Topic: How To Invest

Q: Pat, could I get your recommendation on the BMO Canadian High Dividend Covered Call ETF (TSX: ZWC)? Thanks.

Article Excerpt

A: BMO Canadian High Dividend Covered Call ETF, $18.36, symbol ZWC on Toronto (Units outstanding: 21.1 million; Market cap: $387.4 million; www.bmo.com/gam/ca/investor/products/etfs), focuses on mostly high-quality Canadian stocks. Its top holdings are BCE at 4.2%; Pembina Pipeline, 4.0%; CIBC, 3.8%; Enbridge, 3.7%; Nutrien, 3.6%; Telus Corp., 3.6%; Vermilion Energy, 3.5%; Inter Pipeline, 3.5%; Canadian National Railway, 3.5%; and Emera, 3.4%. The ETF’s industry breakdown is Financials, 38.5%; Energy, 24.1%; Communications services, 13.9%; Utilities, 6.9%; Consumer discretionary, 6.3%; Consumer staples, 5.3%; Industrials, 3.6%; and Information technology, 1.5%. BMO Canadian High Dividend Covered Call ETF yields a very high 6.9%. However, the dividend income that the company receives from its own portfolio is insufficient to cover its dividend. To make up the difference, the ETF has to make a profit on trading its portfolio. It also aims to raise its returns by writing call options on the portfolio’s securities. Selling call options generates a stream of income for this ETF. However, options dealing generates a..

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