BMO COVERED CALL ETF LIST

BMO Covered call ETF list – Full comparison

In this post, we will be sharing BMO Covered call ETF list. We will be comparing 6 of the most popular ETFs in terms of dividends, MER and historical performance. Covered call ETFs are very popular with Canadian investors. Two reasons push investors towards covered call ETFs:

High dividend yield: thanks to the premiums earned when writing call options, the manager under certain conditions can earn premiums and enhance distributions;

Low volatility. Writing a call option is a conservative strategy aimed at reducing volatility;

Great for passive income: if you’re main objective is to achieve high dividend yields and build passive income, then covered call ETFs are a good option. But, remember the high dividend yield comes at a price which very low growth potential.

US Stocks that pay monthly dividends (Full list by sector)

How writing a call option works

Options make it possible to hedge a possible decline in a security and thus limit its loss through a gain on the option. To apply this hedging strategy, you have to take a short position on a call option, in other words sell a call.

The sale of calls achieves two objectives:

· Set the sale price of these securities (exercise price) and therefore set an acceptable loss.

· Collect a premium, i.e. additional income, or limit losses if the strike price is reached.

The option seller will be obligated to deliver the securities if exercised at the price fixed in advance. In this case the market will have evolved contrary to these expectations, it will have appreciated. The option investor will sell his securities for less than the market price.

Covered call options protect against downside risk. This being said, the covered call strategy provides limited downside protection. Also, when you write a covered call, you give up some of the stock’s potential gains. Covered call ETFs will tend to have a higher yield and a lower performance.

Top 10 Best Growth ETF in Canada!

BMO Covered call ETF list

NameAUM*MER
ZWB –BMO Covered
Call Canadian Banks
2.6B0.72
ZWC –BMO CDN High
Div Covered Call
1.3B0.72
ZWP –BMO Europe
High Div Cov Call
935M0.71
ZWH –BMO US High
Dividend Covered Call
918M0.71
ZWK -BMO Covered
Call US Banks 
230M0.71
ZWU – BMO Covered
Call Utilities
1,6B0.71

Source: TD Market research, MER: Management Expense Ratio / BMO Covered call ETF list

Performance and dividend yield comparison

Average long term performance – Updated daily – Best Covered Call ETF Canada

Div Yld
ZWB7.14
ZWC7.15
ZWP8.05
ZWH6.64
ZWK8.04
ZWU8.45

Source: Yahoo Finance 

Full list of ‘Dividend Kings’ stocks by sector – 2023

ZWB – BMO Covered Call Canadian Banks

The ZWB aims to provide exposure to a portfolio of dividend-paying securities (Canadian Banks), while collecting premiums related to call options. The portfolio is chosen on the basis of the criteria below:

• dividend growth rate, yield and payout ratio and liquidity.

ZWB holdings

NameWeight
BMO Equal Weight Banks ETF27.2%
  Bank of Montreal12.9%
Canadian Imperial Bank of Commerce12.7%
Royal Bank of Canada12.1%
National Bank of Canada11.9%
  The Toronto-Dominion Bank11.9%
Bank of Nova Scotia11.4%

Please visit issuers’ website for up-to-date figures – BMO Covered call ETF list

ZWC –BMO CDN High Div Covered Call

The BMO Canadian High Dividend Covered Call ETF (ZWC)  has been designed to provide exposure to a dividend focused portfolio, while earning call option premiums. The underlying portfolio is yield-weighted and broadly diversified across sectors.

The fund selection methodology uses 4 factors: – Liquidity; – Dividend growth rate; – Yield and payout ratio.

ZWC is an excellent option for conservative investors looking for a steady income and low volatility. It’s tax-efficient because the dividends are all coming from Canadian companies. The financial sector and Energy represents 53% of the total overall sector allocation.

ZWC ETF Holdings

Company NameAllocation
Canadian National Railway Co5.4%
BCE Inc5.2%
TELUS Corp5.1%
Enbridge Inc5.0%
Royal Bank of Canada5.0%
Canadian Imperial Bank of Commerce4.9%
Bank of Nova Scotia4.7%
The Toronto-Dominion Bank4.6%
Manulife Financial Corp4.3%

Please visit issuers’ website for up-to-date figures

ZWP – BMO Europe High Dividend Covered Call ETF

The BMO Europe High Dividend Covered Call ETF (ZWP) has been designed to provide exposure to a dividend focused portfolio. These dividend paying companies are selected based on:

  • dividend growth rate,
  • yield,
  • payout ratio and liquidity.

ZWP Dividend ETF Holdings

Company NameAllocation
Roche Holding AG4.0%
Nestle SA4.0%
Novartis AG4.0%
GlaxoSmithKline PLC4.0%
Sanofi SA3.8%
TotalEnergies SE3.7%
Unilever PLC3.7%
Enel SpA3.7%

Please visit issuers’ website for up-to-date figures

Geographic allocation

CountriesWeight
Switzerland23.66%
Germany24.24%
United Kingdom18.76%
France16.72%
Other (multiple countries)16.62%

Please visit issuers’ website for up-to-date figures

Sector allocation

TypeFund
Information Technology6.22
Industrials12.18
Consumer Discretionary11.56
Consumer Staples11.78
Health Care16.56
Financials14.79
Materials9.48
Communication8.10
Energy3.89
Utilities3.66

Please visit issuers’ website for up-to-date figures

ZWH – BMO US High Dividend Covered Call ETF

ZWH has been designed to provide exposure to a dividend focused portfolio, while earning call option premiums. The underlying portfolio is yield-weighted and broadly diversified across sectors. The Fund utilizes a rules-based methodology that considers the following criteria:

dividend growth rate,

yield,

payout ratio,

liquidity.

ZWH Dividend ETF Holding

Company NameAllocation
Apple Inc4.2%
Microsoft Corp4.2%
Coca-Cola Co4.1%
AbbVie Inc4.1%
The Home Depot Inc4.1%
Procter & Gamble Co4.1%
Pfizer Inc4.0%

Please visit issuers’ website for up-to-date figures

Geographic allocation

CountryFund
USA100.0%

Please visit issuers’ website for up-to-date figures

Sector allocation

SectorFund
Information Technology22.61%
Industrials8.39%
Consumer Discretionary10.06%
Health Care12.40%
Financials15.50%
Materials4.36%
Communication9.58%
Consumer Staples7.35%
Energy3.86%
Utilities3.84%
Real estate2.05%

Please consult issuers’ website for up-to-date figures

ZWK -BMO Covered Call US Banks 

The BMO Covered Call U.S. Banks ETF (ZWK) is professionally managed by BMO Global Asset Management. The fund has been designed to provide exposure to a portfolio of U.S. banks while earning call option premiums.

The fund invests in 38 US Banks. It’s ideal for investors looking for dividend income. The dividend yield on November 24th was 6.19%!

The fact that the fund uses call options accomplishes two things:

  • increases the dividend yield;
  • reduces volatility but also growth potential. So, it’s something to keep in mind.
Weight (%)Name
5.86%SIGNATURE BANK/NEW YORK NY
5.58%CITIZENS FINANCIAL GROUP INC
5.55%REGIONS FINANCIAL CORP
5.52%AMERIPRISE FINANCIAL INC
5.52%M&T BANK CORP
5.46%SVB FINANCIAL GROUP
5.43%KEYCORP
5.41%TRUIST FINANCIAL CORP
5.40%FIFTH THIRD BANCORP
5.38%BMO EQUAL WEIGHT US BANKS INDEX ETF

ZWU – BMO Covered Call Utilities

ZWU is another covered call ETF from BMO. It provides exposure to an equal weight portfolio of utilities, telecoms and pipeline companies. The fund manager will enhance yield by issuing options and collectin

ZWU Holdings

Weight
(%)
Name
5.92%BMO EQUAL WEIGHT UTILITIES INDEX
5.44%PEMBINA PIPELINE
5.29%TC ENERGY
5.16%FORTIS INC/CANADA
5.02%ENBRIDGE
4.87%BCE
4.70%TELUS
4.59%PPL
4.52%EXELON
4.46%ROGERS COMMUNICATIONS

Practice example: covered call strategy

An investor has 100 shares of Company A in his portfolio. Company A’s share is worth $ 30. He anticipates a stagnation or a slight drop in its price and he is ready to sell them at the price of 26 $. He decides to sell a call with the following characteristics:

• Exercise price: $ 26 and Maturity: April

• Option price: $ 4 and Quantity: 100

He collects the following amount: 4 x 100 or 400 $ (premium)

Two cases should be distinguished:

CASE 1: Company A’s share price rose above the breakeven point of $ 30.

Break-even point = exercise price + premium = 26 + 4 = 30

The buyer of the option will choose to exercise his right to buy and, as the seller of the call, the seller will have to sell the shares at the strike price.

During this operation:

  • the seller sold his shares for $ 26, which constitutes an acceptable loss for him.
  • the seller collected the amount of the premium of $ 4, which helped boost the performance of his investments (yield).

CASE 2: Company A’s share price has fallen below the breakeven point of $ 30.

The buyer of the option will choose not to exercise his right to buy and the seller will not have to sell his shares.

Thanks to this operation, the seller keeps his shares in the portfolio and he collected the amount of the premium which generated an additional return.

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