BMO Global High Dividend Covered Call ETF: A Steady Hand in Volatile Markets

Investors seeking income in today's uncertain economic climate face a dual challenge: generating consistent yield while shielding portfolios from market turbulence. Enter the BMO Global High Dividend Covered Call ETF (ZWG:CA), a vehicle that combines a robust monthly dividend with a tactical covered call strategy to navigate volatility. Let's dissect how ZWG positions itself as a compelling option for income-focused investors.

The Dividend Anchor: CAD 0.175 Monthly, Yielding 6.79%

ZWG's cornerstone is its monthly dividend of CAD 0.175 per unit, translating to an annualized yield of 6.79% as of mid-2025. This consistency is critical in an era where bond yields remain depressed and equity dividends face pressure. The ETF has maintained this payout since at least December 2024, signaling a sustainable income stream for retirees or income hunters.

But dividends alone don't tell the full story. ZWG's covered call strategy amplifies returns while adding a layer of risk mitigation.

Covered Calls: Income Plus Downside Defense

The ETF employs a covered call strategy, which involves writing call options on its portfolio of global high-dividend equities. This generates premium income upfront, boosting the overall yield. However, it also caps the ETF's upside potential if the underlying stocks surge—a trade-off worth noting.

The benefit? In volatile markets, the premiums collected act as a buffer against price declines. If the market drops, the premium income offsets losses. This “insurance” is particularly valuable in 2025, as central banks navigate rate hikes and geopolitical risks linger.

Global Diversification: Spreading Risk Across Borders

ZWG's portfolio spans global equities, with a focus on companies with strong dividend histories. This diversification mitigates region-specific risks—whether it's a slowdown in the U.S., a eurozone recession, or emerging markets volatility. The ETF's exposure to 30+ tickers (as per its strategy framework) further reduces concentration risk, a key advantage over single-country or sector-focused ETFs.

BMO's Expertise: A Trustworthy Steward

Managed by BMO Asset Management Inc., a subsidiary of the $1.4 trillion BMO Financial Group, ZWG benefits from institutional-grade oversight. BMO's process for security selection and portfolio construction is sensible and repeatable, as highlighted in its strategy pillars. The firm's emphasis on risk management—including strict adherence to price triggers and median-based entry points—aligns with the ETF's defensive mandate.

Risks and Considerations

No investment is without drawbacks. ZWG's non-guaranteed distributions mean yields could fluctuate or shrink if underlying companies cut dividends. Additionally, the covered call strategy's capped upside may underperform in strong bull markets. Investors must also monitor NAV slippage, where the ETF's net asset value lags its underlying index during rallies.

Why Allocate to ZWG Now?

For income-focused investors bracing for volatility, ZWG offers three core advantages:
1. Predictable Income: A 6.79% yield in an era of low bond yields is hard to ignore.
2. Downside Armor: Covered calls provide a cushion in downturns, ideal for a market teetering between growth and recession.
3. Global Diversification: No single region or sector dominates, reducing exposure to localized shocks.

Investment Takeaway

ZWG:CA is not a growth powerhouse—it's a defensive income generator. Its covered call strategy and global diversification make it a logical tactical allocation for portfolios needing steady cash flow without excessive risk. Investors should pair it with growth assets to balance the capped upside, but for those prioritizing income stability, ZWG stands out.

As always, consult official documents like the ETF Facts or prospectus for fee details and risk disclosures before investing.