Investors seeking exposure to the dynamic banking sector can do so by investing in banking-focused Exchange Traded Funds (ETFs). A bank’s performance is usually tied to the larger economy. As such, it is advisable to have at least some exposure to this sector, as it is highly regulated and many banks act as a good source of regular dividend income. BMO S&P/TSX Equal Weight Banks Index ETF (TSE:ZEB) and BMO Eq Wgt US Banks (TSE:ZUB) are two such banking-focused ETFs that can be considered for investing.
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Let’s look at the two ETFs in detail.
BMO S&P/TSX Equal Weight Banks Index ETF (TSE:ZEB)
The BMO S&P/TSX Equal Weight Banks Index ETF seeks to replicate the performance of the Solactive Equal Weight Canada Banks Index. This Index invests in Canadian listed securities from the diversified bank industry.
ZEB was founded in October 2009 and has an expense ratio of 0.28%. Notably, ZEB ETF pays a regular monthly dividend of C$0.14 per share, reflecting a yield of 2.84%. As of date, ZEB has seven holdings, with an AUM (assets under management) of C$4 billion.
Overall, the ZEB ETF has a Moderate Buy consensus rating. Of the seven stocks held in the portfolio currently, six have Buys and one has a Hold rating. Also, the average ZEB ETF price target of C$42.20 implies that the ETF is almost fully valued at current levels.
BMO Eq Wgt US Banks Hedged to CAD Index (TSE:ZUB)
The BMO Eq Wgt US Banks Hedged to CAD Index seeks to replicate the returns of the Solactive Equal Weight US Bank Index Canadian Dollar Hedged. This Index invests in U.S. securities that belong to either Finance, U.S. Banks, U.S. Commercial Banks, or U.S. Commercial Savings Institutions groups.
The ZUB ETF was founded in May 2010 and has an expense ratio of 0.38%. ZUB pays a quarterly dividend of C$0.185 per share, carrying an annualized yield of 2.16%.
As of date, ZUB has an AUM of C$326.27 million. Year-to-date, ZUB ETF has gained 41.5%.
Ending Thoughts
Investors can consider Bank ETFs to gain exposure to the broader economy. ZEB and ZUB are two such ETFs that can be considered after thorough research.
