Stockchase Opinions

Larry Berman CFA, CMT, CTA iShares Cdn Dividend ETF XDV-T COMMENT Aug 07, 2020

Dividend cut. The timing of the dividend was not in line with the quarterly dividend payouts of the underlying securities. There are also many companies that have reduced or suspended dividends because of covid. Overall, dividend expectations have come down.
$21.600

Stock price when the opinion was issued

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HOLD

He sees no problem holding this. If you are not overweight in the Canadian banks already, this is fine. This is a monthly dividend.

COMMENT

Any ETF that focuses exclusively on dividends in that Canadian environment of large caps shouldn’t be classified as high risk. A pretty good place to hide if you have the proper time frame of 2-3 years.

COMMENT

$22,000 for an income dividend holding? He would consider just going with a dividend ETF. You get diversification amongst the blue chips. It gives you a dividend of about 4.5%.

WEAK BUY

XDV-T vs. ZWC-T. Most stocks in those two indexes are similar. ZWC-T has a covered call overlay. XDV-T is more sector concentrated. He advocates that if you are in the market late in the investment cycle you want to be in a covered call strategy. It gives you a smoother ride.

BUY

How to increase dividends. These are all the same thing. You get exposure to Canadian large caps. There is no diversification by being in all three. ZWU-T should replace one of them to get utilities including pipelines and telcos and less reliance on the banks. Still Canada so you need international. ZWE-T is the best international dividend payers yielding 7% with a covered call overlay. ZWS-T is the best in the US. These are the two to add to the three. These should be in a registered portfolios if you are retired because there is no divined tax credit.

DON'T BUY
He is not a buyer of much at this point. There is another major leg down for markets. Buy into weakness and look into recent lows. Look at how bear markets have unfolded.
BUY
If you want dividend growth, then you'll want to tilt more toward the cyclical areas of the economy than the defensives. One of the bellwether dividend ETFs in Canada.
BUY
High-dividend ETF on the TSX.

When you go for high-dividend payers in Canada you get the banks, insurance companies, pipelines, and some of the energy names. Yield will be a bit over 4%. A nice way to play.

Vanguard, iShares, and BMO all have offerings, but they all do it slightly differently. BMO has a covered call version, ZWC. There's ZDV, XDV, VDY. Take a look at them all and see what you like. All have different weights to the components. They're all equally good.

WEAK BUY
XDV vs. XEI

XEI will be a broader basket, while XDV would be more concentrated in the top 60 or so names. The question is do you want a bit more diversification away from the banks, energy names, and lifecos that make up the larger companies in Canada? He's always an advocate for broad diversification in portfolios. Each individual investor has to decide what they want.