# ZDV - new dividend ETF



## Sherlock (Apr 18, 2010)

BMO's new dividend ETF started trading yesterday. How do people think this compares with XDV and CDZ? The MER at 0.35 is lower, and the yield is higher. It seems more attractive at first glance but are there any potential disadvantages compares to the other two?


----------



## CanadianCapitalist (Mar 31, 2009)

I noticed this ETF as well. I'm writing about it on my blog on Monday. A lower fee dividend ETF was on my wish list, so this is good news. It's well diversified, holds 51 stocks, the yield is decent. This is excellent news for investors.

Don't worry too much about volume as long as bid/ask spreads are tight. ETF providers often keep spreads tight by working with market makers.


----------



## andrewf (Mar 1, 2010)

CC, did you accidentally edit over the OP's post?


----------



## gibor365 (Apr 1, 2011)

CanadianCapitalist said:


> I noticed this ETF as well. I'm writing about it on my blog on Monday.


Interesting to read.... Please give a link.
I took a look at new ETF...really MER is much lower than XDV and CDZ. 
Holdings are about 55% financials + energy.
Yield looks like about 4.7% , a little high than XDV and CDZ (XDV is weird with dividends, one month they can pay 3 cents and other 12 cents).

I'd like to see ETF that combines US and CAD dividend champions, banks, telecoms, some utilities and energy from Canada and rest from US


----------



## CanadianCapitalist (Mar 31, 2009)

andrewf said:


> CC, did you accidentally edit over the OP's post?


Oops, yes I did. I'm so sorry Sherlock. Feel free to edit the post. I did the best I could to put the original post back.

Link to the etf:
http://www.etfs.bmo.com/bmo-etfs/glance?fundId=86809


----------



## FrugalTrader (Oct 13, 2008)

This ETF looks interesting. I like the lower cost, but not sure of the weighting. Top holdings are utilities that have extremely high payout ratios.


----------



## Sherlock (Apr 18, 2010)

Haha no problem, I can't remember my exact post but I'll try to edit it with my questions.


----------



## humble_pie (Jun 7, 2009)

at the risk of singeing this new etf, it sounds like just another marketing bundle to me. This one comes with a shiny new package boasting a new low MER, but all the rest is a great big fat rebundled bore, imho.

we don't have 51 top-of-the-line blue chip payors of high eligible dividends in canada. Therefore logic suggests to me that some of the 51 are going to be non-eligible dividend payors, ie payors of what are often known as distributions. This in turns means complicated T3 tax receipts with part allocations to eligible dividends, returns of capital, interests, capital gains & possibly some foreign non-business income.

ouf. Who needs this. Extremely small investors - those with 10-30k size portfolios - may like having their dividend soup served up cheap albeit with watered-down ingredients. But i for one never want outside managers fooling around with my taxable income. I always want to be able to plan in advance what kind of income i'll be receiving.

investors with 100k or more would do better owning the top canadian dividend payors outright imho. There are not many of these quality big cap payors with strong dividend histories. They are easy to find. No MERs. No fees. Drippable dividends. 100% eligible for substantial canadian dividend tax credits. No costs whatsoever.

another small step up & investor can sell otm call options on these same stocks. Now the current yields will be pushing into 8-10% territory, not including any potential gains in the underlying stock itself.

is somebody saying yield 4.7% ? not worth mentioning ...


----------



## Eder (Feb 16, 2011)

If I only had 25k to invest I would just buy the 5 best in this ETF and not have to own the dogs in this ETF as Humble alluded to

I'd pick

BCE
BMO
TransCanada
Fortis
Magna

from ZDV's holdings


5k in each would be well diversified and will yield around 4% total but more importantly there is growth here in capital gains and dividend growth, and no MER to dilute returns.


disclaimer ( I still hold a bunch of XIU ...I should practice some of what I preach)


----------



## warp (Sep 4, 2010)

we don't have 51 top-of-the-line blue chip payors of high eligible dividends in canada. Therefore logic suggests to me that some of the 51 are going to be non-eligible dividend payors, ie payors of what are often known as distributions. This in turns means complicated T3 tax receipts with part allocations to eligible dividends, returns of capital, interests, capital gains & possibly some foreign non-business income.


investors with 100k or more would do better owning the top canadian dividend payors outright imho. There are not many of these quality big cap payors with strong dividend histories. They are easy to find. No MERs. No fees. Drippable dividends. 100% eligible for substantial canadian dividend tax credits. No costs whatsoever.



> Humble:
> 
> Would you care to post a list of what you yourself would consider :
> 
> ...


----------



## andrewf (Mar 1, 2010)

As far as tax treatment, it seems mostly irrelevant to the vast majority who would be holding this fund in a TFSA or RRSP. 

I am also suspicious of the weighting methodology.


----------



## Jon_Snow (May 20, 2009)

Not enough there for me to choose it over two of my favorite holdings, XDV and CDZ.


----------



## warp (Sep 4, 2010)

HUMBLE : 

I was hoping you would reply to my previous request to you, from a few posts ago on this thread, as follows:

Humble:

Would you care to post a list of what you yourself would consider : 

"top-of-the-line blue chip payors of high eligible dividends in canada"

And perhaps which ones you presently own/would buy today.

Thanks.


----------



## humble_pie (Jun 7, 2009)

hello warp i'm glad you brought this up again, i missed it 1st time around.

the fact is that your own list is probably quite a bit better than mine, lol.

you see, i have to pick among good old, big old, blue chip old canadian stuff just like you do. But my list has an extra criterion which is that the GOBO stuff has to have highly liquid option markets, meaning that the institutions do seriously play in the options.

for example, i think it's a good idea to always have 3 banks. My 3 happen to be td, bmo & ry even though i presently prefer bns to ry for several reasons. However, ry is where the option volume is, so that's where i stay for now. For a non-option investor like yourself, my reason would not make any sense.

in pipelines i have trp, altagas & veresen, which is the former fort chicago. All 3 have options, but ala & vsn option markets are so thin as to be unfavourable. I don't mind this at all, because the underlyings (the stocks themselves) have risen wonderfully & substantially since 2009 when i began buying them. However, the absence of an active option market is a bit of a downer for me.

among energy dividend payors i hold cpg (hi divs) & talisman (insignificant divs plus i'm easing slowly out of this stock.) I do have interests in other energy lo-dividend payors but through naked put positions, not through stock holdings.

and so on. In telcos i happen to hold bce but there are certainly persons with far greater knowledge & insight than myself who prefer telus.

in reits, which i would only hold in registered, i happen to have btb.un, a small risky item that i have to do-the-belguy  over just about every single day. Lots of debt, but high yield & stock has risen from the grave where i bought it 18 months ago. I'm eyeing newly-listed DI.UN, a dundee product focusing on european real estate. Before you say do-the-belguy-plus-plus-plus , may i mention it holds german commercial RE only and these are limited to buildings where the german postal service is key tenant ...

warp, if you look back through this thread, you will see Eder offering an excellent short list of 5 well-selected diversified dividend payors. I have 3 from his list; of the 2 others fortis is well-known & magna is an interesting suggestion, probably something i should look into especially if one believes (as i do) that recovery/engineering/manufacturing stocks are not so far off as many doomcriers imagine
.
another person frequently posting his own good short list is argonaut. Again, a well-selected diversified list of quality dividend payors. I even notice that another cmf member has recently pre-empted argo's trademark list & started calling it his own invention !! tch tch

bref, Warp i am sure you already have an excellent selected list. The choices are so easy for us canadians. There is no reason imho for anybody to hold dividend funds, when with zero work & zero cost they can hold the real thing & reap 100% of the benefits.

another reason to hold dividend payors outright & not via a dividend fund is perfect control of the taxation consequences. One knows in advance what the dividends will be; and one can control capital gains from the odd sale now & then down to a perfect tee.


----------



## humble_pie (Jun 7, 2009)

... drafting ...


----------



## warp (Sep 4, 2010)

HUMBLE :

Thanks for the exteneded reply.

I hold almost all of the names you mentioned in your post, so it seems that we may think alike, although I am not an options guy.......

I help friends and family manage smaller accounts, ( and some not so small), and since this is a thread started about ZDV, the new BMO "dividend" ETF...I looked into it.

I actually think its a good holding for a portion of a person's portfolio , especially if that person has neither the time or inclination to follow the markets and try and choose what to buy specifically.
It seems to be more expanded in terms of its holdings than the other dividend ETF's in Canada
It's too new right now though, so I would hope the volumes pick up with time.

I also thank all the other posters who put their good dividend stock "lists" on this board, and hope they all continue to do so.

The other problem these days, is to try to figure out what to do with the portion of one's portfolio that you try to keep in "fixed income".
It's getting harder and harder every day to put this money to work, to try and get any kind of reasonable return while mitigating the risks.

Any thoughts on these 2 issues facing us today?

Thanks


----------



## james4beach (Nov 15, 2012)

ZDV was mentioned a couple times in the "what are you buying" thread but I didn't want to clutter that thread.

I think ZDV actually looks pretty good. I'm not looking for a dividend ETF myself, but if I was, I think this is a good candidate.

MER is 0.38% which isn't too bad for a specialty ETF. The iShares XDIV has a lower MER but that fund is very highly concentrated in financial stocks.

I like the ZDV portfolio better. It's well diversified, about as well as you can diversify in a dividend portfolio:
39% financials
12% utilities
12% energy
11% communications
8% industrials
7% materials

So it's a pretty good spread. The top holdings are all good quality stocks (ENB, RY, BNS, BCE, TD, CM, CNR, T, BMO, TRP) and actually looks very similar to my 5 or 10 pack.

The 1 year performance is poor, but longer term performance looks fine to me. In any non index portfolio, you're going to get performance that diverges from the index... that's not surprising. Overall I like their portfolio composition.

For the dividend investors, I also think a really good portfolio could be: ZDV and ZDY. That covers Canada + US, for better diversification, and ZDY also has great sector diversification and high quality top holdings.

Thoughts on this?


----------



## agent99 (Sep 11, 2013)

I sold our ZDV holdings in taxable accounts because we already own many of the same stocks there. I still have $10K of ZDV in my TFSA. It has done poorly this year compared with our individual holdings. Maybe it will do better in 2021. I will leave it there. I just bought $10k of XDIV for my wife's TFSA so we have a horse race on!

Some may question why I have dividend ETFs (and stocks and pfds) in TFSAs. We do have some GICs and corporate bonds - but those were bought when yields were 2 to 3 times current levels. Problem now, is there is not much choice. Earn next to nothing on GICs or bonds or go to preferreds or common stock. Acceptable pfds have been bid up, so pickings are slim there too.

Re ZDV vs XDIV - I am not much concerned about the higher Financial allocation of XDIV. Over past 10 yrs, XFN beat XIU by 130 to 79 % total return - Financial, esp banks pay their way!

You may find this study of interest. Over the period of the study (09-1997 to 12-2020) the dividend portfolio chosen beat the composite index annualized total return by 11.1 to 6.6%. We have many of same stocks in our portfolio, as no doubt do ZDV and XDIV. In larger account, might as well roll your own and save the MER (although at 0.11% XDIV's is minimal). Regardless, this does show why many of us in retirement have dividend paying portfolios.

I should look at ZDY and similar for RRIFs. No unused cash there at present and just one US stock. Do have foreign ADRs that generate US$ for our trips South - This year I used the US$ to buy that one stock!


----------



## gardner (Feb 13, 2014)

james4beach said:


> [ ZDV ] MER is 0.38% which isn't too bad for a specialty ETF. The iShares XDIV has a lower MER but that fund is very highly concentrated in financial stocks.


The Vanguard fund -- VDY.TO -- has a MER of 0.2%. It tracks the FTSE Canada High Dividend Yield Index which, at least at the moment is different from the mix BMO has in ZDV. I regard the two as somewhat complimentary and hold equal amounts of both, balanced once a year using new money. Obviously there is a lot of overlap, but there is also a slight diversification between them.


----------



## agent99 (Sep 11, 2013)

gardner said:


> The Vanguard fund -- VDY.TO -- has a MER of 0.2%. It tracks the FTSE Canada High Dividend Yield Index which, at least at the moment is different from the mix BMO has in ZDV. I regard the two as somewhat complimentary and hold equal amounts of both, balanced once a year using new money. Obviously there is a lot of overlap, but there is also a slight diversification between them.


VDY has had a better performance than ZDV over past 8.8yrs (inception of VDY). This perhaps because VDY has about 59% in financials vs about 35% in ZDV and 55% in XDIV. XDIV hasn't been around for long, but seems similar in performance to VDY, again because both have large financial allocations.

As I probably already said, I don't usually buy ETFs, but now have some ZDV and XDIV in our TFSAs - Mainly because of lack of good fixed income options and low unit price that suits the smaller accounts.


----------

