What we're looking at
A popular category of exchange-traded funds that invest in the shares of dividend-paying companies and distribute dividend income to investors on a monthly basis.
Yves Rebetez of ETF Insight (etfinsight.ca) has taken all the TSX-listed monthly pay equity ETFs and ranked them by assets. Also shown is the sector exposure for each ETF. Compare the sector weightings of these ETFs with your current holdings before buying. That way, you avoid ending up with too much exposure to any one sector.
What we found
The popularity of the funds in today's screen can be seen in the fact that their combined assets comes in around $6.5-billion. But how many investors have bothered to look at exactly what they own in their monthly pay dividend ETFs?
Notice the extent to which financial stocks dominate some of these funds. That's understandable because banks have long been a dividend staple in Canada. Problem is, financial stocks account for one-third of the S&P/TSX composite index and, as a result, they're bound to be a big holding as well in ETFs and mutual funds that offer broad Canadian market exposure. If you partner one of these funds with a dividend ETF based primarily on banks, you could be seriously affected if there was a downturn in the financial sector.
Mind your exposure to energy stocks as well if you're using monthly pay equity ETFs. Energy is the second-largest sector on the TSX, and it's a big holding in a few monthly pay ETFs as well. Another sector to keep an eye on in monthly pay dividend ETFs is utilities. While not a dominant TSX sector, utilities stocks would come under pressure when interest rates rise.
Finally, it's worth noting that some of the most widely diversified monthly pay equity ETFs focus on the U.S. stock market.
MONTHLY PAY EQUITY ETFS RANKED BY ASSETS
|Assets||Sector Exposure %|
|iShares S&P/TSX Capped REIT Index ETF||XRE-T||1,385.2||0.0||0.0||0.0||0.0||0.0||0.0||95.9||0.0||0.0||0.0|
|iShares Dow Jones Cda Select Div Indx ETF||XDV-T||1,204.4||15.4||2.6||3.4||4.9||0.0||0.0||50.8||0.0||15.3||6.8|
|iShares S&P/TSX Cdn Div Indx Fnd||CDZ-T||876.0||15.3||5.7||11.1||17.2||4.8||0.0||20.6||5.6||3.9||9.0|
|iShares S&P/TSX Capped Fin. Indx ETF||XFN-T||751.5||0.0||0.0||0.0||0.0||0.0||0.0||99.5||0.0||0.0||0.0|
|BMO S&P/TSX Equal Wght Banks Indx ETF||ZEB-T||567.4||0.0||0.0||0.0||0.0||0.0||0.0||100.0||0.0||0.0||0.0|
|BMO Equal Weight REITs Index ETF||ZRE-T||397.9||0.0||0.0||0.0||0.0||0.0||0.0||100.0||0.0||0.0||0.0|
|BMO Equal Weight Utilities Index ETF||ZUT-T||351.2||0.0||0.0||0.0||0.0||0.0||0.0||0.0||0.0||0.0||100.0|
|iShares S&P US Div Grwrs Indx Fd (CAD-Hdgd)||CUD-T||247.8||3.5||9.8||15.9||9.7||18.1||9.8||16.1||3.6||3.3||9.1|
|BMO Canadian Dividend ETF||ZDV-T||162.1||29.0||2.5||3.9||12.0||0.0||3.6||29.9||0.0||6.2||12.8|
|iShares S&P/TSX Equity Income Index Fund||XEI-T||158.9||29.4||1.3||4.8||14.4||0.9||1.1||29.3||0.0||9.4||8.5|
|iShares S&P/TSX Capped Utilities Index Fund||XUT-T||108.1||0.0||0.0||0.0||0.0||0.0||0.0||0.0||0.0||0.0||99.8|
|iShares US High Div Equity Indx Fd (CAD-Hdgd)||XHD-T||67.8||7.7||2.1||2.0||3.2||11.5||23.8||0.0||7.5||17.5||14.0|
|Horizons Active Global Dividend ETF||HAZ-T||58.4||13.1||2.6||14.6||7.2||13.7||5.6||23.8||3.8||11.0||5.5|
|PwrShrs S&P500 Low Volat.(CAD hdgd) Indx ETF||ULV-T||38.6||1.7||2.6||8.0||2.0||24.0||8.8||15.4||3.6||2.6||31.2|
|iShares Equal Weight Banc & LifeCo Fund||CEW-T||35.0||0.0||0.0||0.0||0.0||0.0||0.0||99.6||0.0||0.0||0.0|
|Vanguard FTSE Cdn High Div Yld Index ETF||VDY-T||20.1||27.0||0.5||0.9||4.2||0.1||0.1||59.4||0.0||3.9||3.9|
|Vanguard FTSE Canadian Capped REIT Index ETF||VRE-T||19.6||0.0||0.0||0.0||0.0||0.0||0.0||100.0||0.0||0.0||0.0|
|PowerShrs S&P/TSX Comp Low Volat Indx ETF||TLV-T||10.4||7.8||0.0||1.7||7.1||9.0||0.0||55.2||0.0||10.8||8.4|
|Horizons Active Emerging Markets Dividend ETF||HAJ-T||5.2||12.9||3.4||10.7||0.0||16.0||1.9||7.1||7.5||22.8||11.8|
|BMO US Dividend ETF (USD Units)||ZDY.U-T||4.7||6.0||4.8||9.7||12.1||9.7||4.9||10.4||12.3||4.6||25.6|
|BMO US Dividend Hedged to CAD ETF||ZUD-T||3.1||6.0||4.9||9.7||12.1||9.5||4.8||10.4||12.3||4.8||25.6|
|BMO US Dividend ETF||ZDY-T||3.0||6.0||4.8||9.7||12.1||9.7||4.9||10.4||12.3||4.6||25.6|
|Source: ETF Insight|
© 2007 The Globe and Mail. All rights reserved.
Only GlobeinvestorGOLD combines the strength of powerful investing tools with the insight of The Globe and Mail.
Discover a wealth of investment information and and exclusive features.