Investing · ETF deep dive
ZWC BMO Canadian High Dividend Covered Call ETF
The broadest covered-call fund in the BMO suite: 72 Canadian dividend payers screened for dividend growth and payout health, with out-of-the-money calls written over at least half the book.
Best for: Income-now investors who want covered-call yield without single-sector concentration
Pros
- 6.48% annualized distribution, paid monthly — and recently raised ($0.105 to $0.12/unit, May 2026)
- 72 holdings across sectors — the diversified pick in a category full of 10-stock funds
- BMO writes out-of-the-money on at least 50% of the portfolio, retaining more upside than at-the-money strategies
Cons
- 0.72% MER — roughly six times VDY’s 0.22% for overlapping large-cap exposure
- The written half of the book has capped upside in rallies — that’s the price of the premium
- The 6.48% is dividends plus option premium, not a dividend yield — don’t expect dividend-growth math from it
What's inside ZWC
| Underlying fund | Weight |
|---|---|
| Royal Bank of CanadaRY | 7.6% |
| Toronto-Dominion BankTD | 6.3% |
| CIBCCM | 5.8% |
| Bank of Nova ScotiaBNS | 5.5% |
| Canadian Natural ResourcesCNQ | 5.4% |
Canadian high-dividend large caps — banks, energy and pipelines dominate the top of the book (Top-holdings table, Jun 9, 2026) · holdings as of June 9, 2026 (72 holdings)
The deep dive
ZWC starts where a plain dividend fund starts — a rules-based screen of Canadian payers weighing dividend growth, yield, payout ratio and liquidity — and then adds the overlay: BMO dynamically writes covered calls, out-of-the-money, on at least 50% of the portfolio (the firm’s stated approach across its entire covered-call suite, with expiries generally one to two months out). The premium income is why ZWC distributes 6.48% annualized when the comparable plain fund, VDY, yields about 4.5% — and the capped upside on the written half is what pays for the difference.
Two honest framings. First, cost: 0.72% MER is the toll for the options program — BMO charges 0.22% (XDIV charges 0.11%) for unwritten versions of similar books, so you’re paying ~0.5% a year for the overlay itself; the MER calculator shows what that compounds into. Second, tax: BMO states distributions “may be based on income, dividends, return of capital, and option premiums, as applicable,” and that returns of capital reduce your adjusted cost base. The distribution’s character matters at tax time in a non-registered account — check the fund’s annual tax breakdown rather than assuming it’s all eligible dividends.
The rest of the field
The rest of the field, one line each:
- ZWB — the $4.4B Canadian-banks fund, running since 2011
- ZWU — utilities, telecoms and pipelines at 7.09%, US sleeve CAD-hedged
- HMAX — Canadian financials yield-maximized to 11.71%
- UMAX — utilities-plus (rails, pipes, telecoms) at 13.40%
- HTA — global tech with a 33% write cap, 8.85%
- HHL — US healthcare income at 10.24%, since 2014
Frequently asked questions
What does ZWC hold?
ZWC holds 72 Canadian high-dividend stocks with covered calls on 50%+ of the book — led by Royal Bank of Canada (RY) at 7.6%, Toronto-Dominion Bank (TD) at 6.3%, CIBC (CM) at 5.8% (as of June 9, 2026 (72 holdings)). Sector mix: Canadian high-dividend large caps — banks, energy and pipelines dominate the top of the book (top-holdings table, jun 9, 2026). Weights drift between rebalances — dynamic covered calls — out-of-the-money, written on at least 50% of the portfolio (bmo suite-wide), expiries generally 1–2 months.
What does ZWC cost?
Currently 0.65% management fee; 0.72% published MER (page as of Jun 9, 2026). Covered-call ETFs are the most expensive mainstream category in Canada — the major funds run 0.71%–0.99% MER, versus 0.11%–0.66% for plain dividend ETFs, because you're paying for an active options program. See the full comparison, and what a ~0.8% fee compounds into with the MER calculator.
Is ZWC's distribution yield the same as a dividend yield?
No — and this is the single most important thing to understand about covered-call funds. ZWC's distribution is the underlying stocks' dividends plus option premium, the cash received for selling away part of the portfolio's upside. The yield is real monthly cash flow, but it is not "income the businesses earned" — part of it is the market paying you today for growth you won't receive later. Providers state the trade plainly (Hamilton: "writing options caps the upside growth potential of the portfolio that is covered, in exchange for a higher yield"). Tax-wise, providers state that option premiums are generally treated initially as capital gains, and distributions often include return of capital, which reduces your adjusted cost base — check the fund's annual tax-character breakdown and consider professional advice for large non-registered positions. The covered-call guide walks the full mechanics.
The bottom line
The sane default if you want covered-call income at all: diversified where the yield-maximizers are concentrated, out-of-the-money where they are at-the-money. If you don’t need the extra ~2% of yield, VDY keeps the upside and charges a third as much.
This page is for educational purposes only and is not investment advice. Fund facts were verified at BMO ETFs's published fact sheets and product pages on June 10, 2026; holdings and weights are point-in-time and drift between rebalances; published MERs may lag recent fee changes (page as of Jun 9, 2026). We deliberately do not compare or project returns. Read the fund facts document before buying. See our methodology.