Q: I have both ZWU and ZUT in an RRSP account. For the next 5+ years, should I continue to hold both, or only one. If one, please supply your reasons. ZWU pays a much higher dividend, and has ZUT as it's largest holding, but over the last 5 years it has underperformed ZUT. Is it a case of deciding whether I want more potential growth or more potential income?
5i Research Answer:
ZWU is the covered call utility ETF and ZUT is the 'plain' utility ETF. Because of the covered calls, ZWU is likely to underperform in an uptrending market. The covered calls do help to provide an outsized income stream. We think you are on the right track with the growth vs income debate. If forced to choose, we would side with ZUT for a bit of a better mix of growth and income vs ZWU which will be more income focused.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in ZWU.