# ZUT vs XUT



## gibor365 (Apr 1, 2011)

If you would like to buy Canadian Utility ETF, would you go with ZUT or XUT?


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## fatcat (Nov 11, 2009)

I have ZUT and have done well with it. I like their equal weighting.


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## james4beach (Nov 15, 2012)

I hold both in different accounts. The MERs are the same (BMO lists 'management fee', not MER). I prefer ZUT which is better diversified and has the higher yield, 5.72% - 0.62% MER = *5.1% yield*

XUT: 10 stocks, very heavy in Fortis (22%)
ZUT: 13 stocks, equal weighting


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## Argonaut (Dec 7, 2010)

XUT: Paying 0.62% MER for a fund that is over 50% composed of Fortis, Emera, and Canadian Utilities. Ugh. Anybody researching utilities will come across these three names first.


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## fatcat (Nov 11, 2009)

Argonaut said:


> XUT: Paying 0.62% MER for a fund that is over 50% composed of Fortis, Emera, and Canadian Utilities. Ugh. Anybody researching utilities will come across these three names first.


+1 ... one of the reasons i chose ZUT ... you might as well just buy fortis and emera and save the mer with XUT ...


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## james4beach (Nov 15, 2012)

If you're looking to buy more utilities (as I am) it's probably good to be sitting and waiting these days.

Today, JE cut their dividend and the shares plummeted. My guess is that now we're past year end, some of these companies will reduce their distributions (maybe also ATP and TA) to have more sustainable payouts.

Impossible to time markets of course, but the group's valuation looks high. I'm waiting before buying any more ZUT


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## gibor365 (Apr 1, 2011)

ZUT looks also better choice to me... the problem that from 13 holdings , I wouldn't want 5-6.... and I already have small positions in FTS and TA, but to buy what I like- - not enough funds....
Is there any Utility ETF that holds both US and CAN stocks?


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## james4beach (Nov 15, 2012)

Also a reminder to everyone that these yields can be misleading because they're based on past distributions.
For example, ZUT lists its portfolio yield as 5.79% which is overstated.

JE recently announced it's cutting its dividend starting in a few months. This kind of knowledge is not embedded in the ETF yield quotes (ZUT will still calculate yield based on the stock's current payout). If you want a more accurate forwarding looking yield, you should compile a table of ZUT's holdings (such as this one I made a while ago) and adjust the forward looking yields based either on company announcements, or your own projects if you assume dividend cuts are coming.


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## doctrine (Sep 30, 2011)

Ugh. Know what you buy, even in an ETF. XUT and ZUT are full of stocks that pay dividends greater than 100% of net earnings. Some of them are outright losing money yet paying 8-9% yields. Fortis, Canadian Utilities, and Emera are the only reasonably profitable utilities in Canada that pay less than 100% payout. The yields are lower though, because all utilities have a higher than average P/E - the three of them average a 20 P/E and a yield of 3.3%.

The only way to get exposure to a solid utility (CU) at less than a 15 P/E is to buy ATCO, which is a holding company that owns about 55% of Canadian Utilities. It's P/E is 12, yield is 1.8%, payout of 25%, has a 19 year consecutive dividend increase history and has been accelerating growth - the dividend is up 33% since 2011.


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## Argonaut (Dec 7, 2010)

doctrine: I like your ATCO pick. Just wish its dividend yield was higher. I'd maybe buy at $76 for a 2% yield.

For yield on utilities, it may be a thought to look south for more choice. Con Ed comes to mind first, although its dividend growth recently is even more sad than Fortis. Less than 1% a year doesn't even beat the official inflation numbers.


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## gibor365 (Apr 1, 2011)

Argonaut said:


> For yield on utilities, it may be a thought to look south for more choice. Con Ed comes to mind first, although its dividend growth recently is even more sad than Fortis. Less than 1% a year doesn't even beat the official inflation numbers.


I agree. Too bad I couldn't find any US Utilities ETF Hedge to CAD$, as I was planning to buy into TFSA.
Also, I'm not sure if for US Utilities exposure better to get ETF like VPU or XLU (MER is really low) or pick 1-2 Utilities. I will be trying on weekend to crunch David Fish's dividend champions/contenders spreadsheet to find goo individual Utility stock


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## james4beach (Nov 15, 2012)

I don't own any US stocks/ETFs with any meaningful dividends. What happens (tax wise) to dividends you're paid out from something like that?


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## gibor365 (Apr 1, 2011)

james4beach said:


> I don't own any US stocks/ETFs with any meaningful dividends. What happens (tax wise) to dividends you're paid out from something like that?


If you hold it in registered accounts like RRSP or LIRA, nothing happens, you don't pay any taxes except FX rate.... I hold a lot of US blue-chips, PM, JNJ, PG, PEP, MO, MCD .... just to name a few, and ETFs like VTI , VEA ... and I'm pretty happy with them

P.S with LP. MLP. ADR - rules are different


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## gibor365 (Apr 1, 2011)

Argonaut said:


> Con Ed comes to mind first, although its dividend growth recently is even more sad than Fortis. Less than 1% a year doesn't even beat the official inflation numbers.


After checking out dividend aristocrats found 2 best candidates: ED ,VVC, WGL .
Current valuation looks better for ED, 16% pullback recently and it's a lot considering that in 2008-2009 it fell just 20% (SPY fell almost 50%) , about 4.5% yield, beta 0.18, comparing to other utilities pretty good debt/equity (less than 1), payout ratio 63, reasonable P/E < 15. The biggest drawback is dividend growth that is less than 1% annually.
Both VVC and WGL have a little better growth, 2% and 3-5% , but also more expensive


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## james4beach (Nov 15, 2012)

Just FYI, yesterday I sold my XUT. I already hold ZUT and I'm keeping that one instead as I think it's better diversified, and my logic is that if I'm going to get the risk of utilities anyway, I might as well go with the higher yields.


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## favelle75 (Feb 6, 2013)

Doubled my position in ZUT today. It went down below what I bought it at 6 months ago ($14.55) so I figured what the hey.


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## james4beach (Nov 15, 2012)

I only found old threads on ZUT. The distribution recently increased from $0.060 to $0.065 per month. Taking the more conservative number and assuming it stays constant at $0.72 a year, that gives ZUT a yield of 4.7%. If you believe last month's $0.065 distribution is sustainable, then it's a yield of 5.1%

Are utilities still paying out unsustainably high dividends, as they were in 2013?


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## doctrine (Sep 30, 2011)

ZUT struggles with identifying solid utilities. It only has 10 holdings in equal weight and 2 of them are not very good. 

-Just Energy cut its dividend 3 years ago by 40%, cratering stock price still results in a 12% dividend yield and in its most recent quarter saw a 20% drop in EBITDA despite a promise to increase it 10% year over year - clearly in danger.
-Transalta cut its dividend several times over the last 6 years and is a hot mess. It's current dividend is 80% lower now, but their revenue is plummeting and they are losing money in a struggling Alberta power market and cannot replace the legacy coal assets at anything resembling current valuations.

The good news is the other 8 holdings range from decent to pretty good. I personally have Fortis. All 8 of the others have raised dividends in the last year. If they just refused to hold utilities that cut dividends in the last 5 years, they would lose a lot of trash.


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