ZJUL: A Steady Hand in Uncertain Markets – Hedged Income for CAD Investors

In an era of rising volatility and economic uncertainty, income-seeking investors face a critical challenge: generating reliable returns while shielding portfolios from downside risks. The BMO US Equity Buffer Hedged to CAD ETF (ZJUL) emerges as a compelling solution, offering a unique blend of currency-hedged U.S. equity exposure, quarterly dividends, and downside protection—all tailored for Canadian dollar investors. Its recent declaration of a CAD 0.041 dividend, payable on July 3, underscores its role as a defensive income tool amid shifting market conditions.

The Dividend: A Pillar of Predictability

ZJUL's CAD 0.041 dividend, announced with a June 27 record date, marks the latest installment in its quarterly distribution schedule. While the annualized yield of approximately 0.6% (based on a current NAV of CAD 27.71) may seem modest, it aligns with the ETF's defensive mandate: income stability over aggressive growth. For investors prioritizing low-risk cash flows, this consistency is a standout feature.

The timing of this dividend is strategic. With markets bracing for potential Fed rate hikes, recession risks, or geopolitical shocks, ZJUL's income stream offers a shield against uncertainty. Unlike bonds or non-hedged equity ETFs, ZJUL's structure ensures currency neutrality for CAD investors—critical as the Canadian dollar fluctuates.

The Hedged Structure: A Shield Against Dual Risks

ZJUL's true strength lies in its dual hedging mechanisms:
1. Currency Hedging: By using derivatives like foreign exchange forwards, the ETF offsets USD/CAD volatility. This protects Canadian investors from scenarios where a strengthening CAD erodes U.S. equity returns.
2. Downside Buffer: ZJUL offers a 100% downside buffer over a 1-year outcome period, shielding investors from losses—up to the stated limit. As of June 20, 2025, the remaining buffer stands at 91.98%, slightly reduced by expenses but still robust.

Crucially, investors must hold shares through the full outcome period (e.g., from February 2024 to June 2025) to realize these benefits. The next period's terms will reset, emphasizing the need for long-term commitment.

Why ZJUL Stands Out in Volatile Markets

1. Defensive Income in a High-Volatility World:
2. While the S&P 500 (SPY) yields 1.2%, ZJUL's dividend provides CAD-denominated income with no currency conversion risk.

3. Its buffer mechanism acts as a safety net during market selloffs, unlike traditional ETFs that track indices directly.

4. Strategic Timing of Dividend Declarations:
   ZJUL's quarterly distributions align with key economic reporting periods (e.g., quarterly earnings, inflation data). Declaring a dividend ahead of potential shifts—such as a Fed meeting or recession signal—allows investors to lock in income before uncertainty materializes.

5. Low Correlation with Traditional Assets:
   As bonds face rising rates and equities face valuation headwinds, ZJUL's synthetic exposure (via swaps and derivatives) reduces overlap with mainstream holdings. This diversification can lower portfolio volatility.

Considerations and Risks

• Outcome Period Dependency: Missing the holding period voids the buffer/cap protections. Investors must plan for a 1-year commitment.
• Capped Upside: The 0.79% remaining cap limits gains, making ZJUL unsuitable for growth-focused portfolios.
• Liquidity Costs: The ETF's 8.98% average spread (vs. peers at ~0.1%) may reduce net returns for frequent traders.

Investment Strategy: Pairing ZJUL with Defensive Plays

For income portfolios:
1. Allocate 10–15% to ZJUL as a low-volatility yield source, complementing bonds and dividend stocks.
2. Hold through outcome periods to maximize buffer benefits.
3. Combine with inverse ETFs or options for tactical protection during market peaks.

Final Take

ZJUL is no get-rich-quick tool—it's a risk-mitigated income generator for investors willing to trade upside potential for stability. In a world where volatility is the norm, its currency hedge, quarterly dividends, and buffer mechanism make it a prudent addition to defensive portfolios.

Act Now: With the June 27 record date approaching, CAD investors seeking steady income and protection from currency swings should consider adding ZJUL—before uncertainty turns into turbulence.

Past performance does not guarantee future results. Investors should consult their financial advisor before making decisions based on this analysis.