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Canadian dividend ETFs have gone from darlings to dead weight in the past 12 months.

The latest installment of the Globe and Mail ETF Buyers’ Guide documents the bleak returns from exchange traded funds holding dividend-paying stocks for the year to March 31. Even with dividends factored in, several of these ETFs lost money. It’s quite a contrast from the double digit returns in last year’s ETF guide chapter on Canadian dividend funds.

The case for holding dividend ETFs remains strong: Reliable monthly income with tax advantages in non-registered accounts. As a result of the dividend tax credit, investors pay significantly less tax on dividends paid by Canadian corporations than they do on regular income like bond interest. But the experience of the 12 months to March 31 suggests a need to carefully research what you buy so you’re prepared for both good and bad years.

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Start your research with this segment of the buyers’ guide. ETFs holding strictly dividend stocks are covered here, plus income funds holding a mix of dividend stocks, preferred shares and both government and corporate bonds (The overall MER for these income ETFs includes the underlying funds). There’s also a mix of funds that track indexes, that use a screening process to sift through the universe of dividend stocks and that have a manager who picks stocks.

ETFs on this list were chosen because they have at least a five-year history and have achieved a certain following among investors as shown by trading volumes and asset size.

We’ll close out the 2018 edition of the ETF Buyer’s Guide by looking at U.S. and global dividend and income funds on April 20. The guide has already covered Canadian, U.S. and international/global equity funds, as well as bond ETFs.

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 ETF Guide.

Assets: Shown to give you a sense of how interested other investors are in a fund.

Management expense ratio (MER): The MER is 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 TER is 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 fuller picture of a fund’s cost.

Yield: Weak prices for dividend ETFs have resulted in attractive yields in the 4 per cent range or higher. Yield data is supplied by Globeinvestor.com and based on the recent pattern of monthly payouts and the latest share price; may reflect payments of dividends, bond interest 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.

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Average daily trading volume: Trading of fewer than 5,000 shares a day on average tells you an exchange-traded fund isn’t generating much interest from investors or is still building a following.

Top sector weightings: Sectors like utilities, real estate, pipelines and telecoms may be sensitive to rising interest rates. Energy, where dividend flows depend to some extent on how firm oil and gas prices are, is also a big component of some funds. Note the heavy financial weighting in some funds.

Returns: ETF companies typically disclose total returns, or share-price change plus dividends or distributions.

Some of the funds on this list may contain U.S. and international stocks, which produce dividends that are not eligible for the dividend tax credit.

Notes: Market data as of April 4. Average daily trading volume is for the previous 30 days. Fund returns are annualized to March 31.

*Holds other ETFs: ZCS = BMO Short Corporate Bond Index ETF; ZWE = BMO Europe HIgh Dividend ETF; ZWH = BMO US High Dividend Covered Call ETF.

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**Holds other ETFs: XHB = iShares Canadian HYBrid Corporate Bond Index ETF; XHY = iShares U.S. High Yield Bond Index ETF (CAD-Hedged); CBO = iShares 1-5 Year Laddered Corporate Bond Index ETF

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