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Opinions Richard Croft
BMO Europe High Dividend Covered Call Hedged to CAD ETZWE.TOCOMMENTDec 18, 2017
Richard CroftStock price when the opinion was issued
As of Jun 19, 2026. Market Open.
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Likes exposure to Europe, of which many Canadians have minimal exposure. ZWE looks at the dividend yields of its holdings. Plus, it does some covered writing, which gives you income along the way in tradeoff for upside. Attractive yield, but consider also owning some European stocks on their own. Nice piece of diversification for your portfolio, good bit of income.
In general, Europe is good value compared to US or NA markets. Lower PE and book value, higher dividend. This one has high dividend stocks, with covered call overlay. Up 11% YTD. Makes sense for cashflow. But ZWP, holding underlying securities, gives better total return. Yield is around 7.5%.
A Covered Call ETF on European stocks. The European stock market has underperformed Canada relative to the US since the financial crisis. There is potential upside if you believe they are getting their act together. Most of these ETF's tend to sell Call options against half the portfolio. The challenge is the same as you would have with any ETF that has a broad base of securities in it, because you are looking at securities from various industries. The ones going up are going to be capped and pulled out, and the ones going down the options are going to expire worthless, but you are going to end up writing options on half of those with a lower strike price, which means they can never get back to where they where. You have to be aware of these issues when dealing with a broad-based portfolio and the downside of covered calls.