iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (CDZ) 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 iShares S&P/TSX Canadian Dividend Aristocrats Index ETF, ticker symbol; CDZ, 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 S&P/TSX Canadian Dividend Aristocrats Index ETF (CDZ) is a fund loved by income-focused investors. With over $1 billion invested, this fund aims to provide investors with a steady monthly income through dividend payments. And best of all, the CDZ fund achieves this objective by investing in high-quality stocks from the Canadian markets.
It does not stop there. The iShares S&P/TSX Canadian Dividend Aristocrats Index ETF ETF is not just another dividend fund. Emphasis on the words ‘dividend aristocrats’ in the fund’s name. These are special types of companies that have increased their dividend payouts for several continuous years.
Below are the eligibility criteria for a company to be inducted into the S&P/TSX Canadian Dividend Aristocrats Index;
- The company’s security is a common stock or income trust listed on the Toronto Stock Exchange (TSX) and a constituent of the S&P Canada BMI.
- The security has increased ordinary cash dividends every year for at least five years, but can maintain the same dividend for a maximum of two consecutive years within that five-year period.
- The float-adjusted market capitalization of the security, at the time of the review, must be at least C$ 300 million. The float-adjusted market capitalization is calculated based on the volume-weighted average price (VWAP) of the security on the TSX over the last 10 trading days of the month-end prior to the Annual Review.
- For index additions, the company must have increased its dividend in the first year of the prior five years of review for dividend growth. This rule does not apply for current index constituents.
The key takeaway here is that the companies included in the CDZ ETF are high-quality dividend stocks that have increased over the past five years. Dividend growth stocks are one of the best ways to grow your investment portfolio as fast as possible.
| Quick Facts | CDZ.TO |
|---|---|
| Fund inception date | Sept 8, 2006 |
| Net Assets (Jan 7, 2022) | $1 billion |
| Exchange | Toronto Stock Exchange |
| Annualized distributions yield | 3.17% |
| Distribution frequency | Monthly |
| Management expense ratio | 0.66% |
| Account eligibility | TSFA/RRSP/RESP/RRIF/DPSP |
BlackRock identifies CDZ as a medium-risk investment likely due to the fact that the constituent companies of the fund are solely focused on dividend increases. While increasing dividend payouts are good for the investors, it is not necessarily the best option for a company as they are giving out the cash available for its own growth.
iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (CDZ) Holdings
The CDZ ETF contains about 89 different company holdings at the time of this article. One could consider that this is a rather small number comparing some of the ETFs out there with over thousands of holdings. However, due to the strict screening requirements this fund undergoes, 89 is a considerably good number.
Below are the top 20 holdings of CDZ and their respective weightage in the fund as of January 20, 2022.
| Ticker | Holding Name | Weightage |
|---|---|---|
| CNQ | CANADIAN NATURAL RESOURCES LTD | 3.53% |
| SRU.UN | SMARTCENTRES RL ESTATE INVESTMENT | 3.09% |
| ENB | ENBRIDGE INC | 2.9% |
| KEY | KEYERA CORP | 2.82% |
| PPL | PEMBINA PIPELINE CORP | 2.79% |
| POW | POWER CORPORATION OF CANADA | 2.44% |
| CM | CANADIAN IMPERIAL BANK OF COMMERCE | 2.33% |
| BCE | BCE INC | 2.19% |
| GWO | GREAT WEST LIFECO INC | 2.17% |
| IMO | IMPERIAL OIL LTD | 2.16% |
| EIF | EXCHANGE INCOME CORP | 2.13% |
| FSZ | FIERA CAPITAL CORP CLASS A | 2.12% |
| TRP | TC ENERGY CORP | 2.09% |
| BNS | BANK OF NOVA SCOTIA | 2.04% |
| BMO | BANK OF MONTREAL | 1.95% |
| SMU.UN | SUMMIT INDUSTRIAL INCOME REIT UNIT | 1.88% |
| CPX | CAPITAL POWER CORP | 1.85% |
| CU | CANADIAN UTILITIES LTD CLASS A | 1.85% |
| CSH.UN | CHARTWELL RETIREMENT RESIDENCES RE | 1.83% |
| TD | TORONTO DOMINION BANK | 1.8% |
To mitigate the reliance on any one company, the CDZ fund keeps all the holdings at a bare minimum and almost equal proportions.
iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (CDZ) Performance
The CDZ fund has been quite consistent with its distributions since its inception. With these dividends and capital growth, the fund has grown by 194% since 2006. In dollar terms, an investment of $10,000 in 2006 would have turned into $29,445 by 2022.
The steady growth of the chart above shows that the incomes from the fund have been consistent. When most companies cut down their dividends during the crisis of the COVID-19 pandemic, the CDZ fund was able to maintain its dividends due to the nature of the companies it holds.
Is CDZ ETF for You?
If you are looking for consistent cash flows from your investments, CDZ ETF might be a good pick for you. With a respectable 3.17% dividend yield at current market prices, this yield should increase ever so slightly every year as the fund’s underlying companies increase their dividend payouts. Why not invest directly in the dividend aristocrat companies themselves? Well, for one, it is almost impossible for an individual to attain the level of diversification this fund has achieved with 89 different stocks. Also, any of these companies could stop paying, cut down, or not increase its dividend. While the CDZ fund will take care of delisting such a company from the fund, your private portfolio might not be able to do this as effectively.
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.
