iShares Canadian Select Dividend Index ETF (XDV) Review
On our journey to analyze some of the most popular exchange-traded funds (ETFs) in the investment world, we talked about BMO ETFs and Vanguard ETFs so far. However, this effort will not be complete without BlackRock iShares ETFs, which is the leading ETF manager in the world. To add some context to this claim, BlackRock boasts 389 different ETFs in the US market and 157 ETFs in Canada. These are more than its rival BMO and Vanguard ETF counts put together. In this article, we will be exploring the infamous iShares Canadian Select Dividend Index ETF, ticker symbol; XDV, listed in the Toronto Stock Exchange (TSX).
With over $2 trillion in assets under management and over 900 investment products, BlackRock is one of the leading players in the fund management game. This gives them the luxury of dropping their management fees and further attracting investors. In 2019, BlackRock entered into a strategic alliance with Canada’s RBC Global Asset Management to introduce the iShares brand for ETFs.
iShares Canadian Select Dividend Index ETF (XDV) is one that seeks to provide both long-term capital appreciation and a passive income source to its investors. To achieve this objective, XDV invests in 30 of the best-yielding companies in the Canadian stock market. As per BlackRock, XDV attempts to replicate the performance of the Dow Jones Canada Select Dividend Index.
Some of the biggest perks of XDV are its respectable dividend yield, monthly dividend payout, and high total return since its inception. Historical performance of this fund has been quite solid so far.
| Quick Facts | XDV.TO |
|---|---|
| Fund inception date | Dec 19, 2005 |
| Net Assets (Oct 31, 2021) | $1.8 billion |
| Exchange | Toronto Stock Exchange |
| Annualized distributions yield | 4.21% |
| Distribution frequency | Monthly |
| Management expense ratio | 0.55% |
| Account eligibility | TSFA/RRSP/RESP/RRIF/DPSP |
The management expense ratio of 0.55% is rather high compared with its peers such as BMO Monthly Income ETF (ZMI) at 0.2% and Vanguard FTSE Canadian High Dividend Yield Index ETF (VDY) at 0.21% MERs.
BlackRock ranks XDV as a medium-risk investment likely due to the fact that it has a very narrow scope of investment criteria. The ETF only focuses on high dividends in the Canadian market and holds only 30 companies. This can be considered as very little diversification compared to some other ETFs out there. XDV is also heavily relying on the financial sector with its asset allocation.
iShares Canadian Select Dividend Index ETF (XDV) Holdings
XDV ETF holds a mere 30 companies in its portfolio. Needless to say, these are some of the highest dividend-paying companies in Canada and some of the biggest companies as well. Below is a list of the top 20 holdings of XDV as of December 13, 2021.
| Holding Name | Weightage |
|---|---|
| Canadian Imperial Bank of Commerce | 8.48% |
| Bank of Montreal | 6.8% |
| Canadian Tire Ltd. Class A | 6.12% |
| Royal Bank of Canada | 6.11% |
| BCE Inc. | 5.05% |
| Bank of Nova Scotia | 4.99% |
| Labrador Iron Ore Royalty Corp. | 4.94% |
| Toronto Dominion Bank | 4.73% |
| TC Energy Corp. | 4.49% |
| National Bank of Canada | 4.04% |
| Emera Inc. | 3.72% |
| IGM Financial Inc. | 3.49% |
| Sun Life Financial Inc. | 3.0% |
| Power Corporation of Canada | 2.98% |
| Fortis Inc. | 2.91% |
| Great West Lifeco Inc. | 2.58% |
| IA Financial Inc. | 2.58% |
| Rogers Communications Non-Voting | 2.5% |
| Russel Metals Inc. | 2.5% |
| Canadian Utilities Ltd. Class A | 2.48% |
Almost all of the major banks in Canada have made the top 20 list within the holdings of XDV ETF. This results in a 56% asset allocation in the financial sector for this fund. The second and third highest asset allocations are into the communications and utility sectors with 11.5% each.
Banks are some of the safest investments out there (although not without risk). So one can think that their dividends are almost guaranteed. However, the financial sector is one that is highly regulated by the government as well. In theory, the government could intervene with the dividend payments during an economic downturn.
iShares Canadian Select Dividend Index ETF (XDV) Performance
iShares Canadian Select Dividend Index ETF has been in operations for almost two decades now. This is a very good time period to evaluate its performance. And it has not disappointed its investors.
Since its inception in 2005, XDV has given a total return of 186% until 2021. In dollar terms, an initial investment of $10,000 would have grown to $28,667 in 16 years. This is not an exceptional performance, but it has served its purpose of giving out consistent dividends.
Is XDV ETF for You?
The XDC ETF is one that you can use to generate a steady stream of income while you hold on to your investments and watch them grow slowly. However, it is not recommended to dump all your money into this ETF (or any one ETF/stock/mutual fund for that matter) since XDV has very little diversification. Use this fund to generate some passive income on your portfolio.
Check out the latest information about the fund on iShares.
Disclosure: Any information given in this article is not to be construed as investment advice. You must do your own research before investing any money in the stock market. All investments carry inherent risks even with the possibility of losing all your money.
