Canada is a high cost producer of crude oil due to the oil being very low in the ground due to mountain range of western Alberta east of Edmonton. Canada also has the oil sands in the northern part of Alberta. The mining for oil located in the oil sands has very high cost and it is often said that $70 WTI price crude oil is needed to make it viable.
During this week, the Bank of Canada reduced it over night prime rate by 50bps or 0.50%. This means will cost less to borrow money and the interest rates on savings will be decrease.
Markets go up and markets go down. It is difficult to time the market.
Purchase
On May 10, I made 2 purchases. I will talk about one of those purchases in this post.
Besides my positions for this blog, I have a few positions in savings. I also have a regular high interest savings account as well.
Prior to today, I had one position in this account with some cash. That position is 42 shares of Inter Pipeline (IPL.TO). I kept the cash from the dividends in the account and added some extra cash in the account. I had a total of $135.92 in cash in this account.
My brokerage has commission free ETFs when purchasing units of ETFs.
With the $135.92 in cash, I purchased 9 units of BMO Canadian High Dividend Covered Call ETF. The ticker symbol is ZWC.TO. I purchased the 9 units at $15.25 for a total cost $137.28, which included ECN fees of $0.03. This ETF is an ETF that is owned by Bank of Montreal which is a bank that I am a shareholder. The yield on cost for this position is
BMO Canadian High Dividend Covered Call ETF has been designed to provide exposure to a dividend focused portfolio, while earning call option premiums. The underlying portfolio is yield-weighted and broadly diversified across sectors. The ETF screens for securities for dividend growth, sustainability and option liquidity. The ETF also dynamically writes covered call options. The call options are written out of the money and selected based on analyzing the option's available premium. The option premium provides limited downside protection. Source BMO
This ETF currently has 73 holdings, which you can discover by clicking here.
The BMO Canadian High Dividend Covered Call ETF currently pays a monthly distribution of $0.11 per unit. This position will pay me $0.99 per month in distributions . The yield on cost basis is 8.65%.
With this purchase, there is a cash balance of -$1.36. This cash balance will be in positive territory as Inter Pipeline will pay a dividend on March 16, 2020.
Summary:
This savings account in which I keep these 2 positions and cash is held within my margin account. These positions are not reflected in my investing tab spreadsheet link above and are not mentioned in portfolio updates. However, this savings account will be mentioned in future net worth posts under the savings section.
This position adds an extra $0.99 per month of income to this account. The total income per month generated by this account is expected to be $6.98.
The distribution may be reduced in the coming months for this ETF due to the large reduction in prices of its various holdings and the difficult selling covered calls due to this deduction.
This is a 3 month chart of ZWC which includes today price action.
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| Click to Enlarge |
I will purchase more units of ZWC if cash is available and at a good price.
Note: This position will not be included in my portfolio updates or investing tab spreadsheet. However, this position will be included in net worth updates.
Disclosure: Long BMO, IPL, ZWC
DISCLAIMER
I
am not a financial planner, financial advisor, accountant or tax
attorney. The information on this blog represents my own thoughts and
opinions and should NOT be taken as investment or business advice.
Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.
Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.
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