What are we looking for?
As we approach the RRSP contribution deadline of March 2, savvy investors who have not already been steadily contributing to their registered retirement savings plans are likely thinking about what to do with new assets flowing in. Since dividend investing continues to be top of mind, this week I look for exchange-traded funds whose holdings appear to have some level of focus on dividends for some potential ideas. To do this, I screened our database across two dimensions.
- The Morningstar Factor Profile Yield rank, which is a comparison of a fund’s yield defined by both dividends and share buybacks, ranked, on a percentile basis, against a global universe of roughly 21,000 portfolios. The Morningstar Factor Profile considers seven dimensions in total (style, yield, size, momentum, volatility, quality and liquidity) and is designed to provide clarity on the type of fund based on underlying holdings. Only the yield factor was considered in today’s analysis.
- The Morningstar Quantitative Rating, or “medalist” rating – a forward-looking assessment of a fund’s prospective ability to outperform similar funds after fees, based on five factors: people (the quality of management team); process (the effectiveness and consistency of the investment process); parent (organizational structure and talent retention); performance; and price (fees). Ratings include gold, silver, bronze, neutral and negative.
To qualify, funds must have a medalist rating of silver or gold, and must be ranked in the top 10 percentile in terms of its factor profile rank for yield.
More about Morningstar
Morningstar Research Inc. is a leading provider of independent investment research in North America, Europe, Australia and Asia. Morningstar offers an extensive line of products and services for individual investors, financial advisors, asset managers, retirement plan providers and sponsors, and institutional investors. Morningstar Direct is the firm’s multiasset analysis platform built for asset management and financial services professionals.
What we found
I used Morningstar Direct to pull the relevant information on the funds from the screen, inclusive of their trailing returns (note that many of the funds are new), management expense ratios, ratings and dividend yield. The funds appear in order of their yield, but note that FBU appears to have a very low yield, likely because its focus is on share buybacks as opposed to outright dividends.
This column does not constitute financial advice. It is always recommended to speak to a financial adviser or investment professional before investing.
Ian Tam, CFA, is director of investment research for Morningstar Canada.
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