
TSE:ZWU
This summary was created by AI, based on 19 opinions in the last 12 months.
The BMO Covered Call Utilities ETF (ZWU) is viewed positively by various experts, primarily for its ability to provide a stable income through its covered call strategy, offering a yield of approximately 6-8%. Analysts appreciate its diversification across utility stocks, telecommunications, and pipelines, suggesting it serves as an effective defensive investment, particularly in uncertain market conditions. While there are concerns regarding interest rate sensitivity, many experts emphasize the favorable growth prospects in the utility sector driven by increasing power demands, especially in the context of technology like data centers. The consensus among investors indicates that ZWU is a solid option for income seekers, although they recommend not allocating an entire portfolio to this single ETF. Overall, the utility sector is seen as having significant tailwinds, making ZWU a compelling part of a diversified investment strategy.
ZWU's covered call will pay a higher dividend, though FTS' is solid and growing. ZWU pays more income because you're selling calls. The downside is that as interest rates decline, utilities will improve and you will lose that upside if you hold ZWU and not a plain ETF or Fortis itself. If you are positive utilities, don't use a covered call ETF.
Covered calls supplement income, but sometimes the underlying security performs better over time. Not in this case, which is rare (ZWU vs ZUT). ZWU pays an 8.5% dividend, including the covered call overlay. Share price has risen since October. Utilities are not a growth area, but bought for cash flow and income. Do you want the yield or growth?
Great dividend, but not a lot of growth in terms of earnings. So total return not spectacular. Utilities don't grow at 15% earnings growth rates the way, say, a MA would.
With covered call strategies, you're missing some of the upside over time. You have to really understand what you need this for, income is a prime reason. MERs are also usually higher.
Nice income on this strategy. Yields about 8.25%. Interest rates are starting to steady and potentially pivot lower. As rates start to move lower, some of these dividend stocks, like pipelines or telecoms or banks, will look very attractive as they start to recover.
If you don't need the income, he prefers the underlying securities. Covered calls mean you lose out on some upside. Plus, these ETFs tend to charge higher expense ratios.
Dividend stocks should start to recover a bit once the 10 year bond yields start to back down. This ETF has a return of 5.6% so you can hold for when rates start to come down.
Also part of the question was on covered call strategies. Unless the underlying security is flat or falling you may see some under-performance related to the security itself
With the ROC component, the after-tax yield compares very well to alternatives, but it is hard to say whether it fully compensates, as investors have different tax brackets. If we look shorter term, its five year return is better, at 3.1%. But over ten years, it is down 26%, but with distributions 10-year net is 4.08%. Considering the very weak performance of the last year as interest rates spiked, we would still consider this 'OK' all things considered.
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Dividend yield is strong (~5%), however don't expect large capital gains (covered call gives the capital appreciation away). Would recommend for investors interest in dividend yield.