, has not helped their earnings at all.

As long as you understand how covered calls work i.e. they limit your upside. It has been a great performer. 5.7% dividend yield.

As equity-based products go, this is a pretty conservative one. It is diversified, so that makes it conservative, but utilities are conservative because you have a steady income stream. You also have the covered call overlay which gets you the income of covered calls. If things go up a lot, you get called away. A good, steady sort of thing to use for people who want growth, but are still conservative in trying to get it.

Telcos and pipelines. Some US utility exposure and a covered call overlay. Telcos are about 15%.