2023 Globe and Mail ETF Buyer’s Guide Part Five: Canadian Dividend ETFs (2024)
portfolio strategy
Rob Carrick
Personal Finance Columnist
This article was published more than 6 months ago. Some information may no longer be current.
So much for the idea that dividend stocks are safer.
The average 12-month result for the 10 dividend funds in this fifth instalment of the 2023 Globe and Mail ETF Buyer’s Guide was a loss of 5.7 per cent, compared with a 5.2-per-cent decline for the S&P/TSX composite index.
Several things went wrong for the stocks held by dividend ETFs, including a bad year for bank stocks and headwinds for utilities and pipelines as a result of high interest rates. The good news here is that falling prices for dividend stocks, and dividend ETFs, means higher yields.
The ETF guide highlights how yields vary widely among dividend ETFs. Some funds target lower-yielding stocks with more growth potential, while others put more of an emphasis on yield. The average yield for the funds listed in the guide is 3.8 per cent, up from 2.9 per cent last year. Higher-yielding funds this year are in the mid-4-per-cent range.
The setback for financial stocks in the past year is a reminder to consider the sector breakdowns in the guide. Financials dominate some, but not all, dividend ETFs. Energy, a sector with extreme ups and downs, is another top holding for some funds.
The 2023 edition of the ETF Buyer’s Guide wraps up later in April by looking at asset allocation funds, which offer a well-diversified portfolio in a single ETF. The guide has already covered Canadian, U.S. and international equity funds, as well as bond funds.
Skip below for an explanation of the terms you'll find in this ETF Buyer's Guide.
Click here to download an Excel version of the guide.
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ASSETS ($ Mil.)'+c["Assets ($ Mil.)"]+"
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MER (%)'+c["MER (%)"]+"
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TER (%)'+c["TER (%)"]+"
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Notes: Market data as of April 11, 2023. Returns to March 31, 2023. Source: Rob Carrick; Globeinvestor.com, TMX Money, ETF company websites
Here’s a discussion of terms used in this edition of the ETF Buyer’s Guide:
Assets: Shown to give you a sense of how interested other investors are in a fund.
Management expense ratio (MER): The main cost of owning an ETF on a continuing basis; published returns are shown on an after-fee basis.
Trading expense ratio (TER): The cost of trading commissions racked up by the managers of an ETF as they make adjustments to the portfolio of investments; add the TER to the MER for a full picture of a fund’s cost.
Yield: Based on the recent pattern of monthly payouts and the latest share price; may reflect payments of dividends and return of capital; check the fund profiles on ETF issuer websites to find out what kinds of income have been contained in distributions in recent years.
50-day trading volume: Average number of shares traded daily over the previous 50 days; it’s easier to buy and sell at competitive prices if an ETF is heavily traded.
Returns: ETF companies show total returns or share-price change plus dividends or distributions.
Beta: A measure of volatility that compares funds with a benchmark stock index, which always has a beta of one. A lower beta means less volatility on both the upside and the downside.
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Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification. But the number of ETFs is not what you should be looking at.
Is JEPI a Good Investment? JEPI can be a good investment for more experienced, risk-averse investors who are looking for an ETF that can provide low-volatility, stocklike returns with superior yields. However, JEPI may not be for beginners or long-term investors.
The largest Aggressive ETF is the iShares Core Aggressive Allocation ETF AOA with $1.83B in assets. In the last trailing year, the best-performing Aggressive ETF was AOA at 14.42%. The most recent ETF launched in the Aggressive space was the iShares ESG Aware Aggressive Allocation ETF EAOA on 06/12/20.
One way to enhance your retirement income is to invest in dividend-paying stocks, mutual funds, and exchange traded funds (ETFs). Over time, the cash flow generated by those dividend payments can supplement your Social Security and pension income.
Dividend ETFs are passively managed, meaning the fund manager follows an index and does not have to make trading decisions often. Dividend ETFs are good investment options for investors that are risk-averse and income-seeking.
JEPI has a dividend yield of 7.43% and paid $4.17 per share in the past year. The dividend is paid every month and the last ex-dividend date was May 1, 2024. $4.17.
Vanguard S&P 500 Index ETF (VFV.TO) has a higher volatility of 3.64% compared to iShares Core Equity ETF Portfolio (XEQT.TO) at 3.29%. This indicates that VFV.TO's price experiences larger fluctuations and is considered to be riskier than XEQT.TO based on this measure.
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