The XEI ETF offers exposure to large companies in Canada. It shows the performance of the S & P / TSX Composite High Dividend Index minus costs.
The index consists of 50 to 75 stocks of the S & P / TSX Composite Index, which are geared towards the payment of a monthly income.
This ETF rebalances itself every quarter. Each ingredient is limited to 5% by weight while each sector is limited to 30% by weight.
Benefits of the iShares XEI ETF
- The aim is to achieve long-term capital growth.
- It pays monthly dividends.
- It has an attractive return.
Disadvantages of the iShares XEI ETF
- Not geographically diversified.
iShares XEI ETF facts
- Start time: April 12, 2011
- Benchmark: S & P / TSX Composite High Dividend Index
- Net worth: $ 1,099 million
- MER: 0.22%
- 12 months trailing return: 4.10%
- Distribution yield: 3.89%
- Dividend plan: Per month
iShares XEI ETF MER – Management Expense Ratio
The XEI management fee is 0.20% and the MER 0.22%. The peers Vanguard VDY ETF and BMO ZDV ETF have a MER of 0.21% and 0.39%, respectively.
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 or Qtrade offer free ETFs.
iShares XEI ETF performance
The annual return for the iShares XEI ETF since inception is 6.20%. The broader S&P500 index underperformed.
The performance is acceptable for an income portfolio in “retirement”, but not during the years of accumulation. You leave way too much money on the table. The SP500 gives you double the return.
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|
|3rd||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 XEI ETF Holdings
Investing in XEI means investing in the Canadian stock market.
The following are the top positions in the XEI ETF as of the time of writing. The weight ratio may vary each month at the discretion of the fund manager in accordance with the fund’s objective.
XEI focuses on established, profitable companies with longstanding dividend records. Top positions include leading Canadian names such as Toronto Dominion, the Royal Bank of Canada, TC Energy, BCE etc. Toronto Dominion is the most significant position with a weighting of ~ 5%, followed by RBC with a further allocation of 5%.
TC Energy is the third largest holding and accounts for ~ 4.9% of iShares XEI’s fund allocation. XEI is a great way to invest in the large-cap companies listed on the TSX and pay dividends on a regular basis.
iShares XEI ETF sector allocation
iShares XEI is diversified by sector. The ETF mainly bends towards the energy, finance and communications sectors with weights of ~ 30%, ~ 30% and ~ 13% respectively. Additionally, it offers investors exposure to utilities (~ 11%) and materials (~ 6%) and a 10% balance to cyclical consumer, healthcare and industrial companies. The highest allocation is therefore to energy and the least weight to health care. However, these assignments can change from time to time.
Why hold iShares XEI ETF?
The XEI ETF is similar to many other ETFs and dividend ETFs that largely follow the TSX. In the end, you want to focus on the lower fees and the more even returns.
I have to admit that I only see it as an income investment in retirement.
If you want the dividends, it’s not clear you’re getting the same growth, but the best banks and utility stocks will bring you more income.