Highest dividend ETF in Canada (Top 11 paying over 6%)

In this post, we will be going over 11 high dividend yields ETFs. All the ETFs selected pay over 6% in dividend yield! We will start by comparing the performance and MER. Then, we will discuss how to select the best ETF among the ones selected. for each ETF, we will provide all pertinent financial data.

Dividend yield and Beta comparison

NameDiv yieldMER
HPF – Harvest Energy
Leaders Plus Income
6.791.71
ZWC – BMO CDN High
Div Covered Call
6.950.72
ZWE – BMO Europe High
Div CC CAD Hedge
6.720.71
ZWP – BMO Europe
High Div Cov Call
6.640.71
LIFE – Evolve Global Healthcare
Enhance Yld
6.540.68
ZWH – BMO US High Dividend
Covered Call
5.900.71
CALL – Evolve US Banks
Enhanced Yield
6.990.69
LIFE-B – Evolve Global
Healthcare Enhance Yld Unheg
6.020.68
HEP – Horizons Enhanced
Income Gold Prod
6.620.81
ZWS – BMO US High Dividend
Covered Call Hedged to CAD
5.900.71
FIE – Ishares CDN Fin Mthly Income5.940.89
Source: Barchart.com as of September 13th

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Comparison performance and MER

Name6M3yrs5Yrs
HPF2.24-13.86-5.66
ZWC15.556.07n-a
ZWE 15.485.357.33
ZWP12.734.51n-a
LIFE20.4414.21n-a
ZWH 15.589.029.10
CALL 10.324.60n-a
LIFE-B 18.5513.66n-a
HEP 8.0219.675.61
ZWS16.408.85n-a
FIE 15.859.9711.05
Source: TD Market research as of August 31st, MER: is the management expense ratio

Comments and analysis

Review of HPF Harvest Energy Leaders Plus Income ETF


The strategy used: Partially covered call strategy to enhance income and protect against downturn / Energy / Dividend

HPF has a poor historical performance even with the covered call strategy in place. The dividends are not safe as some big players in the energy industry are expected to cut dividends. If you are bullish on energy stocks, it would be wise to hold them directly. With HPF you are swapping income for growth.

Review of ZWC BMO CDN High Div Covered Call ETF


The strategy used: Covered call strategy to enhance income and protect against downturn / Canada / Dividend

ZWC is an excellent option for conservative investors looking for a steady income and low volatility. The covered call strategy increases the yield but limits long-term growth. So it’s essential to keep this in mind.

ZWC is tax-efficient because the dividends are all coming from Canadian companies.

Review of ZWE and ZWP – BMO Europe High Div CC CAD ETF


The strategy used: Covered call strategy to enhance income and protect against downturn / Europe / Dividend

Both ZWE and ZWP invest in high-quality European stocks such as Volkswagen, Nestlé…etc. They have a covered call strategy in place to protect against downturns and enhance yield. The yield is attractive, but the long-term performance is low (3 years: 4.51% annualized for ZWP and 5.35% for ZWE).

Both ZWP and ZWE have the same holdings. ZWE is Canadian hedged to reduce exchange risk. ZWP is a non hedge ETF.

Review of LIFE and LIFE-B Evolve Global Healthcare Enhance Yld ETF


The strategy used: Partially covered call strategy to enhance income and protect against downturn / Global / Healthcare / Dividend

LIFE and LIFE-B are some of the best ETFs playing the healthcare sector with a focus on dividend yield. Both had an excellent performance, especially during the pandemic. Many analysts argue though, that the global healthcare sector has become overvalued. In a nutshell, it might be a prudent strategy to wait for a pullback. Overall, the long-term outlook for the industry is favorable.

LIFE.B is non-hedged. LIFE is Canadian hedged to reduce exchange risk.

Review of ZWH and ZWS BMO US High Dividend Covered Call ETF


The strategy used: Covered call strategy to enhance income and protect against downturn / US / Dividend

ZWH and ZWS invest in a portfolio of high-quality US stocks. It’s an ideal investment for prudent investors who would like exposure to US market and steady income. These funds use a covered call strategy which limits the growth potential but offers some protection in case of a market downturn.

ZWS is Canadian hedged, while ZWH is non hedged.

Review of CALL – Evolve US Banks Enhanced Yield ETF


The strategy used: Partially covered call strategy to enhance income and protect against downturn / US / Banking / Dividend

CALL invests in major US Banks and seeks primarily to provide income through dividends and call premiums. The covered call strategy limits the ability of the fund to capture the growth in the US banking industry.

CALL is non hedged
CALL-B is Canadian hedged to reduce currency exchange risk.


Review of HEP – Horizons Enhanced Income Gold Prod ETF


The strategy used: Covered call strategy to enhance income and protect against downturn / North America / Gold / Dividend

This fund is a great way to extract extra yield from gold miners. If you are bullish on gold stocks and income is a secondary objective, it would be better to invest directly in gold stocks. In case you are unsure where gold stocks are headed, you can hold for HEP for the income it provides.

The fund used a covered call strategy to protect against a downturn. I believe this strategy is not effective when applied to high volatility portfolios such as gold stocks.

Review of FIE – Ishares CDN Fin Monthly Income ETF


Strategy used: Canada / Banking / Dividend

FIE invests mainly in Canadian banks. This fund does not use a covered call strategy. It’s ideal if you are bullish in the Canadian banking sector. The MER is expensive considering that FIE has few holdings (mainly the six major Canadian banks).

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How to analyze a high dividend ETF

Total return: Though the focus here is on the dividend yield, you have keep in mind the total return. The profit or loss we make on any investment is a combination of both dividend income and capital gain or loss. Looking at the long term performance of the fund is crucial. An ETF that provides an acceptable capital appreciation with a high dividend yield is preferable.

Diversification: A diversified ETF is always a safer option. Some high yield ETFs are sector specific (Financials, Energy or Gold). The ones focused on Energy and Gold have had a very poor long term performance and carry high volatility risk.

Covered call ETFs: Understanding how these high dividend ETFs achieve such a high yield is also important. Most of the ETFs below use covered call options. This strategy is great as it enables the fund to collect earned options premiums which are added to the dividends paid out to the investors. On the flip side, this strategy limits the upside potential of the stocks held by the fund.  In a nutshell, a covered call ETF will outperform its competitors in corrections and underperform in a market rally. Personally, I find this strategy to be well suited when used on a low volatility basket of securities. It’s quite challenging to time the market when using this strategy on gold and energy stocks or any other high volatility basket of securities.

Volume and liquidity of the ETF. The higher the asset under management, the lower the trading costs of the ETF (difference between the bid and ask price).

Management expense ratio.

HPF – Harvest Energy Leaders Plus Income

Harvest Energy Leaders Plus Income ETF is an equally weighted portfolio of 20 large global energy companies. The ETF is designed to provide a consistent monthly income stream with an opportunity for growth. In order to generate an enhanced monthly distribution yield, an active covered call strategy is engaged.

HPF High dividend ETF Holdings

SecurityWeight %
Hess Corporation5.1
Phillips 665.1
Valero Energy Corporation5.0
Parkland Corporation5.0
EOG Resources, Inc.5.0
Suncor Energy Inc.5.0
TC Energy Corporation4.9
Pembina Pipeline Corporation4.9
HollyFrontier Corporation4.9
Enbridge Inc.4.9
Equinor ASA4.9
Exxon Mobil Corporation4.9
ConocoPhillips4.9
as of April 30th

ZWC – BMO CDN High Div Covered Call

The BMO Canadian High Dividend Covered Call ETF (ZWC)  has been designed to provide exposure to a dividend focused portfolio, while earning call option premiums. The underlying portfolio is yield-weighted and broadly diversified across sectors.

The fund selection methodology uses 4 factors: – Liquidity; – Dividend growth rate; – Yield and payout ratio.

What’s unique about this ETF is that it uses covered calls to protect against downside risk. This being said, the covered call strategy provides limited downside protection. Also, when you write a covered call, you give up some of the stock’s potential gains. These ETFs will tend to have a higher yield and a lower performance.

The financial sector and Energy represents 56% of the total overall sector allocation.

ZWC High dividend ETF Holdings

Weight (%)Name
4.96%TORONTO-DOMINION BANK
4.91%BCE INC
4.91%ROYAL BANK OF CANADA
4.71%CANADIAN IMPERIAL
BANK OF COMMERCE
4.61%BANK OF NOVA SCOTIA
4.24%MANULIFE FINANCIAL CORP
4.20%TRANSCANADA CORP
4.10%ENBRIDGE INC
3.81%BANK OF MONTREAL
3.77%GREAT-WEST LIFECO INC
as of May 7th

ZWE and ZWP – BMO Europe High Div Covered Call

These 2 ETFs are part of the BMO Europe High Dividend Covered Call ETFs. They have been designed to provide exposure to a dividend focused portfolio. These dividend paying companies are selected based on:

  • dividend growth rate,
  • yield,
  • payout ratio and liquidity.

Their holdings include well known and mostly large cap European companies such as (Total, Volkswagen, Nestle…etc).

Both ZWP and ZWE have the same holdings. ZWE is Canadian hedged to reduce exchange risk. ZWP is a non hedge ETF.

ZWE and ZWP high dividend ETF Holdings

Weight (%)Name
4.18%VOLKSWAGEN AG PFD
3.99%NESTLE SA
3.99%UNILEVER PLC
3.96%SIEMENS AG
3.85%ALLIANZ SE
3.80%RIO TINTO PLC
3.77%TOTAL SE
3.74%BASF SE
3.62%NOVO NORDISK A/S
3.49%LVMH MOET HENNESSY
LOUIS VUITTON SE
as of May 7th

LIFE and LIFE-B – Evolve Global Healthcare Enhance Yld ETF

LIFE seeks to replicate the performance of the Solactive Global Healthcare 20 Index.  This is an equally weighted index of 20 global health care companies.

LIFE ETF writes covered call options on up to 33% of the portfolio securities, at the discretion of the Manager. The level of covered call option writing may vary based on market volatility and other factors.

LIFE.B is non hedged. LIFE is Canadian hedged to reduce exchange risk.

Though LIFE ETFs offer a interesting yield, the performance was negative.

LIFE and LIFE-B high dividend ETF Holdings

NAMEWEIGHTCOUNTRY
Danaher Corp5.18%UNITED STATES
Novartis AG5.12%SWITZERLAND
Intuitive Surgical Inc5.10%UNITED STATES
CSL Ltd5.08%AUSTRALIA
AstraZeneca PLC5.07%BRITAIN
Pfizer Inc5.01%UNITED STATES
AbbVie Inc5.01%UNITED STATES
Medtronic PLC4.92%IRELAND
Sanofi4.88%FRANCE
GlaxoSmithKline PLC4.86%BRITAIN
As of May 6th

ZWH and ZWS – BMO US High Dividend Covered Call ETF

BMO US High Dividend Covered Call has been designed to provide exposure to a dividend focused portfolio, while earning call option premiums. The underlying portfolio is yield-weighted and broadly diversified across sectors. The Fund utilizes a rules-based methodology that considers the following criteria:

dividend growth rate,

yield,

payout ratio,

liquidity.

What’s unique about this ETF is that it uses covered calls to protect against downside risk. This being said, the covered call strategy provides limited downside protection. Also, when you write a covered call, you give up some of the stock’s potential gains. These ETFs will tend to have a higher yield and a lower performance.

ZWS is Canadian hedged while ZWH is non hedged.

ZWH and ZWS High dividend ETF holdings

Weight (%)Name
4.41%BANK OF AMERICA CORP
4.32%HOME DEPOT INC/THE
4.22%CISCO SYSTEMS
INC/DELAWARE
4.13%JPMORGAN CHASE & CO
4.09%INTERNATIONAL BUSINESS
MACHINES CORP
4.07%MICROSOFT CORP
3.91%ABBVIE INC
3.83%CHEVRON CORP
3.75%AT&T INC
3.70%PFIZER INC
As of May 7th

Holdings (ZWP) as of May 7th

Weight (%)NameBloomberg Ticker
98.86%BMO US HIGH DIVIDEND COVERED CALL ETFZWH
1.14%CASH

CALL and CALL-B – Evolve US Banks Enhanced Yield ETF

Evolve US Banks Enhanced Yield ETF invests primarily in the equity constituents of the Solactive Equal Weight US Bank Index Canadian Dollar Hedged, while writing covered call options on up to 33% of the portfolio securities, at the discretion of the Manager. The level of covered call option writing may vary based on market volatility and other factors.

The index tracks the performance of major U.S. banks. 

This ETF is offered under 2 tickers:

  • CALL is non hedged
  • CALL-B is Canadian hedged to reduce currency exchange risk.

CALL and CALL-B High dividend ETF Holdings

NAMEWEIGHT
Ameriprise Financial Inc5.49%
US Bancorp5.18%
Bank of America Corp5.15%
Wells Fargo & Co5.09%
PNC Financial Services Group Inc/The5.04%
Citizens Financial Group Inc5.02%
Western Alliance Bancorp5.01%
KeyCorp4.96%
First Republic Bank/CA4.95%
Signature Bank/New York NY4.93%
as of May 7th

HEP – Horizons Enhanced Income Gold Prod ETF

HEP invests in North American listed companies that are primarily exposed to gold mining and exploration. The holdings at the time of each reset are the largest and most liquid issuers in their sector.

To mitigate downside risk and generate income, HEP will generally write covered call options on 100% of the portfolio securities. The level of covered call option writing may vary based on market volatility and other factors and is at the discretion of the manager.

HEP High dividend ETF Holdings

Security NameWeight
NEWMONT CORP8.31%
OSISKO GOLD ROYALTIES LTD8.09%
PAN AMERICAN SILVER CORP8.06%
FRANCO-NEVADA CORP7.74%
ROYAL GOLD INC7.74%
ANGLOGOLD ASHANTI LTD ADR7.42%
ENDEAVOUR MINING CORP7.06%
WHEATON PRECIOUS METALS CORP6.78%
YAMANA GOLD INC6.61%
KINROSS GOLD CORP6.51%
as of March 31st

FIE – Ishares CDN Fin Mthly Income

Seeks to maximize total return and to provide a stable stream of monthly cash distributions. FIE has a high exposure to the financial sector. FIE is a Canadian dividend income ETF.

FIE ETF Holdings

NameWeight (%)
ISHARES S&P/TSX CANADIAN PREFFERED20.87
iShs Canadian Corp Bnd Idx ETF10.17
CANADIAN IMPERIAL BANK OF COMMERCE8.61
ROYAL BANK OF CANADA8.30
MANULIFE FINANCIAL CORP7.19
TORONTO DOMINION7.09
SUN LIFE FINANCIAL INC6.94
NATIONAL BANK OF CANADA6.49
POWER CORPORATION OF CANADA5.73
IA FINANCIAL INC3.64

Disclaimer

The data on this website is for your information only. It does not constitute investment advice, or advice on tax or legal matters. Any information provided on this website does not constitute investment advice or investment recommendation nor does it constitute an offer to buy or sell or a solicitation of an offer to buy or sell shares or units in any of the investment funds or other financial instruments described on this website. Should you have any doubts about the meaning of the information provided herein, please contact your financial advisor or any other independent professional advisor.