Stan WongBMO US Dividend ETFZDY.TOCOMMENTOct 24, 2019

VFV is about 34% tech and communications, so it's pricey. 25x PE, 4.4x price to book. Yield is 1.6%.

ZDY has better valuations, less exposure to tech and communications of about 20%. 18x PE, 3.3x price to book. Yield is 2.8%. More conservative. Better risk/reward.

ZDY-T vs. XDU-T. He is indifferent. We will be challenged for the next few years in dividend growth. XDU-T outperformed ZDY-T recently. You get a slightly different mix of companies. You get high dividend payers or quality dividend payers. He would get both, not one or the other.

At market bottoms you don’t want ETFs with covered calls like ZWH-T because you are giving away some of the upside. You want ZDY-T or the currency hedged version of that. CYH-T is a benchmark for world dividends. It is a Canadian dollar currency hedged ETF. TDIV-Q is a technology dividend play.

ZDY-T vs. ZUD-T. They are identical holdings. ZUD-T has a currency hedge. He buys ZDY-T to get exposure to the US dollar as well as US dividends. If he thinks the CAD$ will get stronger, he trades to ZUD-T. You can also get ZDY.U-T to buy it in US$.

BMO U.S. dividend: make sure there's a quality measure in this ETF. US equities are doing quite well. This is offered in hedged and unhedged. Consider both 50/50 for portfolio diversity. It'll be large-cap names. This is not horrible.

ZWH-T vs. ZWI-T. ZDY-T is dividend payers, the best US payers. ZWH-T has a covered call. In a downward market he likes the covered call overlay. In a strong market you don’t want it. He prefers ZDY-T right now.

A 2-5 year hold?A good ETF with about a 30-basis point MER. Keep in mind this really is a ranking on a three-year dividend growth. It re-constitutes its holding every 6 months. You are probably seeing pretty high valuations, which would be a little bit concerning. One of the simplest things you could own.

He is a big fan of BMO’s suite of dividend funds. Rather than just rating stocks according to their overall yield, they have put in some constraints, such as a three-year rise in dividend payouts. This is sort of a high-quality sustainable yield oriented ETF. He likes this, but he is tending to move away from US equities.

This is a smart Index where they take the Russell 1000, top 100 quality US stocks on a dividend basis equal weighted. A dividend payer of around 3% in the US. It is going to trade very similar to what the S&P 500 does to the Dow. Wouldn’t be surprised if we end of the year at 2100, right about where we are now. If it is sideways, and maybe a little lower, you want to have more focus on dividends in your portfolio, because it is a bit more defensive way of playing the market. A complement to that could be the Dow with a covered call, which would hedge your currency.

Is hedged. If you think the CAD$ is going down further you want an unhedged ETF so that you can benefit from the currency change. He was waiting for $0.91/CAD$ to move out of US$ investments directly and then he will use hedged ETFs for US$ investments.