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(Getty Images/iStockphoto)

NUMBER CRUNCHER

Monthly-pay dividend ETFs: Are you overexposed? Add to ...

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.

Our screen

Yves Rebetez of ETF Insight 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.

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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, showing sector exposure (%)

ETF Ticker Assets
Under
Mgmt.
$-mil
Energy
%
iShares S&P/TSX Capped REIT Index ETF XRE-T 1,385.2 0.0%
iShares Dow Jones Cda Select Div Indx ETF XDV-T 1,204.4 15.4%
iShares S&P/TSX Cdn Div Indx Fnd CDZ-T 876.0 15.3%
iShares S&P/TSX Capped Fin. Indx ETF XFN-T 751.5 0.0%
BMO S&P/TSX Equal Wght Banks Indx ETF ZEB-T 567.4 0.0%
BMO Equal Weight REITs Index ETF ZRE-T 397.9 0.0%
BMO Equal Weight Utilities Index ETF ZUT-T 351.2 0.0%
iShares S&P US Div Grwrs Indx Fd (CAD-Hdgd) CUD-T 247.8 3.5%
BMO Canadian Dividend ETF ZDV-T 162.1 29.0%
iShares S&P/TSX Equity Income Index Fund XEI-T 158.9 29.4%

Source: ETF Insight

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  • XRE-T
  • XDV-T
  • CDZ-T
  • XFN-T
  • ZEB-T
  • ZRE-T
  • ZUT-T
  • CUD-T
  • ZDV-T
  • XEI-T
  • XUT-T
  • XHD-T
  • HAZ-T
  • ULV-T
  • CEW-T
  • VDY-T
  • VRE-T
  • TLV-T
  • HAJ-T
  • ZDY.U-T
  • ZUD-T
  • ZDY-T
Live Discussion of XRE on StockTwits
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Live Discussion of ZEB on StockTwits
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Live Discussion of ZRE on StockTwits
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Live Discussion of ZUT on StockTwits
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Live Discussion of CUD on StockTwits
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Live Discussion of ZDV on StockTwits
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Live Discussion of XEI on StockTwits
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