Investment objective
The ZWB ETF 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.
What’s a covered call ETF?
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.
ZWB is an excellent option for conservative investors looking for a steady income, moderate volatility and exposure to the Canadian banking sector. It’s tax-efficient because the dividends are all coming from Canadian banks.
Please consult our recent post comparing ZWB with other popular High Dividend ETFs in Canada.
- HDIV ETF review: Hamilton Enhanced Multi-Sector Covered Call
- 8 Best Covered Call ETF Canada – High dividend yield
Historical performance
| ETF | Div Yld | |
|---|---|---|
| ZWB | 6.79% |
Historical performance updated daily
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ZWB MER
| ETF | MER* % |
| ZWB – BMO Covered Call Canadian Banks | 0.71 |
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ZWB Stock Profile
Updated daily
ZWB Stock 52 weeks high and low
Updated daily
ZWB vs HMAX ETF
Strategy
The ZWB ETF from BMO sells out-of-the-money (OTM) call options on 50% of the stocks. The OTM strategy caps the return of the written positions at the option strike price until the option expires. Generally, for BMO ETFs, option expiries are 1 to 2 months.
| % potfolio | Option strategy | Divdend Yield | |
| ZWB | 50% | OTM | 6-7% |
| HMAX | 50% | ATM | 13%* |
Covered call strategy – HMAX vs ZWB; *13% is the target yield
Portfolio allocation
| Big Can Banks | Insurance | Asset Management | |
| HMAX | 76.4% | 14.9% | 10% |
| ZWB | 100% | – | – |
How to choose a good dividend ETF
– Total return: Though the focus here is on the dividend yield, you have to keep in mind the total return. The profit or loss we make on any investment combines both dividend income and capital gain or loss. Looking at the long-term performance of the fund is crucial. An ETF that provides a good capital appreciation with a high dividend yield is preferable.
–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 an inferior long-term performance and carry high volatility risk.
–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).
ZWB Dividend history
| Distribution Period | Ex-Div Date | Record Date | Pay Date | Cash Distrib | Total Distrib |
|---|---|---|---|---|---|
| January 2023 | January 27, 2023 | January 30, 2023 | February 02, 2023 | 0.120000 | 0.120000 |
| February 2023 | February 24, 2023 | February 27, 2023 | March 02, 2023 | 0.120000 | 0.120000 |
| March 2023 | March 29, 2023 | March 30, 2023 | April 04, 2023 | 0.120000 | 0.120000 |
| April 2023 | April 26, 2023 | April 27, 2023 | May 02, 2023 | – | – |
| May 2023 | May 30, 2023 | May 31, 2023 | June 05, 2023 | – | – |
ZWB ETF Holdings
| Name | Weight |
| BMO Equal Weight Banks ETF | 27.2% |
| Bank of Montreal | 12.9% |
| Canadian Imperial Bank of Commerce | 12.7% |
| Royal Bank of Canada | 12.1% |
| National Bank of Canada | 11.9% |
| The Toronto-Dominion Bank | 11.9% |
| Bank of Nova Scotia | 11.4% |
Consult issuers’ website for up-to-date data