Investing · ETF deep dive
ZWU BMO Covered Call Utilities ETF
Defensive income squared: rate-sensitive utilities, telecoms and pipelines — already high payers — with the call overlay lifting the distribution to 7.09%.
Best for: Income investors who want their covered-call sleeve in the defensive, regulated corner of the market
Pros
- Highest yield of BMO’s big three covered-call funds (7.09%) from sectors that already pay well
- US holdings hedged back to the Canadian dollar — no FX noise in a CAD income stream
- Defensive underlying book: regulated utilities and contracted pipelines, not cyclical earnings
Cons
- Utilities and telecoms are bond proxies — rising rates hit the underlying prices directly
- Canadian telecom has been a value trap in recent years; the screen doesn’t avoid it
- 0.71% MER, and the written half gives up recovery upside after exactly the kind of drawdown these sectors just had
What's inside ZWU
| Underlying fund | Weight |
|---|---|
| TC EnergyTRP | 5.5% |
| EnbridgeENB | 5.3% |
| FortisFTS | 5.1% |
| BMO Equal Weight Utilities ETFZUT | 5.1% |
| Hydro OneH | 5.0% |
| Pembina PipelinePPL | 4.9% |
| Verizon CommunicationsVZ | 4.7% |
| Williams CompaniesWMB | 4.5% |
| BCEBCE | 4.4% |
| Rogers CommunicationsRCI.B | 4.3% |
Utilities 54.5% · Energy (pipelines) 23.9% · communication services the remainder — North American, US names CAD-hedged (Provider sector table, Jun 9, 2026) · holdings as of June 9, 2026 (50 holdings)
The deep dive
ZWU applies the standard BMO overlay — out-of-the-money calls on at least 50% of the portfolio, dynamically managed — to the market’s most income-native sectors: utilities, telecommunications and pipelines, on both sides of the border, with the US currency exposure hedged back to CAD. Because the underlying stocks already yield more than the broad market, the premium stacks on a higher base: 7.09% annualized, paid monthly at $0.07/unit, steady at that rate through the first five months of 2026.
The risk to understand is duration in equity clothing. Utilities, telecoms and pipelines trade like long bonds — they fell with rates in 2022 and recover when rates ease. A covered-call wrapper is awkward at exactly that turn: the written half of the book gets called away into the recovery. If you hold ZWU, hold it for the income through the cycle, not as a rate-cut trade — for dated money, compare what a GIC pays with zero price risk.
The rest of the field
The rest of the field, one line each:
- ZWC — the broad-Canada book — 72 dividend payers at 6.48%
- ZWB — the $4.4B Canadian-banks fund, running since 2011
- 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 ZWU hold?
ZWU holds Utilities, telecoms and pipelines (CA + US, hedged) with covered calls on 50%+ of the book — led by TC Energy (TRP) at 5.5%, Enbridge (ENB) at 5.3%, Fortis (FTS) at 5.1% (as of June 9, 2026 (50 holdings)). Sector mix: Utilities 54.5% · Energy (pipelines) 23.9% · communication services the remainder — North American, US names CAD-hedged (provider sector 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); us dollar exposure hedged to cad.
What does ZWU cost?
Currently 0.65% management fee; 0.71% 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 ZWU's distribution yield the same as a dividend yield?
No — and this is the single most important thing to understand about covered-call funds. ZWU'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
A coherent fund for a specific job: maximum defensive income, hedged, monthly. Accept that you own bond-proxy sectors with the rebound partly sold off, and size it as an income sleeve — not a core.
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.