Investment Q&A

Q: Retired dividend-income investor. Your answer today about an ETF with a focus on renewables hit all of my markers. I've been struggling how to address the renewables latest trend and your answer solves my dilemma (already own AQN, FTS, TRP).

Q#1 = So, if XUT has roughly 45% renewables, what % renewables does ZUT have?

Also, it appears that ZUT outperforms XUT over multiple time periods and has a slightly larger dividend. ZUT is also equal weighted while XUT is not.

Q#2 = Which would you choose, XUT vs ZUT and why? I'm leaning towards ZUT.

Q#3 = Now, throw in where we are in the market cycle. Assume you chose ZUT in question #2, what would you think of ZWU? ZWU has a covered call overlay that helps to deliver a 7.9% dividend vs ZUT of 3.5%. I know you are not keen on CC ETF's in an expanding market as they limit the upside.

Thanks for your guidance...much appreciated...Steve

Q: Good day and thank you for all your valuable information. In looking to consolidate some income positions in my portfolio I would like to bring one of these two high income earners toward a fuller position of 4-5% in my portfolio (currently ZWC at 1.1% and MFT at 1.98%). Portfolio is aimed at getting 80-20 split equity-fixed income. Can I have your thoughts on these two and any suggestion toward any other I should be considering instead. Thank you.

Q: For a balanced portfolio with the next 3-5 years in mind, what are your suggested weightings in preferreds, utilities and high yield bonds. Given low interest rates preferreds in particular seem like a place investors will go to seek higher yields with some opportunity for growth.

Q: Hello!

I am currently invested in three of these ETF's. Can you recommend other high dividend paying ETF's to complement my current allocation. Thank you!

Q: Hi 5i
"Rock Bottom" and "staying lower for longer" are the phrases being assigned to interest rates.
I hold pref shares (min rate reset) that seem to be benefiting from income seeker buying.
I also hold Canadian dividend paying stocks that have not recovered due to fears of more dividend cuts and poor economic performance ahead. (ET, FSZ, BCE, BNS, PPL, IPL, ENB.......)

With increasing emphasis now being put on very low rates, are there advantageous investments today for income with growth as investors realize they need more income and gravitate to income producers? (and high interest accounts continue to pay less and less interest)

Does a diversified Canadian ETF like ZWC (Covered Call Canadian) or ZWH (Covered Call US) make sense going forward?

Thanks
Dave

Q: I'm interested in covered calls and note that ZWU, ZWC and ZWH are all down 15-20% YTD.
For an income portfolio, they look very appealing with their 7% to 9% yield.
Would you recommend to bump up the income?
What % of an income portfolio would you recommend?
Can you rank from most to least favourite?

Q: At this time, would you recommend cover call ETFs for an buy/hold income investor? Can you recommend some cover call ETFs?
Thanks

Q: I am 72 and retired. I have been building a part of my portfolio (58.4%) for the last three years with ETFs. Current holdings are (% weight of portfolio in brackets): zwh (10.5), zwu (9.1), zwc (8.5), mft (5.9), xtr (5.3), xhy (5.2), zwe (4.7), cdz (3.2), zdh (3.2) & zre (2.9). With 24.2% cash, I plan on slowly adding to these etfs. How would you do this? The remainder of my portfolio is in dividend paying Canadian large caps.
Thanks, Jim

Q: Looking to add some tax efficient income to an otherwise well diversified portfolio. What do you think of the above mentioned ETFs? Could you suggest a couple of more?
Thank you!

Q: Hello 5i Team,
I am in the process of building an income portfolio and I would like your opinion on the above stocks. Would you start a .5 position in the current market environment? (While the markets are rising) All of the above are for very long term holds.
Do you think KEY's dividend is sustainable and do you think its assets might look attractive to a bigger player like ENB?
I like gold long term and I have .5 positions in AGI and YRI and comfortable with. I currently view Sprott as sort of a mini ETF for junior gold stocks. As in I do not have the expertise or tolerance for individual junior stocks but I would be able to get a diversified portfolio of such stocks run by proven leadership and expertise. Is this a reasonable view to have of SII? Another .5 position would bring my total gold exposure to 10% which is where I would like to keep it. Does adding SII make sense given a higher risk tolerance or does adding to AGI or YRI make more sense.
I currently have no ETF exposure and the yields on ZWC and ZWE are quite attractive and they offer excellent diversification. Are the yields sustainable? I have heard that with covered call funds in general the main drawback is that the upside is limited while the main advantage is that the downside is also limited through yield. Is this correct? Income is the main objective with these holdings but if held for 10+ years or more I would expect some capital gains to be made. Is this reasonable? Do these ETFs ever trade at significant discounts or premium? How is the income classified to tax purposes?

Thank you for the great service!

Q: Hello to the team
How reliable are the divi. on this companies there are an integral part of my retirement,generally they are less 10 years in the market and being clobbered,should' i reduce some of these position and replace them with some exposure to US. like PDI or wait as long that the divi is there,i'm 76.
Thank You

Q: Hi Peter: When I sit back and take a look at the big picture and review how my portfolio performed during COVID-19 (so far), I try to see what lessons I can learn, then turn to how to apply those lessons to make my portfolio stronger.

I am a retired, dividend-income investor. I am a huge believer in asset allocation and have designed a portfolio, in my opinion, to be reasonably well diversified, although heavy to Canada. It WAS roughly 70% equities (including 32% foreign content) and 30% fixed income (roughly 15% insured annuities, 15% Fisgard Capital...both averaging in the 5-6% pre-tax range and minor cash). My equities are mostly blue chip, dividend payers, as you can see above. The 3 mutual funds are a very minor part of my portfolio, especially Eric's Energy Fund (<2%). I also receive a company pension and CPP-OAS which, when included, drops my equities to roughly 32%.

I use various metrics to monitor my portfolio, such as P/E, P/BV, P/CF, P/S, Beta, ROE, Div growth, Payout%, technical indicators like 200 mda. I am normally a buy-and-hold investor who trims/adds around a core position.

Periodically I measure how "at risk" my portfolio is relative to the overall market. I do this by prorating my portfolio using Beta. Based on equities only, I averaged 0.68 and for my entire portfolio I averaged 0.44. So, one would think that if the overall market (TSX) was to drop 30%, then I would have thought my portfolio would drop 44% to 68% of that, being in the range of 13% (overall) to 20% (equities only).

In actual fact, my entire portfolio dropped 27% from peak to trough vs the expected 13%...over double! I understand that EVERYTHING was sold off...almost no exceptions. So what do we learn from this and what changes should we consider? Do we accept that "sxxt happens" once in a while...you can't predict every event, accept it and move on? Should we consider increasing the cash component as a buffer? Or...is there something else to be learned here?

Thanks for you help...much appreciated...Steve

Q: Hello,
I presently have a LIF and a RRIF majority is invested in zwc and zwu along with some other less then ideal stocks [interpipe,fru,hot,bpy] , have gone from 550k to 350 k in a month, expensive lesson on proper portfolio construction I guess. Would you suggest selling the covered call etfs and buy non covered call versions at this point in time ? Am I correct in thinking If the tsx returns to 17,900 again zwc and zwu will not return to previous nav due to covered call loss ? Thanks very much for Your help, great website.

Q: Retired, dividend-income investor. I currently own ZLB (RRSP, max'd out), XIT (RRSP-TFSA, max'd out), ZRE (Cash, 3/4 position, will add to over time), ZWC (Cash, close to max'd out). I also have some legacy positions in RBF1018 (RBC Cdn Equity Income-D...MER of 1.0) and CIG50217 (Sentry Cdn Income...high MER), both of which I have averaged roughly 7-8% return over the last many years, prior to this crisis. On top of the above I own AD, AQN, AW, BCE, CSH, CM, FTS, NTR, NWC, RY, TRP, WSP in various amounts to achieve my overall asset allocation targets (not to mention my fixed income portion of my portfolio.

I normally like to run a concentrated portfolio of around 20 positions, composed of +/- 6 ETF-MF and +/- 14 stocks. I have mapped out the use of my current cash (15%) into monthly repurchases over the next 6 months. My question relates to the combination of ETFs, but focusing on ZWC. I own ZWC for its high CC dividend, but recognize that the upside is potentially limited in a recovery. Also, when mapping out spending my cash, I reach an uncomfortable level of too high an allocation per individual stock. That led me to consider adding another ETF. I looked at several, and filtered them down to CDZ, XEI and XDV. I have chosen CDZ as my candidate to add. Looking under the hood at the ETF holdings, they appear to not overlap too much with my own individual stocks.

Do you like this strategy? Does it result in a significant overlap in stocks, held either individually or within the existing ETFs?

Thanks for your help...Steve

Q: Hi folks, I would like you to reco some good dividend ETFs in the Candian space that you think are potentially a good buy for now. By 'good', I meant the company should have solid fundamentals, and the price should be low so the yield is high. I do not expect the US tech to boom forever, I would rather reap my 7 to 8% percent and hope it last forever. Thanks :) Tony

Q: Retired dividend-income investor. I currently own ZLB (in RRSP, max'd out, love it) ZRE (Cash account, purchase for LT hold-distributions, plan to add to it over time) and ZWC (Cash account, purchased for LT hold-dividends).

I have a sizeable capital loss in ZWC....2 choices. #1 = Keep it, top it up over the next several months. #2 = Sell it, save the capital losses for future years (don't need them for 2020) and replace with either CDZ or XDV. I flushed XDV right away due to the very skewed asset allocation (to financials & utilities).

So that left the comparison between ZWC and CDZ. Their metrics are, for the most part, similar (beta, P/E, P/CF, ROE, MER).

ZWC is down 39% YTD, pays a current yield of 11%, has a reasonable asset allocation (the 22% energy allocation initially may seem high but might be good for the eventual rebound). However, I don't have the knowledge on how the Covered Call part of ZWC may impact the comparison with CDZ.

CDZ is down 43% YTD, pays a current yield of 6%, but has a slightly more diverse asset allocation and has performed better than ZWC over a 3 year period, but has a higher Beta.

I entered the comparison exercise believing I would conclude to sell ZWC. Now however I might just periodically top it up. Your thoughts please?

Thanks....Steve

Q: Your suggestion to not have covered calls make sense, however can you suggest ETF's to replace the 3 I have?
Also you say this is a good time to buy dividend stocks, can you please suggest some good ones.

Q: Retired, dividend-income investor. I own ZWC and ZRE and am thinking of topping them up. Their share prices have obviously taken a hit and buying more at these lower prices with magnified dividend yields "appears" attractive.

What I am wondering is related to the continuation of the dividend. By my numbers, ZRE is yielding 7.4% and ZWC 10.5% (annual dividend divided by current stock price). Am I correct that the yields are supported by not only the underlying security, but the covered call option? What happens if the underlying security reduces their dividend? I guess my real question is...is there a risk of the ETF dividend being cut?

Thanks...Steve

Q: Hello,

I am already knee deep in BMO covered call ETF's and down 20% - 30%.

I can dollar cost down and buy more , take the high yield and wait for price to rise
OR
Sell and move on (to what?)

I believe 5i is wary about buying covered call options during a crash due to limited upside potential.

What could I do at this stage to get income of an equivalent yield and possible upside?

Cheers

Q: Hi, I'm a retired, dividend-income investor. I took some profits and losses (to wipe out potential capital gains) over the last 5 weeks and am now planning on reinvesting the cash to top up some of my existing equities, up to my desired asset allocation. I want to leg in, in probably 3 waves over the next couple (?) of months, to top up ZWC, AD, AQN, AW, BNS, BCE, LNF, NWC, RY, TRP, WSP.

Can you please indicate which of the above equities you would allocate into which wave (in other words, does it look like the equity is "ready" for an investment OR should I continue to wait for a while)...or not at all (not worth any further investment).

Thanks for your help...Steve