BMO Covered Call Utilities ETF T.ZWU

Alternate Symbol(s): BMMVF

The ETF seeks to provide exposure to the performance of a portfolio of utilities companies to generate income and to provide long-term capital appreciation. To achieve investment objective the ETF will primarily invest in and hold the equity securities of Canadian companies widely recognized as utilities companies, which may also include telecommunication and pipeline companies, and use derivative instruments to hedge U.S. dollar securities back to the Canadian dollar. Depending on market volatility and other factors, the ETF will write covered call options on these securities. Under such call options, the ETF will sell to the buyer of the option, for a premium, either a right to buy the security from the ETF at an exercise price or, if the option is cash settled, the right to a payment from the ETF equal to the difference between the value of the security and the exercise price.

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BMO Covered Call Utilities ETF > Take a Look at the Return Of Cpaital Amount for 2022.

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Comment by DeanEdmontonon May 17, 2023 10:06am

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Post# 35452241

RE:RE:Take a Look at the Return Of Cpaital Amount for 2022.

Analog Guy - Don't know if this helps but here is a high level explanation of ROC.

The Return of Capital lowers your average cost base on the share, and this is calculated in Dec and applied by most brokerages in April or May. You should see the adjustment in the average cost per share reflected in your account. So long term it means you effectively increase the potential capital gains on your holdings.

If you are earning enough dividends outside a registered plan to take full advantage of the 50,000 near zero tax treatment on dividends, then the increased capital gains is not all bad as you only pay tax on 50% of the gain, and the return of capital is not taxable in the years you receive it. You do however have to look at whether you are holding this fund in a registered account like a LIF that is paying out a monthly, quarterly or annual payment, or is it in an RSP that the dividend is being reinvested, TFSA has considerations as well, or is it outside a registered plan and are you spending the dividend or reinvesting it.

These considerations apply to all funds using covered call strategies to increase yield.

ANALOG GUY wrote: I've always thought Covered Call ETFS are a Yield Enhancer not a Capital Enhancer. Return Of Capital (ROC) is something that I've seen smart people explain and I'm still not sure I understand it. There is Good ROC and Bad ROC.

anyway, when markets are in recession coming mode, I prefer Covered Call ETFs

when the Bull returns I will switch out of them

i also own things like SIA, PPL, ENB ..... dividends are the lowest taxed income (better than capital gains) with the Federal/Provincial tax credits