Topic: How To Invest

Q: Pat, the bulk of my investments are in North America. I am looking at Europe and thought that an ETF holding solid blue chips would be best for me. As I also require income, I came across ZWP, which pays a very good dividend and holds high-quality companies. Do you think that this would be a good ETF at this time? Thanks.

Article Excerpt

A: BMO Europe High Dividend Covered Call ETF, $16.40, symbol ZWP on Toronto (Units outstanding: 63.6 million; Market cap: $1.0 billion; www.bmo.com/gam), invests in a dividend-focused portfolio of European stocks. The fund started up in March 2018. Its MER is a relatively high 0.71%. Its top holdings include the following: BASF SE, Zurich Insurance Group, Rio Tinto plc, Swiss Re AG, Allianz SE, Deutsche Post AG, Enel SA, Swisscom AG, Total SE and ABB Ltd. BMO Europe High Dividend Covered Call ETF yields a high 7.4%. However, the dividend income that the fund receives from its own portfolio is insufficient to cover its distribution to its unitholders. To make up the difference, it has to make a profit on trading its portfolio. The ETF 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 incurs a lot of brokerage commissions, which eat away at the fund’s…