# CDZ or XIU or both



## runner39 (Mar 11, 2010)

Which one to have in the portfolio, or have both?

They overlap with 18 holdings, MER favours XIU, dividend favours CDZ.

performance over last year favours CDZ, realize XIU has been around longer.


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## the-royal-mail (Dec 11, 2009)

Not XDV?


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## CanadianCapitalist (Mar 31, 2009)

I own XIU. I don't buy into the idea of investing solely in dividend paying stocks.


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## runner39 (Mar 11, 2010)

the-royal-mail said:


> Not XDV?


CDZ outperforms XDV and better dividend.


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## fatcat (Nov 11, 2009)

there is so much overlap between these 3 funds
i have equal weight of cdz and xdv

xiu yields 2.5%
cdz = 4.29
xdv = 3.68

xiu and xdv are similar insofar as they both have a lot of the banks at the top 

xiu is the low cost one stop shop but the yield isn't nearly as good


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## andrewf (Mar 1, 2010)

Yield isn't everything. I'd expect total return for XIU to be better than either of the dividend holders, but due to higher volatility/risk.


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## fatcat (Nov 11, 2009)

> Yield isn't everything. I'd expect total return for XIU to be better than either of the dividend holders, but due to higher volatility/risk.


even at 4% vs 2.5% .. i know that capitalist also preferred xiu, can you expand on your thinking ?


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## andrewf (Mar 1, 2010)

Companies return cash to shareholders in two ways:

- dividend payments
- share buybacks

Looking at dividend yield alone is ignoring one huge and growing component of total return. For tax reasons, many investors prefer that companies not issue dividends but rather repurchase shares. Also, it's easier for companies to repurchase shares at their discretion without committing to stream of dividend payments.

Then we have growing companies, which do neither but aim for capital appreciation through growth. Dividend funds will exclude these.


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## fatcat (Nov 11, 2009)

> Looking at dividend yield alone is ignoring one huge and growing component of total return. For tax reasons, many investors prefer that companies not issue dividends but rather repurchase shares. Also, it's easier for companies to repurchase shares at their discretion without committing to stream of dividend payments.


right, and if you held an equal amount of say xdv versus xiu for 5 years, there would be enough in the way of share buybacks to give a total return that was better for xiu than xdv ?



> Then we have growing companies, which do neither but aim for capital appreciation through growth. Dividend funds will exclude these.


this i get but isn't the thinking lately that if we are going to experience slow or flat growth, then dividend stocks are the way to go ?


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## runner39 (Mar 11, 2010)

andrewf said:


> Yield isn't everything. I'd expect total return for XIU to be better than either of the dividend holders, but due to higher volatility/risk.


http://www.morningstar.ca/globalhom...ected=&action=&csvfile=&nodata=0&aspredirect=


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## andrewf (Mar 1, 2010)

fatcat said:


> right, and if you held an equal amount of say xdv versus xiu for 5 years, there would be enough in the way of share buybacks to give a total return that was better for xiu than xdv ?


Maybe, maybe not. Hence my point about added risk. XDV also leaves you even more concentrated in a handful of industries (esp financial) than XIU.

I'm saying that you should not pick investments solely on the basis of dividends. Total after-tax return is the name of the game, and dividends are just a part of that.


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## CanadianCapitalist (Mar 31, 2009)

andrewf said:


> Maybe, maybe not. Hence my point about added risk. XDV also leaves you even more concentrated in a handful of industries (esp financial) than XIU.
> 
> I'm saying that you should not pick investments solely on the basis of dividends. Total after-tax return is the name of the game, and dividends are just a part of that.


That's my opinion as well. As andrewf points out, corporations can do three things with earnings: (1) Reinvest in business (2) Dividends (3) Buybacks. If a company can earn a better return on earnings by investing in the business than Joe public can why would you want them to return cash to you either via dividends or buybacks? By focusing solely on dividends, investors miss out on these fast growing companies. 

Don't get me wrong. I'd rather have a company return cash to shareholders if it can't do any better with earnings. For a lot of mature companies, that's the case. But again, even these companies can return cash to shareholders by share buybacks. So, why focus just on dividend payers and exclude every other company?


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## the-royal-mail (Dec 11, 2009)

I'm not sure I agree with what I'm reading here, but maybe I just don't understand. I'm a shareholder. My SOLE reason for investing and giving my money to any business is because I want the best possible return on my investment in the shortest amount of time. If they keep all the money for themselves, where do *I* fit into the benefits from their good business decisions? Life is short and I don't have 50 years. If you want to keep me interested I need to see good returns or improvement in the stock value (thus increasing the value of my investment when I cash out) or at least some dividends. I'm happy to DRIP but I want to see that money coming into my account, to my name. I'm not a doormat and I certainly won't be travelling any one-way streets.


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## HaroldCrump (Jun 10, 2009)

the-royal-mail said:


> I'm not sure I agree with what I'm reading here, but maybe I just don't understand. I'm a shareholder. My SOLE reason for investing and giving my money to any business is because I want the best possible return on my investment in the shortest amount of time. If they keep all the money for themselves, where do *I* fit into the benefits from their good business decisions?


Because their sound business decisions will lead to appreciation in your stock price.
Appreciation is also a type of return (capital gain).
Theoretically, every year, you can sell off the fraction of your shares that represent the gain and keep your original capital intact.


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## fatcat (Nov 11, 2009)

> That's my opinion as well. As andrewf points out, corporations can do three things with earnings: (1) Reinvest in business (2) Dividends (3) Buybacks. If a company can earn a better return on earnings by investing in the business than Joe public can why would you want them to return cash to you either via dividends or buybacks? By focusing solely on dividends, investors miss out on these fast growing companies.


surely that can't be true if we have to endure a slow growth environment for several years, can it ?


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## Belguy (May 24, 2010)

Pay Daddy first!!!


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