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BMO Covered Call Utilities ETF (ZWU)
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Vanguard FTSE Canadian High Dividend Yield Index ETF (VDY)
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Hamilton Canadian Financials YIELD MAXIMIZER TM ETF (HMAX)
I have adopted a dividend investment strategy of investing predominantly in canadian dividend paying equities and as expected am overweight in financials, telecom and utilities, this strategy allows me to sleep well at night, I am looking at enough dividend income from the portfolio to retire on and not have to touch the principle investment.
besides the lack of diversification in geography and sector. can you give me your opinion about concerns you may have with such a strategy and what you would suggest doing otherwise ?
We do not have much issue here if an investor's goals are being met. A suggestion to enhance the income and diversification of the portfolio could be to add in a covered call ETF. Something like HMAX or ZWU would provide enhanced income as well as broad exposure to utilities and financials. These ETFs could also provide greater income potential than indiviual stocks. The same can be said about adding a high-yield dividend ETF such as VDY. Adding income focused ETFs would allow an investor to worry less about company specific factors which we see as beneficial if the goal is capital protection. Another suggestion for diversification could be adding consumer staples companies to the portfolio who have a similar defensive profile to the sectors listed. These are just a few suggestions as our main concern is sector diversification. In a inflationary/high interest rate environment, dividend stocks can take a beating, as they did in 2022. This would be the main risk we see, but seems less likely now for a few years.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in ZWU.