Written by Vicky @ Vix Money
XDV, iShares Dow Jones Canada Select Dividend Index Fund, was introduced on December 19th, 2005. This ETF seeks to replicate the 30 highest dividend paying companies in the Dow Jones Canada Select Dividend Index. It is part of a group of ETFs owned by iShares, and, as of June 11th, 2009, is now currently being managed by BlackRock Asset Management Canada Limited. With the recent rebranding of the Claymore ETF family, whom now all trade under the iShares name, iShares is definitely the market leader in the Canadian ETF market.
Which companies are represented in XDV?
When you purchase an ETF like XDV, it is good to know what kind of companies you are investing in, as well as the sectors they do business in. Although it does not guarantee against loss, diversification in your portfolio helps you reach your long-term financial goals while simultaneously minimizing the risk associated with it.
In XDV, the main sectors that are represented are the financial industry, the telecommunications sector, and the oil & gas sector. As of April 5, 2012, over 80% of the fund’s holdings are in these sectors.
The following is a list of the top 10 holdings of the fund (as of April 5, 2012):
|National Bank of Canada||5.95%|
|Bank of Montreal||5.21%|
|AG Growth International Inc.||5.08%|
|Bonterra Energy Corp.||4.91%|
|Royal Bank of Canada||4.50%|
|Bank of Nova Scotia||4.24%|
|IGM Financial Inc.||3.96%|
Altogether, the top 10 holdings account for approximately 50% of the fund’s portfolio. As previously mentioned, XDV owns shares in 30 of the highest yielding companies in the Dow Jones Select Dividend Index.
Which ETF to choose?
When making your decision on which ETF to choose, here are a couple things to keep in mind.
Management Expense Ratio (MER)
One of the biggest reasons to build an investment portfolio containing ETFs is that the costs of owning them are much lower, comparatively speaking, than to owning mutual funds in Canada. XDV has a current MER of 0.53%, which is twice as high as XIC‘s MER, but still only about 1/5 of what the average mutual fund MER in Canada is (approximately 2.50%).
Tracking Error and Return
The purpose of XDV, like other index funds, is to replicate the returns of a benchmark index. In this case, XDV is designed to replicate the performance of the Dow Jones Select Dividend Index. Therefore, the primary goal of the fund manager is to minimize the difference between the fund return and the index return. In order to determine how successful a fund manager is in accomplishing this goal, you have to look at the tracking error. Ideally, you want to purchase ETFs that have the lowest tracking error record.
The following shows the annual returns (in percentages) of XDV compared to its benchmark index; you can see that the fund managers have been doing very well in keeping the tracking error low.
The timing of these dividends varies amongst the different ETF products out there. XIC, for example, pays out their dividends quarterly. XDV, on the other hand, pays out their dividends on a monthly basis.
The most recent distribution paid out in 2012 for XDV was on March 30, 2012 at the rate of 0.069 per share. If you owned 100 shares of XDV on March 23, 2012 (the ex-dividend date), you would have received $6.90 (0.069 x 100 = $6.90) distribution for March. The current annual distribution per share is 0.77 cents.
To compare different ETFs, you may want to compare their dividend yields. This is especially important to those who are seeking dividend yields for an income stream. The current yield for XDV, as of February 29, 2012, is 3.90%. This yield can be found on Yahoo Finance and other financial websites.
To be honest, after doing this post, XDV’s dividend yield definitely stood out for me. For all those dividend investors out there, I definitely see the appeal of this style of investing!
What do you think readers? Is this ETF already part of your portfolio? If not, would you consider adding it to your current portfolio?