ZUT, ZWU, HUTL, UMAX and XUT — Full Comparison for Income Investors
| ETF | MER | Yield | Strategy | Best For |
| ZUT | 0.61% | ~4% | Index | Growth |
| ZWU | 0.71% | ~7–8% | Covered Call | Income |
| XUT | 0.62% | ~4% | Index (Cap) | Large-cap |
| HUTL | 0.65% | 7.26–7.80% | Covered Call | Global income |
| UMAX | ~0.65% | 13.65% | ATM Calls | Max income |
Sources: Yahoo Finance, Hamilton ETFs, Harvest ETFs, BMO GAM — as of March 2026.
| ⚡ Bottom Line Up Front For pure growth: ZUT (equal weight, no covered calls, best long-term upside). For income + moderate growth: ZWU or HUTL (7–8% yield, covered calls on ~50%). For maximum income: UMAX (13.65% yield, ATM covered calls — highest income, capped upside). HUTL adds global diversification beyond Canada. XUT is the simplest but most concentrated option. |
Why Invest in Utilities ETFs in 2026?
The utility sector has historically been one of the most defensive allocations available to Canadian investors. Utility companies provide essential services — electricity, natural gas, water, telecoms, and pipelines — with regulated revenues and predictable cash flows that hold up even during economic downturns.
In 2026, utilities are benefiting from an additional growth tailwind: the explosion in AI data centre energy demand. Global utilities companies — particularly in the U.S. and Europe — are seeing surging electricity demand driven by hyperscaler data centres, making the sector both defensive and growth-oriented for the first time in decades.
- Resilience — utility revenues are regulated, making them less volatile than cyclical sectors
- Reliable income — consistent monthly or quarterly distributions from underlying dividend payers
- Defensive positioning — utilities typically outperform during rate cuts and economic slowdowns
- AI demand catalyst — rising electricity demand from data centres is boosting utility earnings globally
- Interest rate sensitivity — utilities rally when interest rates fall, making current environment constructive
Risks of Investing in Utilities ETFs
| ⚠️ Key Risks to Understand Interest rate risk — utilities are rate-sensitive. Rising rates reduce the relative attractiveness of utility dividends. Regulatory risk — government policy changes can affect utility revenues. Currency risk — for HUTL which holds global utilities. Covered call risk — for ZWU, HUTL and UMAX, the options strategy caps upside in strong bull markets. |
Historical Performance Comparison (as of March 27th, 2026)
Total returns include dividends and distributions reinvested:
| ETF | YTD | 1-Year | 3-Year | 5-Year |
|---|---|---|---|---|
| ZWU.TO | 10.94% | 19.22% | 11.33% | 8.76% |
| ZUT.TO | 11.94% | 28.55% | 13.20% | 7.19% |
| XUT.TO | 10.69% | 27.81% | 13.56% | 8.49% |
| HUTL.TO | 12.37% | 22.89% | 14.54% | 11.50% |
| UMAX.TO | 7.20% | 13.45% | N/A | N/A |
Sources: Yahoo Finance trailing returns as of March 27th, 2026. Past performance does not guarantee future results.
🔍 Key Insight — Covered Calls vs Index ETFs
A common misconception among investors is that covered call ETFs significantly underperform traditional index ETFs. While this can be true in certain market conditions, the reality is much more nuanced—especially in the utilities sector, where income plays a central role.
⚠️ Important: The returns shown below are total returns, meaning they include distributions (dividends) reinvested. This is critical, as covered call ETFs generate a large portion of their returns through income.
When we look at recent performance data:
- ZUT (index ETF): 13.20% (3-year)
- ZWU (covered call ETF): 11.33% (3-year)
➡️ The difference exists — but it is moderate, not extreme, especially when compared to the higher and more consistent income provided by covered call strategies.
💡 Key takeaway:
The real tradeoff is not simply performance vs. underperformance —
it is capital growth vs. income optimization.
Covered call ETFs may lag slightly in strong bull markets, but they compensate by delivering steady monthly cash flow, which is highly valuable for income-focused investors.
🧠 ETF Breakdown
Below is a detailed breakdown of the best utilities ETFs in Canada, including their strategy, strengths, and limitations.
💰 ZWU — BMO Covered Call Utilities ETF
👉 Best for: Passive income investors
ZWU is designed for investors seeking high and stable monthly income, using a covered call strategy on a portion of its portfolio.
📊 Key Characteristics
This ETF is designed for investors seeking reliable income with reduced volatility, primarily through a covered call overlay on defensive sectors.
- Yield: ~7–8%
- Strategy: Covered calls (~50%)
- Exposure: Utilities + telecom + pipelines
- Distribution: Monthly
👍 Pros
The main advantage of this ETF is its ability to generate steady and predictable cash flow, even in sideways markets.
- High and consistent income
- Lower volatility than traditional equity ETFs
- Well-suited for retirement or income portfolios
👎 Cons
However, this income comes with trade-offs, particularly in strong market environments.
- Limited upside in strong bull markets
- Higher MER (~0.71%) due to options strategy
💡 Bottom line:
This type of ETF is not designed to maximize total return — it is built to convert market exposure into income, making it a powerful tool for investors prioritizing cash flow over growth.
📈 ZUT — BMO Equal Weight Utilities ETF
ZUT offers pure exposure to Canadian utilities without the use of options, allowing investors to fully participate in market upside. Its equal-weight structure also reduces concentration risk compared to traditional cap-weighted ETFs.
📊 Key Characteristics
This ETF is designed for investors seeking capital appreciation with moderate income, while maintaining exposure to a defensive sector.
- Yield: ~4%
- Strategy: Pure index (no covered calls)
- Structure: Equal-weight (~14 holdings)
👍 Pros
ZUT stands out for its ability to capture full market upside, making it a strong choice during bullish periods.
- Captures full upside potential
- Strong recent performance (28.55% over 1 year)
- Better diversification than cap-weight ETFs
👎 Cons
However, the absence of an options strategy means less income and more sensitivity to market fluctuations.
- Lower income compared to covered call ETFs
- More exposed to market volatility
💡 Bottom line:
ZUT is built for investors who prioritize long-term growth over immediate income, offering clean exposure to a stable sector while preserving full upside potential.
⚖️ XUT — iShares Utilities ETF
👉 Best for: Simplicity and passive exposure
XUT provides straightforward exposure to the Canadian utilities sector through a market-cap weighted approach. This means larger companies dominate the portfolio, making it a simple and familiar option for investors who prefer traditional index investing.
📊 Key Characteristics
This ETF is designed for investors seeking low-cost, passive exposure to major Canadian utility companies.
- Strategy: Market-cap weighted
- Concentration: Top holdings represent ~60%
👍 Pros
XUT is ideal for investors who value simplicity, liquidity, and cost efficiency.
- Simple and easy to understand
- Competitive MER
- Exposure to major Canadian utilities
👎 Cons
However, the structure leads to higher concentration in a few dominant players.
- High concentration risk
- Less diversification than equal-weight ETFs
💡 Bottom line:
XUT is a no-frills, passive ETF that delivers core exposure to the utilities sector, but with a trade-off: simplicity comes at the cost of concentration risk.
🌍 HUTL — Global Utilities Income ETF
👉 Best for: Income + global diversification
HUTL provides exposure to utilities companies across multiple countries, combined with a covered call strategy designed to enhance income. This makes it a compelling option for investors looking to diversify beyond Canada while maintaining strong cash flow.
📊 Key Characteristics
This ETF is built for investors seeking high income with international exposure, reducing reliance on a single market.
- Yield: ~7–8%
- Holdings: ~30 global companies
- Strategy: Covered calls
👍 Pros
HUTL stands out for combining income generation with geographic diversification, which can improve portfolio resilience.
- International diversification
- Strong total return (3Y: 14.54%)
- Reduces reliance on Canadian market
👎 Cons
However, global exposure introduces additional risks and complexity.
- Currency risk
- Slightly more complex structure
💡 Bottom line:
HUTL is ideal for investors who want to boost income while diversifying globally, but should be comfortable with currency fluctuations and a more sophisticated strategy.
🚀 UMAX — High Yield Utilities ETF
👉 Best for: Maximum income investors
UMAX is built for investors seeking maximum cash flow, using a more aggressive at-the-money (ATM) covered call strategy. By selling options closer to the current price, the ETF generates higher premiums—at the cost of significantly limiting upside potential.
📊 Key Characteristics
This ETF is designed to maximize income generation, even in flat or moderately bullish markets.
- Yield: ~13%
- Strategy: ATM covered calls
- Holdings: ~13 stocks
👍 Pros
UMAX stands out for its ability to deliver very high and frequent income, making it attractive for cash flow–focused portfolios.
- Very high monthly income
- No leverage used
- Strong cash flow generation
👎 Cons
However, this aggressive income strategy comes with important trade-offs.
- Upside is significantly capped
- Shorter track record
💡 Bottom line:
UMAX is ideal for investors who prioritize maximum income today over future growth, but it requires accepting limited upside and higher strategy constraints.
🧠 Final Insight
When choosing a utilities ETF in Canada, it’s essential to align your selection with your investment objective.
👉 Ask yourself:
- Do you need monthly income today?
- Or are you focused on long-term capital growth?
Covered call ETFs like ZWU and UMAX are powerful tools for generating income, while index ETFs like ZUT and XUT are better suited for maximizing long-term returns.
👉 In many cases, the best approach is a combination of both — creating a portfolio that balances income, stability, and growth.
⚖️ ZWU vs ZUT — The Core Decision
| ZUT | ZWU | |
|---|---|---|
| Strategy | Index | Covered Call |
| Yield | ~4% | ~7–8% |
| 1-Year | 28.55% | 19.22% |
| 3-Year | 13.20% | 11.33% |
| Upside | Full | Limited |
| Income | Lower | Higher |
💡 Simple Rule
👉 Need income now → ZWU
👉 Want long-term growth → ZUT
🧭 Which ETF Should You Choose?
| Investor Profile | Best ETF |
|---|---|
| Long-term growth | ZUT |
| Monthly income | ZWU |
| Income + global diversification | HUTL |
| Maximum yield | UMAX |
| Simple passive exposure | XUT |
Frequently Asked Questions
What is the best utilities ETF in Canada?
It depends on your goal. For total return and long-term growth: ZUT. For monthly income: ZWU or HUTL. For maximum yield: UMAX at 13.65%. There is no single best — the right choice depends on whether you prioritize income, growth, or a combination.
Are Canadian utilities ETFs good for a TFSA?
Yes — utilities ETFs are excellent TFSA holdings. Distributions grow and can be withdrawn completely tax-free. For maximum compounding, consider ZUT in a TFSA since its lower yield means less forced income tax drag. Income-focused investors can hold ZWU or HUTL in a TFSA to shelter the higher distributions from tax.
Do utilities ETFs go up when interest rates fall?
Generally yes. Utilities are interest-rate sensitive — when rates fall, the relative attractiveness of utility dividends increases, driving prices higher. This is why utilities ETFs typically perform well in rate-cutting environments. The current environment of declining rates in Canada is constructive for the sector.
What is the difference between ZUT and ZWU?
ZUT is a pure index ETF with no covered calls — it captures the full upside of Canadian utilities but pays a lower yield (~4%). ZWU uses covered calls on 50% of the portfolio to boost yield to ~7–8%, but caps some of the upside. Over 3 years, ZUT returned 28.53% vs ZWU’s ~4.46% — a significant difference driven by ZWU’s options strategy limiting participation in the utilities rally.
Is UMAX safe?
UMAX holds blue-chip Canadian stocks (Enbridge, TC Energy, Fortis, CNR, etc.) which are individually considered safe, stable businesses. The risk is the ATM covered call strategy which caps upside in bull markets and the shorter track record (launched June 2023). The 13.65% yield is sustainable as long as underlying dividends and option premiums remain stable, but it is not guaranteed.
Disclaimer
This article is for educational purposes only and does not constitute financial advice. ETF yields, returns and fees are subject to change. Data sourced from Yahoo Finance, Hamilton ETFs, Harvest ETFs, BMO GAM as of March 2026. Past performance does not guarantee future results. Always verify current data before investing.
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