The major Canadian and U.S. stock markets, while still subject to volatility, continue to offer attractive returns for investors—especially if you buy the top stocks. All in all, we think that if you can afford to stay in the market for several years or longer, now is a good time for new buying. We see ETFs like iShares Canadian Select Dividend Index ETF as one way for you to profit from the continuing stock market rise, while at the same time cutting your risk.
The best of these funds offer a diversified group of stocks and charge you low management fees. Here’s one which holds mostly blue-chip stocks traded on the Canadian exchange, as opposed to narrower ones focused on resources or themes, such as alternative energy or biotech.
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ISHARES CANADIAN SELECT DIVIDEND INDEX ETF (Toronto symbol XDV; buy or sell through brokers; ca.ishares.com) holds 30 of the highest-yield Canadian stocks. It also considers dividend growth and payout ratios in making its selections.
The weight of any one stock is limited to 10% of the fund’s assets. Its MER is 0.55%. The ETF, which began trading on September 28, 1999, yields a high 4.6%.
Most market indexes are set up for investors so that the stocks in the index are those with the highest market capitalization and are also the most widely traded. However, the iShares Canadian Select Dividend Index ETF focuses on the 30 stocks that it sees as having the highest dividend yields; it also considers their prospects for dividend growth and the sustainability of their dividend payouts.
ETFs: iShares Canadian Select Dividend Index ETF’s more active management does impose a cost
That’s why this ETF is more actively managed than the iShares S&P/TSX 60 Index ETF. As a result, it charges a higher MER.
The fund’s top holdings are Canadian Tire at 8.0%; Bank of Montreal, 7.8%; Royal Bank, 6.8%; National Bank, 5.1%; Bank of Nova Scotia, 4.9%; TD Bank, 4.8%; TC Energy, 4.7%; BCE, 4.6%; CIBC, 4.6%; and Sun Life Financial, 4.0%.
Recommendation in Canadian Wealth Advisor: iShares Canadian Select Dividend Index ETF is a buy.
