Blackrock’s XDV ETF or iShares Canadian Select Dividend Index ETF offers diversified exposure to 30 high-yield Canadian companies in the Dow Jones Canada Total Market Index.
The index is almost like trying to replicate that “Dogs of the TSX” as it focuses on high yield holdings from a list of Canadian blue chip stocks.
The fund was founded in December 2005 and invests primarily in large Canadian stocks. It is intended to replicate the performance of the Dow Jones Canada Select Dividend Index net of costs.
Benefits of iShares XDV
- Get high returns and growth together.
- iShares XDV owns 30 high-yield blue chip Canadian companies
- iShares XDV offers regular monthly income (payout versus dividend).
- It seeks long-term capital growth and rebalances it annually.
- Does well against the TSX.
Disadvantages of iShares XDV
- It is a more expensive ETF compared to the Vanguard VDY ETF.
- Lower return than the Vanguard VDY ETF.
iShares XDV ETF facts
- Start time: December 19, 2005
- Benchmark: Dow Jones Canada Select Dividend Index
- Net worth: $ 1,540 million
- MER: 0.55%
- 12 months trailing return: 4.11%
- Distribution yield: 3.87%
- Dividend plan: Per month
iShares XDV MER – Management Expense Ratio
At 0.55%, XDV has a good MER, but you can have a cheaper MER with a Vanguard ETF like the VDY.
The MER is what Blackrock needs to manage the fund for you. It’s much cheaper than mutual funds and in some cases cheaper than investing yourself.
Mutual funds can charge over 2% and rob you of your returns. It’s time to ditch your mutual funds and switch to ETFs ASAP. Many brokers like Questrade offer free ETFs.
iShares XDV performance
iShares XDV has decent performance by keeping up with the TSX index. With most investors unable to beat the index, XDV does well.
The annual return for the iShares XDV ETF since inception is 6.25%. If you compare to my annual ROR of 14.40% there is a big difference. Just take a look at the S&P500 index for a different perspective.
Take your TFSA account as an example. The rules are the same for everyone and I mean everyone. Growth is ultimately a factor in your investment performance, provided you set your TFSA contribution limit each year. The annual performance of an ETF is important as you can see under the growth over 20 years.
|1||2009||5,000||5,000||5.250||5,500||Not pursued||Not started|
|2||2010||5,000||10,000||10,762||11,550||Not pursued||Not started|
|3||2011||5,000||15,000||16,550||18.205||Not pursued||Not started|
|4th||2012||5,000||20,000||22,628||25,525||Not pursued||Not started|
|5||2013||5,500||25,500||29,534||34.128||$ 41,742||Not started|
|6th||2014||5,500||31,000||36,786||43,590||$ 52,820||Not started|
|7th||2015||10,000||41,000||49.125||58,949||$ 56,307||Not started|
|8th||2016||5,500||46,500||57,356||70,984||$ 70,200||Not started|
|9||2017||5,500||52,000||65,999||84.034||$ 78,900||13,308 USD|
|10||2018||5,500||57,500||75,074||98.487||$ 96,937||$ 58,818|
iShares XDV ETF Top 10 Holdings
Below are the holdings of the XDV ETF at the time of writing, sorted by market capitalization. The weight ratio may vary each month at the discretion of the fund manager depending on the fund objective.
At the time of writing, the Canadian Imperial Bank of Commerce was the top constituent of the XDV ETF with a weight of 8.11%, followed by Canadian Tire Ltd. with an allocation of 6.86%. The Bank of Montreal is their third largest holding and accounts for more than 6% of iShares XDV’s fund allocation.
The top 10 positions account for more than 50% of the portfolio and six of the top 10 positions are leading Canadian banks (Big Six of Canada), which account for nearly 34% of the portfolio. So this ETF is also a great way to invest in the Canadian banking sector.
iShares XDV ETF sector allocation
iShares XDV is heavily weighted against financials, which technically corresponds to the weighting of the TSX. As an ETF with a high dividend yield, you should compare it to other dividend ETFs.
Why hold iShares XDV ETF?
In short, you want to hold it for dividend and keep some appreciation over time. Note, however, that the ETF is keeping up with the TSX JUST when the monthly distribution is reinvested.
If you want the dividends, it’s not clear you are getting dividend growth like the best banks and utility stocks will do for you.
The iShares XDV EWTF has many Canadian banks and insurance stocks in its portfolio whose dividends are generally safe. It is an ideal investment for risk averse investors (e.g., investors approaching retirement) who seek a steady monthly income and plan to hold onto the investment for the medium to long term.