In this post, we will be going over 11 high dividend yields ETFs. All the ETFs selected pay over 6% in dividend yield! We will start by comparing the performance and MER. Then, we will discuss how to select the best ETF among the ones selected. for each ETF, we will provide all pertinent financial data.
How to analyze a high dividend ETF in Canada
– Total return: Though the focus here is on the dividend yield, you have keep in mind the total return. The profit or loss we make on any investment is a combination of both dividend income and capital gain or loss. Looking at the long term performance of the fund is crucial. An ETF that provides an acceptable capital appreciation with a high dividend yield is preferable.
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–Diversification: A diversified ETF is always a safer option. Some high yield ETFs are sector specific (Financials, Energy or Gold). The ones focused on Energy and Gold have had a very poor long term performance and carry high volatility risk.
–Covered call ETFs: Understanding how these high dividend ETFs achieve such a high yield is also important. Most of the ETFs below use covered call options. This strategy is great as it enables the fund to collect earned options premiums which are added to the dividends paid out to the investors. On the flip side, this strategy limits the upside potential of the stocks held by the fund.
In a nutshell, a covered call ETF will outperform its competitors in corrections and underperform in a market rally. Personally, I find this strategy to be well suited when used on a low volatility basket of securities. It’s quite challenging to time the market when using this strategy on gold and energy stocks or any other high volatility basket of securities.
–Volume and liquidity of the ETF. The higher the asset under management, the lower the trading costs of the ETF (difference between the bid and ask price).
–Management expense ratio.
Dividend yield and Beta comparison
| Name | Div yield | MER |
| ZWC – BMO CDN High Div Covered Call | 6.63 | 0.72 |
| ZWE – BMO Europe High Div CC CAD Hedge | 6.37 | 0.71 |
| ZWP – BMO Europe High Div Cov Call | 6.48 | 0.71 |
| LIFE – Evolve Global Healthcare Enhance Yld | 6.42 | 0.68 |
| ZWH – BMO US High Dividend Covered Call | 5.58 | 0.71 |
| CALL – Evolve US Banks Enhanced Yield | 6.48 | 0.69 |
| LIFE-B – Evolve Global Healthcare Enhance Yld Unheg | 5.88 | 0.68 |
| GLCC – Horizons Enhanced Income Gold Prod | 6.30 | 0.81 |
| ZWS – BMO US High Dividend Covered Call Hedged to CAD | 5.63 | 0.71 |
| FIE – Ishares CDN Fin Mthly Income | 5.85 | 0.89 |
| HPF – Harvest Energy Leaders Plus Income | 4.43 | 1.71 |
| HDIV -Hamilton Enhanced Multi-Sector Covered Call | 9.58 | na |
| HDIF -Harvest Diversified Monthly Income ETF | 10.05 | na |
Historical performance
Source: Updated daily
Popular high dividend ETF Canada
Review of HPF Harvest Energy Leaders Plus Income ETF
The strategy used: Partially covered call strategy to enhance income and protect against downturn / Energy / Dividend
HPF has a poor historical performance even with the covered call strategy in place. The dividends are not safe as some big players in the energy industry are expected to cut dividends. If you are bullish on energy stocks, it would be wise to hold them directly. With HPF you are swapping income for growth.
Review of ZWC BMO CDN High Dividend Covered Call ETF
The strategy used: Covered call strategy to enhance income and protect against downturn / Canada / Dividend
ZWC is an excellent option for conservative investors looking for a steady income and low volatility. The covered call strategy increases the yield but limits long-term growth. So it’s essential to keep this in mind.
ZWC is tax-efficient because the dividends are all coming from Canadian companies.
Review of HDIV and HDIF
HDIV and HDIF are strong competitors to ZWC. These ETFs are diversified accorss various sectors. They use the covered call strategy plus additional leverage to push even higher the dividend yield. Since these two ETFs are relatively new, their performance and MER are not yet published. One thing is certain, though, the MER for both HDIV and HDIF will definitely be higher than ZWC. Also, the additional leverage used by these funds enhances the yield but also creates more risk for investors.
Review of ZWE and ZWP – BMO Europe High Dividend CC CAD ETF
The strategy used: Covered call strategy to enhance income and protect against downturn / Europe / Dividend
Both ZWE and ZWP invest in high-quality European stocks such as Volkswagen, Nestlé…etc. They have a covered call strategy in place to protect against downturns and enhance yield. The yield is attractive, but the long-term performance is low (3 years: 4.51% annualized for ZWP and 5.35% for ZWE).
Both ZWP and ZWE have the same holdings. ZWE is Canadian hedged to reduce exchange risk. ZWP is a non hedge ETF.
Review of LIFE and LIFE-B Evolve Global Healthcare Enhance Yld ETF
The strategy used: Partially covered call strategy to enhance income and protect against downturn / Global / Healthcare / Dividend
LIFE and LIFE-B are some of the best ETFs playing the healthcare sector with a focus on dividend yield. Both had an excellent performance, especially during the pandemic. Many analysts argue though, that the global healthcare sector has become overvalued. In a nutshell, it might be a prudent strategy to wait for a pullback. Overall, the long-term outlook for the industry is favorable.
LIFE.B is non-hedged. LIFE is Canadian hedged to reduce exchange risk.
Review of ZWH and ZWS BMO US High Dividend Covered Call ETF
The strategy used: Covered call strategy to enhance income and protect against downturn / US / Dividend
ZWH and ZWS invest in a portfolio of high-quality US stocks. It’s an ideal investment for prudent investors who would like exposure to US market and steady income. These funds use a covered call strategy which limits the growth potential but offers some protection in case of a market downturn.
ZWS is Canadian hedged, while ZWH is non hedged.
Review of CALL – Evolve US Banks Enhanced Yield ETF
The strategy used: Partially covered call strategy to enhance income and protect against downturn / US / Banking / Dividend
CALL invests in major US Banks and seeks primarily to provide income through dividends and call premiums. The covered call strategy limits the ability of the fund to capture the growth in the US banking industry.
CALL is non hedged
CALL-B is Canadian hedged to reduce currency exchange risk.
Review of GLCC – Horizons Enhanced Income Gold Prod ETF (previsouly HEP)
The strategy used: Covered call strategy to enhance income and protect against downturn / North America / Gold / Dividend
This fund is a great way to extract extra yield from gold miners. If you are bullish on gold stocks and income is a secondary objective, it would be better to invest directly in gold stocks. In case you are unsure where gold stocks are headed, you can hold for HEP for the income it provides.
The fund used a covered call strategy to protect against a downturn. I believe this strategy is not effective when applied to high volatility portfolios such as gold stocks.
Review of FIE – Ishares CDN Fin Monthly Income ETF
Strategy used: Canada / Banking / Dividend
FIE invests mainly in Canadian banks. This fund does not use a covered call strategy. It’s ideal if you are bullish in the Canadian banking sector. The MER is expensive considering that FIE has few holdings (mainly the six major Canadian banks).
HPF – Harvest Energy Leaders Plus Income
Harvest Energy Leaders Plus Income ETF is an equally weighted portfolio of 20 large global energy companies. The ETF is designed to provide a consistent monthly income stream with an opportunity for growth. In order to generate an enhanced monthly distribution yield, an active covered call strategy is engaged.
HPF High dividend ETF Holdings
| Security | Weight % |
| Hess Corporation | 5.1 |
| Phillips 66 | 5.1 |
| Valero Energy Corporation | 5.0 |
| Parkland Corporation | 5.0 |
| EOG Resources, Inc. | 5.0 |
| Suncor Energy Inc. | 5.0 |
| TC Energy Corporation | 4.9 |
| Pembina Pipeline Corporation | 4.9 |
| HollyFrontier Corporation | 4.9 |
| Enbridge Inc. | 4.9 |
| Equinor ASA | 4.9 |
| Exxon Mobil Corporation | 4.9 |
| ConocoPhillips | 4.9 |
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.
What’s unique about this ETF is that it uses covered calls to 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. These ETFs will tend to have a higher yield and a lower performance.
The financial sector and Energy represents 56% of the total overall sector allocation.
ZWC High dividend ETF Holdings
| Weight (%) | Name |
| 4.96% | TORONTO-DOMINION BANK |
| 4.91% | BCE INC |
| 4.91% | ROYAL BANK OF CANADA |
| 4.71% | CANADIAN IMPERIAL BANK OF COMMERCE |
| 4.61% | BANK OF NOVA SCOTIA |
| 4.24% | MANULIFE FINANCIAL CORP |
| 4.20% | TRANSCANADA CORP |
| 4.10% | ENBRIDGE INC |
| 3.81% | BANK OF MONTREAL |
| 3.77% | GREAT-WEST LIFECO INC |
ZWE and ZWP – BMO Europe High Div Covered Call
These 2 ETFs are part of the BMO Europe High Dividend Covered Call ETFs. They have 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.
Their holdings include well known and mostly large cap European companies such as (Total, Volkswagen, Nestle…etc).
Both ZWP and ZWE have the same holdings. ZWE is Canadian hedged to reduce exchange risk. ZWP is a non hedge ETF.
ZWE and ZWP high dividend ETF Holdings
| Weight (%) | Name |
| 4.18% | VOLKSWAGEN AG PFD |
| 3.99% | NESTLE SA |
| 3.99% | UNILEVER PLC |
| 3.96% | SIEMENS AG |
| 3.85% | ALLIANZ SE |
| 3.80% | RIO TINTO PLC |
| 3.77% | TOTAL SE |
| 3.74% | BASF SE |
| 3.62% | NOVO NORDISK A/S |
| 3.49% | LVMH MOET HENNESSY LOUIS VUITTON SE |
LIFE and LIFE-B – Evolve Global Healthcare Enhance Yld ETF
LIFE seeks to replicate the performance of the Solactive Global Healthcare 20 Index. This is an equally weighted index of 20 global health care companies.
LIFE ETF writes covered call options on up to 33% of the portfolio securities, at the discretion of the Manager. The level of covered call option writing may vary based on market volatility and other factors.
LIFE.B is non hedged. LIFE is Canadian hedged to reduce exchange risk.
Though LIFE ETFs offer a interesting yield, the performance was negative.
LIFE and LIFE-B high dividend ETF Holdings
| NAME | WEIGHT | COUNTRY |
| Danaher Corp | 5.18% | UNITED STATES |
| Novartis AG | 5.12% | SWITZERLAND |
| Intuitive Surgical Inc | 5.10% | UNITED STATES |
| CSL Ltd | 5.08% | AUSTRALIA |
| AstraZeneca PLC | 5.07% | BRITAIN |
| Pfizer Inc | 5.01% | UNITED STATES |
| AbbVie Inc | 5.01% | UNITED STATES |
| Medtronic PLC | 4.92% | IRELAND |
| Sanofi | 4.88% | FRANCE |
| GlaxoSmithKline PLC | 4.86% | BRITAIN |
ZWH and ZWS – BMO US High Dividend Covered Call ETF
BMO US High Dividend Covered Call 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.
What’s unique about this ETF is that it uses covered calls to 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. These ETFs will tend to have a higher yield and a lower performance.
ZWS is Canadian hedged while ZWH is non hedged.
ZWH and ZWS High dividend ETF holdings
| Weight (%) | Name |
| 4.41% | BANK OF AMERICA CORP |
| 4.32% | HOME DEPOT INC/THE |
| 4.22% | CISCO SYSTEMS INC/DELAWARE |
| 4.13% | JPMORGAN CHASE & CO |
| 4.09% | INTERNATIONAL BUSINESS MACHINES CORP |
| 4.07% | MICROSOFT CORP |
| 3.91% | ABBVIE INC |
| 3.83% | CHEVRON CORP |
| 3.75% | AT&T INC |
| 3.70% | PFIZER INC |
Holdings (ZWP) as of May 7th
| Weight (%) | Name | Bloomberg Ticker |
| 98.86% | BMO US HIGH DIVIDEND COVERED CALL ETF | ZWH |
| 1.14% | CASH | – |
CALL and CALL-B – Evolve US Banks Enhanced Yield ETF
Evolve US Banks Enhanced Yield ETF invests primarily in the equity constituents of the Solactive Equal Weight US Bank Index Canadian Dollar Hedged, while writing covered call options on up to 33% of the portfolio securities, at the discretion of the Manager. The level of covered call option writing may vary based on market volatility and other factors.
The index tracks the performance of major U.S. banks.
This ETF is offered under 2 tickers:
- CALL is non hedged
- CALL-B is Canadian hedged to reduce currency exchange risk.
CALL and CALL-B High dividend ETF Holdings
| NAME | WEIGHT |
| Ameriprise Financial Inc | 5.49% |
| US Bancorp | 5.18% |
| Bank of America Corp | 5.15% |
| Wells Fargo & Co | 5.09% |
| PNC Financial Services Group Inc/The | 5.04% |
| Citizens Financial Group Inc | 5.02% |
| Western Alliance Bancorp | 5.01% |
| KeyCorp | 4.96% |
| First Republic Bank/CA | 4.95% |
| Signature Bank/New York NY | 4.93% |
GLCC – Horizons Enhanced Income Gold Prod ETF
HEP invests in North American listed companies that are primarily exposed to gold mining and exploration. The holdings at the time of each reset are the largest and most liquid issuers in their sector.
To mitigate downside risk and generate income, HEP will generally write covered call options on 100% of the portfolio securities. The level of covered call option writing may vary based on market volatility and other factors and is at the discretion of the manager.
HEP High dividend ETF Holdings
| Security Name | Weight |
| NEWMONT CORP | 8.31% |
| OSISKO GOLD ROYALTIES LTD | 8.09% |
| PAN AMERICAN SILVER CORP | 8.06% |
| FRANCO-NEVADA CORP | 7.74% |
| ROYAL GOLD INC | 7.74% |
| ANGLOGOLD ASHANTI LTD ADR | 7.42% |
| ENDEAVOUR MINING CORP | 7.06% |
| WHEATON PRECIOUS METALS CORP | 6.78% |
| YAMANA GOLD INC | 6.61% |
| KINROSS GOLD CORP | 6.51% |
FIE – Ishares CDN Fin Mthly Income
Seeks to maximize total return and to provide a stable stream of monthly cash distributions. FIE has a high exposure to the financial sector. FIE is a Canadian dividend income ETF.
FIE ETF Holdings
| Name | Weight (%) |
| ISHARES S&P/TSX CANADIAN PREFFERED | 20.87 |
| iShs Canadian Corp Bnd Idx ETF | 10.17 |
| CANADIAN IMPERIAL BANK OF COMMERCE | 8.61 |
| ROYAL BANK OF CANADA | 8.30 |
| MANULIFE FINANCIAL CORP | 7.19 |
| TORONTO DOMINION | 7.09 |
| SUN LIFE FINANCIAL INC | 6.94 |
| NATIONAL BANK OF CANADA | 6.49 |
| POWER CORPORATION OF CANADA | 5.73 |
| IA FINANCIAL INC | 3.64 |
Disclaimer
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