Q: I hold ZWU ( significantly),in my RRSP +my non registered account,since my belief was that 1) utilities offer stable yields+ are quite essential even in a recession 2) call options from BMO are made for 50% max of portfolio, so ZWU could also benefit from some growth( in theory ..).But in fact,ZWU share price is in a constant downtrend since the last 10 yrs (17 $ in 2013,10$ now).The dividend is for more than 50% ROC, the rest being mostly eligible dividend.Do the clear fiscal advantage+ the 8 % yield compensate for the capital reduction over those 10 years ?
5i Research Answer:
With the ROC component, the after-tax yield compares very well to alternatives, but it is hard to say whether it fully compensates, as investors have different tax brackets. If we look shorter term, its five year return is better, at 3.1%. But over ten years, it is down 26%, but with distributions 10-year net is 4.08%. Considering the very weak performance of the last year as interest rates spiked, we would still consider this 'OK' all things considered.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in ZWU.