# XIU versus XDV Choice Distinction?



## dogleg1 (Jul 4, 2016)

Are there significant reasons for choosing one of these ETFs over the other?


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## AltaRed (Jun 8, 2009)

A few reasons I can think of: 1) one does not like the asset allocation of one (likely XDV) vs XIU due to financials concentration, 2) MER favours XIU vs XDV, 3) one wants to have a higher cash flow stream to lessen sale of equities for one's SWR (favours XDV), 4) one wants to defer tax longer (favours XIU with its cap gains deferment vs XDV dividends) from a Total Return perspective, and while I have not done the comparison, XIU may have a better long term TR than does XDV.


Also see http://www.moneysmartsblog.com/comparing-market-cap-etf-vs-dividend-etf-how-much-duplication/


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## james4beach (Nov 15, 2012)

Yes there are some notable differences. In my opinion XDV is just way too heavily exposed to one sector. You might also want to consider CDZ. It depends on what your priority is, but between sector exposure, tax efficiency and MER, personally I think XIU is the best.

XDV
* 62% financial sector exposure
* 77% of distributions (last 5 yrs) as eligible dividends, medium tax efficiency non-reg
* high MER 0.56%

XIU
* heavy on top two TSX sectors, financials 41% energy 22%
* 87% of distributions (last 5 yrs) as eligible dividends, excellent tax efficiency non-reg
* low MER 0.18%

CDZ
* better sector diversification, financials 23% energy 18%
* 53% of distributions (last 5 yrs) as eligible dividends, not as tax efficient non-reg
* high MER 0.67%


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## My Own Advisor (Sep 24, 2012)

For many of the reasons you've highlighted above:

1. XIU has more holdings (double?) than XDV; more diversification.
2. XIU is more tax efficient.
3. XIU has lower cost.

At the end of the day, I think XIU is one of the best lower-cost Canadian equity ETFs you could ever own. Only a handful of others (VXC, ZCN, XIC) _might _be better long-term.

With XDV once you own the top banks, top 3 telcos and a few insurance companies that's basically the proxy for the fund and not worth the fee at all IMO unless you are not willing to own any of those stocks directly.


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## james4beach (Nov 15, 2012)

I forgot another reason to choose XIU over the others: an established track record over a very long history.

XIU has been around since 1999 and its return since inception is 7.1% per year. That's more than 17 years, and an excellent return despite starting right near the peak of the stock market bubble in 1999.


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## EngPhysGuy (Jul 9, 2015)

XIU follows the TSX60... most Canadian ETF providers have something very similar to this. 

XDV is the iShares Canadian dividend ETF. Most Canadian ETF providers have a dividend ETF, though they seem to all follow different rules/benchmarks and thus have a different make up. Might want to take a look XEI as well - it has good broad exposure to the various sectors. About 30% energy/financials as well as 13% REITs, with low 0.22% MER.


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## dogleg1 (Jul 4, 2016)

Thanks to all of you for your helpful information. I believe I am going to buy XIU . I have owned XDV for a while and think I will sell it and replace it with XIU as well.


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## Argonaut (Dec 7, 2010)

All of these ETFs have the same or similar holdings, just different weights. One approach is to own a sample of them directly, for a MER of 0.00%. I'd only be willing to pay a MER if the investment was something I couldn't do myself, whether it's because it's illiquid and obtuse (bond market), there may be storage problems (precious metals), or the market is incredibly efficient and low cost (US market).


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## AltaRed (Jun 8, 2009)

Rolling your own does not work for those without the interest or acumen to roll their own. I have put my ex is into 100% ETFs* because she does NOT want to even think about a stock, nor am I motivated in managing a stock portfolio for her (thank you very much). I know others who want to spend 101% of their time doing other things they enjoy more. It is not a 'one size fits all'.

* Is circa 50/50 in XDV/XIU for her Cdn equity component. Why? Because it works best for her to 'juice' her annual cash flow just enough (above that that would be received from XIU alone) to 'warrant' being in XDV (or any of the other higher yielding ETFs).


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## dubmac (Jan 9, 2011)

I own and drip CDZ & have been happy with it despite the highish MER. I purchased & drip 2 financials stocks - BNS and SLF - to make up more of the financials component in the same acount as CDZ. That way I get my financials exposure - but not in the ETF.
In a TFSA account I purchased VDY (MER = 0.22%) which is 64% financials and around 19% Oil & Gas. It did well last year (+31%) - produces a nice distribution which I have been accumulating and plan to reinvest. 
Banks and this ETF are expensive now - I wouldn't purchase till there is a correction. VDY and XFN are nice ETF's to get bank exposure.


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## Argonaut (Dec 7, 2010)

This is what I don't understand -- something like XFN should be considered a crime against investors. You're paying 0.63% MER for the ever-so-complicated strategy of picking Canadian banks and financials. Hmm, I wonder what's going to be in the top holdings? In a time like now where bank equity yields are dropping towards 3% due to capital gains, that 0.63% MER starts to look pretty extortionate.


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## My Own Advisor (Sep 24, 2012)

Agreed Argo.

You could say the same for a REIT ETF. Own top-5 of XRE and cherry pick after that if you really want to. Save the 0.6% MER. 

I would personally never own XFN. It's not that difficult to figure out the biggest 5 banks and 3 largest lifecos. Buy and hold for as long as you possibly can. But to each their own


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