BMO US High Dividend Covered Call ETF (ZWH.TO)

If you believe bank stocks in general and US Bank stocks in particular are poised to do well, that is not likely to change anytime soon. The environment is fairly favourable.

He does not like it as much with the US$ below $.74. He holds it with ZPW-T. He can hedge the US$ exposure which individual investors can’t easily do. The currency conversion rate is crucial to this trade.

Comment on an ETF Basket of ZWE-T, ZDH-T and ZWH-T. ZWE-T is high dividend Euro stocks with a covered call. A defensive way to play Europe. ZDH-T is hedged. ZWH-T is international High Dividend US, non-hedged. He likes them all and owns them in his funds.

Hold off until after the election? We have bigger concerns over the next year than the US election. Europe fracturing next year is a bigger risk for global markets. ZWH-T gives you higher dividend payers, but is not currency hedged. He sees a 10% correction minimum in the next 6 months.

A very controversial part of the US market right now. The dividend market, which has been a darling for a very, very long time, may start encountering a little bit of stumbling when rates start moving back up. This is generally an excellent investment, but it is going to cause you a bit of grief in the short term. When you add on the covered call side of it, that is fine in a very volatile kind of sideways moving market. It will probably hold its own for a little while, but you are going to have a lot of people telling you that you shouldn’t own it. He would keep your weighting at about 4% of your portfolio.

This is a basket of high dividend payers in the US. On days when the Fed talks about rising interest rates, those stocks tend to drop. That is his concern about high dividend payers. Look for ETF’s or companies that are growing their dividends, or have those dividend attributes. In a rising environment, you will do better just holding the individual or underlying holdings, rather than having a covered call strategy. (See Top Picks.)

(A Top Pick June 3/16. Up 3.9%.) A basket of dividend stocks with covered calls being written against it. The thesis at the time was that we were in a range bound market, and you might as well click some yield.

You want to be in high dividend yielding equities. They suffer much less volatility than the broader market. This is a broad based basket of sectors, plus you have that covered call on top of it. If we do get a flat market this is an ideal holding.

BMO Europe High Dividend Covered Call Hedged to CAD (ZWE-T) or BMO US High Dividend Covered Call (ZWH-T)? He has a thesis that the US’s outperformance of the equity and currency markets is over. We have had 7 years of a structural US$ Bull market, and their equity market is expensive with headwinds on earnings. Europe has the unique situation where everybody recognizes the structural problems, but those are already priced in.

(A Top Pick April 7/16. Up 1.12%.) Dividend stocks in general tend to be less volatile than the broader market during the summertime. You want to focus on reducing volatility in your portfolio during this period of seasonal weakness for stocks.

You want to be focused on these covered call strategies at this point. If you think upside is capped, covered call strategies are ideal. This is unhedged versus the US$, so you will have that confirmation, and it might act as a hedge if you get a strengthening of the US$.

Generally everything that has a high dividend tends to not suffer the seasonal fluctuations that the broader market does. This is a basket of dividend paying stocks. It also tends to benefit from a covered call write strategy which increases the yield to above the dividends that are being paid out. Right now the dividend is about 5.6%, which is quite healthy.

ZWH-T vs. ZWA-T. ZWH-T is high dividend exposure split across all economic sectors, but you have exposure to the US$. ZWA-T is narrower and has a currency hedge. For new money he would not put it into these as he is raising cash as he thinks another pullback is coming.

Recently sold his holdings. Had done well on the currency side, but was getting beaten up along with everything else. He likes this ETF. If you have concerns the Cdn$ might improve over the next little while, then he would go with the ZWA, which is hedged against a decline in the US$.

How will this react when the Cdn$ starts to rise? He likes this question because it will have an effect. This ETF really didn’t do anything because of growth, it only made money because of currency. It is basically higher yielding S&P stocks. When there is an appreciation in the Cdn$, this could get hurt. He is not buying this now.