Looking to invest in Canadian banks without having to analyze and buy your own stocks?
This BMO ETF might be the right choice for you to get easy access to Canadian banking.
Let’s go over this BMO ZEB ETF review to see if it’s the right choice for you.
Invest In Canadian Banking Stocks
Gain relatively safer exposure to a basket of Canadian banking stocks through an ETF that tracks the performance of the top financial institutions in the country.
- Provides easy exposure to a basket of top Canadian banks
- Focuses on Canada’s reliable banking sector
- Provides monthly dividend income
- MER could be lower
What Is BMO ZEB ETF?
The BMO Equal Weight Banks Index ETF is a financial instrument that launched on the TSX on October 20, 2009, and it is designed to emulate, to the extent possible, the performance of the Solactive Equal Weight Canadian Banks Index net of expenses.
The Solactive Equal Weight Canadian Banks Index includes securities listed in the Canadian bank industry. The constituent securities are subject to liquidity screens and a minimum market capitalization.
By investing in this ETF, you’re essentially trusting the strength and resilience of the Canadian banking system.
Additionally, the index allocates an equal weight to each of the securities instead of weighting the holdings based on the individual securities’ market capitalization.
ZEB.TO is currently trading at close to $31.73.
ZEB Key Facts
As of October 12, 2023:
- Ticker Symbol: ZEB.TO
- Exchange: Toronto Stock Exchange
- Assets Under Management: $3,881.11 Billion
- MER: 0.28%
- Annualized Distribution Yield: 5.43%
- Currency Traded: CAD
- Eligible Accounts: Most registered (TFSA, RRSP, etc) and non-registered available
BMO ZEB MER And Fees
BMO ZEB ETF charges a management fee of 0.25% and comes with a Management Expense Ratio (MER) of 0.28%. The ETF is not as pricy compared to many other ETFs offering exposure to the banking sector in Canada.
BMO ZEB Dividend Yield
My favourite feature about BMO ZEB ETF is that it is a monthly dividend-paying ETF despite the fact that the underlying securities pay quarterly shareholder dividends.
The wide economic moats of the underlying securities allow the fund to finance monthly shareholder dividends comfortably.
As of October 12, 2023:
- Annualized Distribution Yield: 5.43%
- Dividend schedule: Monthly
BMO ZEB Performance And Returns
Here is the growth of a hypothetical $10,000 invested in BMO ZEB since inception:
As of September 29, 2023:
|1 Year||2 Year||3 Year||5 Year||10 Year||Since Inception|
BMO ZEB ETF exclusively invests in the Canadian banking sector.
BMO ZEB ETF invests entirely in Canadian banking stocks without any exposure to fixed-income securities:
This section of my ZEB ETF review would have typically discussed its top ten holdings, but the fund holds only six, namely, the Toronto-Dominion Bank (17.11%), Bank of Montreal (16.63%), Canadian Imperial Bank of Commerce (16.53%), Royal Bank of Canada (16.42%), National Bank of Canada (16.32%), and the Bank of Nova Scotia (16.10%).
|Weight (%)||Name||Bloomberg Ticker|
|16.63%||BANK OF MONTREAL||BMO|
|16.53%||CANADIAN IMPERIAL BANK OF COMMERCE||CM|
|16.42%||ROYAL BANK OF CANADA||RY|
|16.32%||NATIONAL BANK OF CANADA||NA|
|16.10%||BANK OF NOVA SCOTIA/THE||BNS|
BMO ZEB Sector Weighting
As of October 12, 2023, as seen in the chart below, the ETF has allocated 99.11% to financials sector.
BMO ZEB Risk Rating
BMO ZEB has a medium risk rating.
BMO ZEB Alternatives
This section of my BMO ZEB ETF review will cover a few alternative financial instruments with which you can compare the ETF.
BMO Covered Call Canadian Banks ETF is one of the Canadian bank ETFs that comes the closest to BMO ZEB ETF.
BMO ZWB ETF is primarily comprised of seven holdings, and one of them is BMO ZEB ETF itself. The remaining assets for the fund are allocated almost equally to the Big Six Canadian banks.
However, it is also a costlier fund that charges a management fee of 0.65% and an MER of 0.71%.
CI Canadian Banks Income Class ETF (CIC) is another Canadian bank ETF that focuses on investing in Canadian equity securities trading in the banking sector. Managed by CI Global Asset Management, CIC ETF comprises primarily of the same holdings as for BMO ZEB ETF.
The ETF has a 0.65% management fee and an MER of 0.81%.
RBC Canadian Bank Yield Index ETF (RBNK) is one of the newest ETFs among Canadian bank ETFs. It began trading on the TSX in October 2017. The fund primarily consists of the same holdings as BMO ZEB ETF.
However, the fund does not allocate its assets into the constituent banking stocks with an equal weighting.
It focuses more on Scotiabank (the fastest-growing bank) and the Canadian Imperial Bank of Commerce (the largest bank). RBC RBNK ETF has a management fee of 0.29% with an MER of 0.33%.
Yes, there is. The BMO Equal Weight Banks Index ETF is one of several bank ETFs that are trading on the TSX.
There are several Canadian bank ETFs that you can consider investing in, including BMO Covered Call Canadian Banks ETF, CI First Asset CanBanc Income Class ETF, iShares Equal Weight Banc & Lifeco ETF, and the RBC Canadian Bank Yield Index ETF.
How To Buy BMO ZEB ETF In Canada
The cheapest way to buy ETFs is from discount brokers. My top choices in Canada are:
- 105 commission-free ETFs to buy and sell
- Excellent customer service
- Top-notch market research tools
- Easy-to-use and stable platform
- Stock and ETF buys and sells have $0 trading fees
- Desktop and mobile trading
- Reputable fintech company
- Fractional shares available
To learn more, check out my full breakdown of the best trading platforms in Canada.
BMO ZEB ETF is a slightly tricky investment to consider adding to your portfolio. I like the fact that the ETF provides you with monthly dividend payouts. You can add it to your portfolio as a monthly income-generating asset.
The ETF also provides you with a simpler way to get exposure to the top banking stocks instead of individually adding each one to your portfolio.
However, the high management fee and MER will eat into your profits, especially as the holdings within the fund keep appreciating in the long run.
You can easily replicate the performance of this ETF by adding the individual stocks to your portfolio at a minimal cost, provided that you intend to buy and hold the assets for the long haul.
You won’t get monthly payouts since the individual holdings pay quarterly shareholder dividends, but the cost will be significantly lower.
If you want to add dividend-paying ETFs to your portfolio, I suggest you check out my list of the best dividend ETFs in Canada to learn how to earn easy passive income.