BMO Covered Call Utilities ETF (ZWU.TO)

BCE-T Replacment: If you want to replace it, he would look at ZWU-T because it gives you all the Telco's. It gives you a couple in the US as well as pipelines and utilities. He is not looking for a lot more downside. It pays north of 6%.

Utilities and telecoms. They have been underperforming. Many times, these companies are dividend payers but not necessarily dividend growers. He would be careful in this interest rate rising environment.

This is about about covered calls in utilities, including a lot of American ones. Morgan Stanley is recommending some American utilities. True, rising interest rates pressure these stocks, but this ETF pays a dividend of 6.9%. This ETF will get beaten up a bit, but it's still good.

IPL-T or ENF–T. As a long term hold they are okay. He would prefer that rather than a single company he would like ZWU-T because you get all the pipelines and telecoms and a covered call overly. You are very diversified within Canada. North of a 6% yield. This is nice as a long term hold.

This is a high dividend paying ETF that is very interest rate sensitive. He still thinks this is the best way to hold a diversified basket of utility type companies that pays a dividend above 6%.

This is a very interest rate sensitive ETF, holding pipelines, telcos and utilities. As these are very capital intensive entities with high borrowing needs they get hurt with rising interest rates. He doesn’t think interest rates will be going much higher and he will be buying more on if prices get lower, because he likes the yield and sees it as a good diversifier in his portfolio.

It is in all the portfolios he manages. It is pipelines, utilities and telcos. It is 70% Canadian / 30% US. They write covered calls to enhance yield to 6-6.5%. Because of all the yields carrying a lot of debt on their balance sheets it is very interest rate sensitive. You get a bit of a shock as they start to raise interest rates. It will stay in a trading range of $13 to $14.25 for some time. He has been nibbling for some time.

It is a great holding for Canadians to get telcos and pipelines. 30% is in US utilities. The CAD$ has rallied 2-3% and utilities in the US have been getting beaten up. That caused the last swing down in the price. This should stabilize if there is a dovish rate hike in Canada this week. After Wednesday’s BOC meeting it would be a good time to buy if they do a ‘raise and done for a year.’

In a covered call strategy there are two factors for the distribution: Distribution of equities the ETF holds and premiums from the covered calls. There were no cuts in the stocks’ dividends but volatility shrunk so much this year that the premium from the covered call overlay is coming down and that is what brought the ETF’s distribution down. Don’t worry about it. We will see volatility pick up in the future.

A basket of Canadian utility companies, so the dividends are good, and you have Covered Calls against them. Premiums on utilities, typically are not very high, which tends to deflate the potential capital gains you would get from the option premiums. He would prefer ZWB-T because he likes the banking sector going into next year.

A Covered Call ETF. This is a mixed bag of traditional utilities and pipeline utilities. A steady type of name and you are going to get extra yield from the covered call writing. An interesting name. It probably won’t give you the growth he is looking for in his portfolios. If you are in an area where markets are moving higher, you want to be in the underlying securities, not a covered call strategy.

He loves ZWB-T and it is a great way to hold the banks. But he sold out, taking profits, putting it into ZWU-T. This is a lot more interest rate sensitive. ZWU-T will outperform in a market correction as utilities are more defensive.

Good for a TFSA?This ETF holds a range of utilities and pays an excellent return. Essentially you are buying a portfolio of Canadian utilities. If you want a nice cash flow in your portfolio, it gives you diversification.

The .U units are in US$ and not a lot of people are using them. Its liquidity is that of the underlying securities. The market maker creates more units as required. There is no need to worry about liquidity just because the ETF is thinly traded.

There are 20 securities in this with roughly 5% in each. Is 10%-15% of that too much to have in one Security? This pays a very nice yield. Originally it was just Canadian utilities, but now they have some US stuff as well. Utilities are very subject to interest rate changes, and is something to keep in mind. He doesn’t know about going with 15%, but you are probably fine with 5%-10%. With a possible increase in interest rates, you might want to wait a few days.