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  5. ZWC: I am at a point in my life where I am looking to my investments more for income than growth. [BMO Canadian High Dividend Covered Call ETF]
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Q: I am at a point in my life where I am looking to my investments more for income than growth. My question concerns how you might incorporate a strategy that are includes "dividend" stocks that pay a low yield. eg HD, TRI, CN etc. Assuming you wish to obtain an overall yield of 4% - 5% from your portfolio (in order to satisfy RRIF requirements while maintaining some growth) I would think it best not to load up only on high yield stocks and continue maintain a balanced portfolio. To achieve the necessary income should one invest in low dividend payers and sell a portion of the low yield dividend payers annually in order to achieve the be needed income; go a bit overweight on high yield equities in order to juice the income; or just forget about balancing the portfolio?

Any thought you have would be greatly welcomed.

Appreciate the insight.

Paul F.
Asked by Paul on September 14, 2023
5i Research Answer:

Incorporating lower-yield dividend stocks into a portfolio to obtain an overall yield of 4% to 5% would also require the inclusion of high-yield stocks or funds. An investor can look at several of the low-yield (higher growth) names in our income model portfolio, and supplement these names with high-yield ETFs like HMAX (15.5% yield), ZWB (7.7% yield), FLI (7.8% yield), and ZWC (~8.0% yield).

Adding names such as above can help bring up a portfolio's average yield and provide necessary monthly income. Alternatively, an investor can look for a more balanced approach, such as modeling after our income model portfolio which aims to generate a 4% to 5% annual yield. Since most of the stocks will pay a quarterly distribution, selling certain names on a monthly basis can help to provide monthly income, and the excess yield throughout the year can be re-deployed back into those names.

Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in ZWB.

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