# Divident ETF: CDZ or XDV?



## bmckay (Mar 10, 2011)

I am wanting to invest in a dividend ETF. I was wondering what people's thoughts are on both CDZ and XDV...


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## Freedom45 (Jan 29, 2011)

Personally, I own both, but if I had to pick one, I'd lean towards CDZ. XDV is heavily weighted in financials, while CDZ is spread out a little better throughout a number of sectors.

Personal preference, and your decision may depend partly on what else you own. If you own some energy stocks, you may lean towards XDV for it's exposure to financials. If you own mostly banks, you may lean to CDZ for it's energy/industrials exposure.


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## Soils4Peace (Mar 14, 2010)

Like Freedom45, I believe the main distinction is that CDZ is spread out and XDV is heavy in the big financials. I went with CDZ for exposure to smaller market caps. I get the big banks and other financials from also holding a TSX index fund, which has lower management fees.


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## fatcat (Nov 11, 2009)

i buy equal amounts (so far) of XIU and CDZ


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## Financial Cents (Jul 22, 2010)

Banks and financials always find a way to make money.

That's why I owned XDV for awhile.

Now I own 10 stocks XDV holds, directly 

Like others have written, if you already have a few financials in your portfolio, go CDZ. Just know the CDZ MER is 0.10-0.15 higher than XDV.

My Own Advisor


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## larry81 (Nov 22, 2010)

fatcat said:


> i buy equal amounts (so far) of XIU and CDZ


strange, what is the overlap between the two ?


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## fatcat (Nov 11, 2009)

combining the 2 gives a better dividend return and exposure to some smaller companies and it dilutes the concentration of financials that you get with almost all the major etf's (like XIU and XDV)


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## Financial Cents (Jul 22, 2010)

If you already hold XIU, I don't see much extra value in holding XDV.

CDZ, you get more energy and industrials.


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## gibor365 (Apr 1, 2011)

Financial Cents said:


> If you already hold XIU, I don't see much extra value in holding XDV.
> 
> CDZ, you get more energy and industrials.


That's right. in XIU and XDV the major holdings are banks. So if you hold XIU or XIC, CDZ is better for diversification


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## larry81 (Nov 22, 2010)

fatcat said:


> combining the 2 gives a better dividend return and exposure to some smaller companies and it dilutes the concentration of financials that you get with almost all the major etf's (like XIU and XDV)


I personally own XIC for this reason


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## fatcat (Nov 11, 2009)

> If you already hold XIU, I don't see much extra value in holding XDV.
> 
> CDZ, you get more energy and industrials.





> That's right. in XIU and XDV the major holdings are banks. So if you hold XIU or XIC, CDZ is better for diversification


 that's what i concluded



> I personally own XIC for this reason


 CDZ and XIU in equal parts have a yield of 3% with an MER of .41

XIC has a yield of 2.19 with an MER of .25


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## dubmac (Jan 9, 2011)

I like CDZ because I can reinvest the montly dividend (DRIP) & buy more shares - last time I checked you can't do that with Ishares XDV. I did notice that as of April the dividend dropped on CDZ from $0.075 to $0.055 per share .


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## bmckay (Mar 10, 2011)

What causes the monthly distribution to fluctuate? This must mean that companies within the ETF either cut or raise their dividends...Or am I missing something?


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## gibor365 (Apr 1, 2011)

dubmac said:


> I like CDZ because I can reinvest the montly dividend (DRIP) & buy more shares - last time I checked you can't do that with Ishares XDV. I did notice that as of April the dividend dropped on CDZ from $0.075 to $0.055 per share .


Yeap, this is dissapoiting. Claymore is too greedy. I checked their top holdings, they have much high dividends than CDZ ... and I doubt their holdings cut dividends.
This is why I bought instread HEX (new income ETF from Horizon). Today they announce 1st monthly dividends , yield 14.31%. Pretty nice 
http://tmx.quotemedia.com/article.php?newsid=40484043&qm_symbol=HEX


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## Belguy (May 24, 2010)

XIC would probably be my first choice for a Canadian equity ETF because of it's broad exposure to the Canadian market. 

I prefer low fee, broad based ETF's for a long term, buy and hold core equity holding and XIC meets these requirements best.


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## bmckay (Mar 10, 2011)

Belguy said:


> XIC would probably be my first choice for a Canadian equity ETF because of it's broad exposure to the Canadian market.
> 
> I prefer low fee, broad based ETF's for a long term, buy and hold core equity holding and XIC meets these requirements best.


XIC is the best for that, but not if your investing for income.


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## fatcat (Nov 11, 2009)

i sort of feel like equal weights of XIU and CDZ gives you the best of both, broad exposure and a good return and a reasonable mer of .4


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## Brian Weatherdon CFP (Jan 18, 2011)

As a side-thought .........

There was a time when I very strongly wanted to avoid any exposure to two of Canada's banks. Nameless here, but one of them has been known for repeated gross errors such as entering and leaving area/s of business and costing shareholders enormously, and also faxing private client info to a junkyard in the U.S. despite repeated efforts to stop those faxes. Not that I would mention any party in particular . . .

If ETFs carry holdings I wish to avoid, I find it relatively easy to find a mutual or seg fund whose management is proven successful, and whose mandate steers away from such holdings I wish to avoid. A team of CAs / CFAs managing funds has the dexterity to aim at holdings I like, and avoid catastrophes. That's my personal opinion, and is one of several reasons I (like many) have tended to use ETFS for shorter-term strategies but not for the longterm. 

A more direct comparison if you want to make it.... You may find a dividend fund where 13% to 15% is split between two Cdn banks that broadly inspire great confidence, and two other banks that continually face questions are not appearing in the top 10 holdings. Compare that with an ETF which will not make that kind of judgment call.... I'm more comfortable choosing to hold a specific dividend fund rather than the ETF.

_Yes oh yes, I understand the rationale & justifications for ETFs. No reply needed._

Cheers! My opinion...you're really on the right track anyway with dividends, however you do it.

BW


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## larry81 (Nov 22, 2010)

what is the general opinion about complementing XIC with a small-cap ETF like XCS. I dont have this problem with my US exposure since i personally hold VTI and it include a signifiant portion small-cap.


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## gibor365 (Apr 1, 2011)

I'd sk what is the diference between XIU and XIC


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## I'm Howard (Oct 13, 2010)

Brian, your statement is confusing since , over the long run no fund manager consistantly beats the appropriate index, so I would think an ETF is a good long term hold.

Mutual Funds confiscate approximatly 2% of your value annually, , after twenty years that is almost 40% they have taken, that alone validates ETF's as a good long term hold.

The fact that many Funds change Managers during their life also adds weight to buying and holding ETF's.


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## Financial Cents (Jul 22, 2010)

@Larry81

Maybe I should invest in more small caps, but I don't. 

I keep my RRSP pretty simple: XIU, XBB, a couple U.S. dividend-paying stocks for U.S. and international exposure and I sprinkle in some VWO for good measure 

I find the XCS fee kinda high, over 0.55% right? I just hate fees though.

Do you have a specific reason why you want to hold XCS? Not for income I assume nor for yield (~1%).


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## Financial Cents (Jul 22, 2010)

I'm Howard said:


> Mutual Funds confiscate approximatly 2% of your value annually, , after twenty years that is almost 40% they have taken, that alone validates ETF's as a good long term hold.


Like diamonds but not nearly as pretty, fees are forever...


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## Belguy (May 24, 2010)

What about a combination of XCV and XCS and rebalance periodically?


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## Betzy (Feb 7, 2011)

gibor said:


> This is why I bought instread HEX (new income ETF from Horizon). Today they announce 1st monthly dividends , yield 14.31%. Pretty nice
> http://tmx.quotemedia.com/article.php?newsid=40484043&qm_symbol=HEX


TDW says it's actually 20.80% yield!! Whats up with this is it possible?
Monthly distribution, how long can they keep this up? Or is this just something to do with the fact it is brand new...?


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## andrewf (Mar 1, 2010)

It's almost certainly unsustainable. HEX should be able to provide a total return of perhaps 9% if nothing unfortunate happens.


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## warp (Sep 4, 2010)

Seems you guys never read all the small print.

First of all, anyone should just know that a yield of 15 % is not sustainable.

Here is the link about HEX that "GIBOR" posted.

http://tmx.quotemedia.com/article.php?newsid=40484043&qm_symbol=HEX

Read the footnote marked (1)
I'll even re-print it right here , as follows:

(1) The Horizons AlphaPro Enhanced Income Equity ETF (HEX) was launched on March 17, 2011. The monthly rate for April includes a prorated payment for the period from the ETF's launch to March 31, 2011. Monthly distributions are based primarily on option premiums written against the ETF's equity portfolio. As such, the current rate of distribution may not be repeated in future months. 

They even tell you current distributins may not..( prob means "will not")...be repeated in future months.

Secondly be aware that this ETF bases its disstributions on OPTION PREMIUMS, not income from its actual holdings. 
If you are happy with that, then its fine...but I do get the feeling few understood this.

Good luck


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## humble_pie (Jun 7, 2009)

one should ignore the TD figs.

they're from thomson reuters. Nobody understands the formula TRI used. Their system took the 1st div, annualized it & somehow went berserk.

as i explained in another thread, i think the horizon fund managers sold options fast & furiously in order to collect high premium with intention of flowing this through to unitholders in the 1st div (or maybe 1st couple of divs).

i think the objective was to quickly vault their new funds into the ranks of top income-paying etfs as will be shown in the screeners. This will rapidly attract new buyers to these funds.

there's nothing illegal or even surprising. All can be defended by saying that the portf managers believed markets to be slightly toppish recently, therefore harvested plenty high premiums pronto while the going was good. Mgrs may even have gone out longer in time so as to pluck bigger premiums. Gather ye rosebuds while ye may.

there were some huge volume & price leaps in bmo etfs also, a few months ago, that were clearly manipulations in order to get those new funds properly launched w adequate funding from investors ...


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## gibor365 (Apr 1, 2011)

Betzy said:


> TDW says it's actually 20.80% yield!! Whats up with this is it possible?
> Monthly distribution, how long can they keep this up? Or is this just something to do with the fact it is brand new...?


Horizons announced for this month $0.17874 per share. You can calculate yield 

Theoretically it's possible, AGNC paying about 19-20% for long time  , but I assume that on annual basis it will be in range 10-15%. Future will show.

'warp', did you see one stock or ETF who officially guarantee dividend yield?! 

_be aware that this ETF bases its disstributions on OPTION PREMIUMS, not income from its actual holdings. 
_
Distributions: Net call option and dividend income

_i think the objective was to quickly vault their new funds into the ranks of top income-paying etfs as will be shown in the screeners. This will rapidly attract new buyers to these funds.
_
As I mentioned before, I agree with your assumption. It's very possible. StockMarket is just a market.

Companies like AGNC, NLY, Invesco attract investors with huge dividends for long time.

BTW, i bought HEX long go before dividend was announced. Just covered calls idea was kinda interesting for me, so I invested couple of % of my portfolio


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## Brian Weatherdon CFP (Jan 18, 2011)

I'm Howard said:


> ....confusing since , over the long run no fund manager consistantly beats the appropriate index, so I would think an ETF is a good long term hold. .... Mutual Funds confiscate approximatly 2% of your value annually, , after twenty years that is almost 40% they have taken, that alone validates ETF's as a good long term hold. .... The fact that many Funds change Managers during their life also adds weight to buying and holding ETF's.


Hi Howard, I recognize the validity of your points here. (a) Few managers consistently match or beat index, and we only know that for sure in hindsight; (b) MER whether 1%, 2%, or more is a logical drag on results. (c) Funds managers move, retire or die in saddle. In these you are right.

Yet I propose: (a) with reasonable amount of asset we can get low-cost active management; (b) avoid or reduce some unwanted holdings _as mentioned yesterday_ that normally are prominent in ETFs; (c) select a team built around in-house mentoring so style and mandate remain even amid change of personnel.

Worthwhile discussion  I see the positions on both sides. 
For myself personally I've selected funds, and less often own ETFs.


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## webber22 (Mar 6, 2011)

Brian Weatherdon CFP said:


> ....For myself personally I've selected funds, and less often own ETFs.


Well go figure, a financial planner selecting high cost funds instead of ETF's.


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## Financial Cents (Jul 22, 2010)

@bmckay - so, did you make your decision yet? Curious...


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## larry81 (Nov 22, 2010)

webber22 said:


> Well go figure, a financial planner selecting high cost funds instead of ETF's.


At least he drink his own kool-aid 

No offense to Brian !


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## bmckay (Mar 10, 2011)

Financial Cents said:


> @bmckay - so, did you make your decision yet? Curious...


I have also seriously been looking at HEX now. A covered calls ETF is interesting and the yield is great. I will make my decision early next week...Either CDZ or HEX at this point. Might put $5000 into Shaw as well and hold for many years to come for the divy. Again, probably early next week. Are markets closed Monday?


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## Belguy (May 24, 2010)

My only dividend ETF is the iShares TR Dow Jones Select Dividend Index Fund (DVY), which I hold in my new LIF, for it's better diversification than the Canadian dividend funds.


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## bmckay (Mar 10, 2011)

It is better to put Canadian dividend paying securities in a TFSA and American dividend paying securities in a RRSP to avoid paying the withholding tax charged by the IRS. 

Am I correct?


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## humble_pie (Jun 7, 2009)

mister brian weatherdon cpl's argument for holding managed dividend funds rather than etfs is that the fund managers can select the banks.

he says he likes a fund that favours 2 widely-favoured banks, with a sprinkling of 2 others.

surely that's an argument for holding bank stocks outright & for avoiding all management fees entirely, even those of an etf.

the fact is that the universe of high-quality canadian common stocks paying dividends north of 2.8 or 3 percent is so tiny that investors with 100k or more are far better off selecting & owning some of these stocks outright instead of paying fund management companies.

capital gains can be much better controlled, too, for stocks held in outright ownership.


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## Financial Cents (Jul 22, 2010)

bmckay said:


> It is better to put Canadian dividend paying securities in a TFSA and American dividend paying securities in a RRSP to avoid paying the withholding tax charged by the IRS.
> 
> Am I correct?


That's my approach bmckay. I've got a few Canadian dividend-payers in my TFSA, my wife's TFSA and I only keep U.S. dividend-paying stocks in my RRSP or LIRA - to avoid withholding taxes.


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