Q&A With Gordon Pape: Using U.S. Dollars to Invest in Canadian Banks

US dollars

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In this Q&A, financial expert Gordon Pape recommends a Canadian Bank ETF for a reader looking to invest U.S. dollars.


Q – I have a good portion of my portfolio in USD. I would like to invest in an ETF that is focused on Canadian banks/financials that is in USD. I do not want to convert USD to Canadian dollars currently. Are there any ETFs that you would recommend? – Frank S.  

A – Take a look at the BMO Canadian Banks Covered Call Canadian Banks ETF (U.S. dollar units). The trading symbol is ZWB.U on the TSX.

This ETF holds an equal-weighted portfolio of the Big Six Canadian banks, and the mangers write covered call options to boost income. The performance history isn’t impressive but keep in mind the US dollar units were only launched in January 2022. That was hardly an auspicious time, with rising interest rates and recession fears battering the banking sector. As a result, the units show an average annual compound rate of return of -6.57 per cent since inception (to Feb. 29). The Canadian dollar version of this fund (ZWB-T) has been around since 2011 and shows an average annual gain since inception of +7.72.

I think banking stocks will make a strong recovery as recession fears recede and interest rates begin to decline later this year.

The fund currently pays a monthly distribution of US$0.14 per unit for a yield of 7.2 per cent. The MER is high, at 0.72 per cent.

A Google search will reveal other options if you want to make comparisons. – G.P.

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