Decoding Top Canadian Dividend ETFs: Pre and Post Great Recession Comparison

This post serves as a continuation of my previous article discussing the best dividend ETFs suitable for beginners. Here, I will be highlighting the top Canadian dividend ETFs. My investment approach has consistently leaned towards passive investing, and I find that dividend ETFs align seamlessly with my strategy. These dividend ETFs play a pivotal role in diversifying my portfolio, complemented by the inclusion of a select few dividend aristocrats.

It's crucial to evaluate an ETF's performance relative to a benchmark. In this article, I'll be utilizing the iShares Core S&P/TSX Capped Composite Index ETF (XIC) as the benchmark for analysis.

Ticker	Holdings	MER	P/E	Dividend	Yield	CAGR	Best Year	Worst Year	Finance	Energy	Inception
XIC	247	0.06%	15.64	Q	2.48%	7.12%	2009 (34.54%)	2008 (-33.34%)	33.55%	19.38%	2001
CDZ	80	0.66%	15.82	M	3.74%	5.79%	2009 (38.44%)	2008 (-29.97%)	22.27%	24.44%	2006
XDV	30	0.55%	12.39	M	4.01%	5.57%	2009 (37.45%)	2008 (-31.15%)	58.70%	5.68%	2006
VDY	65	0.22%	14.60	M	3.84%	8.37%	2016 (26.55%)	2015 (-10.54%)	67.60%	17.30%	2012
XDIV	21	0.11%	15.66	M	N/A	7.53%	N/A	N/A	54.74%	19.71%	2017
XEI	75	0.20%	16.30	M	4.73%	5.79%	2016(28.11%)	2015 (-14.57%)	29.66%	30.12%	2012
DXM	30	0.60%	16.44	Q	4.09%	4.94%	2016 (20.32%)	2015 (-15.44%)	25.30%	24.14%	2012
PDC	45	0.55%	15.50	M	5.09%	8.53%	2016 (23.37%)	2015 (-8.76%)	31.07%	31.22%	2012
ZDV	51	0.39%	15.90	M	4.42%	5.29%	2016 (24.83%)	2015 (-13.34%)	35.22%	20.21%	2012

When categorizing the ETFs into two distinct groups, those initiated before and after the Great Recession, we can observe several key differentiators among the funds.

In the first category, including XIC, CDZ, and XDV, their performance during the 2008-09 financial crisis is particularly notable. CDZ emerges as a standout performer during this period, displaying the smallest drop in value in 2008 and the most substantial increase in value in 2009. Additionally, CDZ boasts a higher level of diversification, with approximately 25% allocation to both the Financial and Energy sectors. In terms of Compound Annual Growth Rate (CAGR), XIC performs exceptionally well at 7.12%. Analyzing Maximum Drawdown (MDD), a crucial metric for capital preservation, all three ETFs experienced a similar MDD of around -44%. However, XIC stands out by recovering the quickest, taking only 245 days, while CDZ and XDV took almost twice as long, with a recovery period of 458 days. Furthermore, in terms of annual dividend increases, CDZ takes the lead, and it also holds companies that have consistently increased cash dividends for at least five consecutive years, providing an additional quality tilt. Considering these factors, CDZ stands as a top choice in this category.

In the second category, which includes DXM, PDC, VDY, XEI, and ZDIV, it's essential to evaluate their performance. VDY demonstrates the best performance, closely followed by PDC. MDD for these ETFs falls within a range of -11% to -23%, with PDC exhibiting the lowest MDD at -11.23%. Additionally, PDC boasts the shortest MDD recovery time of 214 days, making it a robust choice. With a solid dividend yield of 5.09% and an impressive CAGR of 8.53%, PDC emerges as the clear winner. Notably, PDC avoids an extreme bias towards the financial sector, further enhancing its appeal.

In summary, when dividing the ETFs based on their initiation before or after the Great Recession, CDZ and PDC emerge as the top choices in their respective categories, offering distinct advantages in terms of performance, diversification, and dividend growth.

iShares Core S&P/TSX Capped Composite Index ETF (XIC)

The iShares Core S&P/TSX Capped Composite Index ETF offers a cost-effective avenue to gain exposure to the entirety of the Canadian stock market. Since its inception, XIC has displayed a commendable average annualized return of 6.47%. For instance, a $10,000 investment made in March 2001 would have burgeoned to an impressive $30,917 today, showcasing a notable Compound Annual Growth Rate (CAGR) of 7.12%. While assessing its historical performance, it's noteworthy that the most significant decline in value transpired between June 2008 and February 2009, with a notable dip of -43.58%. Delving into the dividend history, XIC has witnessed a substantial average (yearly) dividend increase of 24.65% (a total of 6 times) and a relatively moderate average (yearly) dividend decrease of 26.05% (occurred 4 times). Altogether, XIC exhibits an average net increase of 4.37%. In terms of sector diversification, this ETF boasts a predominant investment allocation in the Financials and Energy sectors, further enhancing its appeal to investors seeking diversified exposure in these segments.

iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (CDZ)

The iShares S&P/TSX Canadian Dividend Aristocrats Index ETF offers a cost-effective opportunity for investors to gain exposure to Canadian companies that have consistently increased cash dividends every year for at least five consecutive years. Since its inception, CDZ has delivered an average annualized return of 6.18%. For example, if you had invested $10,000 in October 2006, your investment would now be valued at $19,015, demonstrating a respectable Compound Annual Growth Rate (CAGR) of 5.79%. In terms of historical performance, the most notable decline in value occurred between November 2007 and February 2009, resulting in a decline of -43.85%. Turning to the dividend history, CDZ has experienced a substantial average (yearly) dividend increase of 47.36% (on 5 occasions) and a more moderate average (yearly) dividend decrease of 20.39% (noted 5 times). On the whole, CDZ maintains an average annual dividend increase of 13.48%, coupled with a trailing twelve-month (TTM) yield of 3.74%, making it an attractive choice for income-focused investors seeking reliable dividend growth.

iShares Canadian Select Dividend Index ETF (XDV)

The iShares Canadian Select Dividend Index ETF provides a cost-effective avenue for investors to gain exposure to 30 of the highest yielding Canadian companies. Since its inception, XDV has maintained an average annualized return of 5.71%. To put this into perspective, if you had invested $10,000 in January 2006, your investment would now be valued at $19,599, reflecting a commendable Compound Annual Growth Rate (CAGR) of 5.57%. Notably, the most significant decline in value occurred between November 2007 and February 2009, resulting in a decrease of -43.56%. Examining the dividend history, XDV has seen a substantial average (yearly) dividend increase of 20.04% (on 5 occasions) and a relatively moderate average (yearly) dividend decrease of 10.44% (also noted 5 times). In summary, XDV boasts an average annual dividend increase of 4.80% and currently offers a trailing twelve-month (TTM) yield of 4.01%. These factors collectively position XDV as an attractive choice for investors seeking both dividend income and potential capital appreciation.

FTSE Canadian High Dividend Yield Index ETF (VDY)

The FTSE Canadian High Dividend Yield Index ETF, known as VDY, offers a cost-effective means for investors to gain exposure to stocks characterized by higher-than-average dividend yields. Since its inception, VDY has delivered an impressive average annualized return of 8.66%. For instance, a $10,000 investment made in December 2012 would have grown to $15,456 today, showcasing a notable Compound Annual Growth Rate (CAGR) of 8.37%. Notably, the most substantial decline in value occurred between September 2014 and February 2016, with a notable decrease of -17.47%. It's worth mentioning that VDY is a relatively young fund, and consequently, its dividend history may not provide sufficient data for in-depth analysis. However, VDY maintains an average dividend increase of 18.99% and currently offers an appealing trailing twelve-month (TTM) yield of 3.84%. These factors collectively position VDY as a promising choice for investors seeking higher dividend yields and potential capital appreciation.

BMO Canadian Dividend ETF (ZDV)

The BMO Canadian Dividend ETF offers investors an opportunity to access a yield-weighted portfolio comprising 51 dividend-paying stocks. Since its inception, ZDV has demonstrated an average annualized return of 6.24%. For example, an initial $10,000 investment in February 2012 would have grown to $13,224 today, highlighting a commendable Compound Annual Growth Rate (CAGR) of 5.29%. It's noteworthy that the most significant decline in value occurred between September 2014 and February 2016, with a notable dip of -19.33%. In terms of the dividend history, ZDV exhibits an average (yearly) dividend increase of 19.51% (on two occasions) and a modest average (yearly) dividend decrease of 5.07% (noted three times). On the whole, ZDV maintains an average dividend increase of 0.86% and currently offers an enticing trailing twelve-month (TTM) yield of 4.42%. These factors collectively position ZDV as a compelling choice for investors seeking exposure to dividend-paying stocks and an attractive dividend yield for their portfolio.

iShares Core MSCI Canadian Quality Dividend Index ETF (XDIV)

The iShares Core MSCI Canadian Quality Dividend Index ETF, also known as XDIV, offers a cost-effective means for investors to gain exposure to stocks with robust overall financials, characterized by solid balance sheets and less volatile earnings. It's important to note that XDIV is a relatively new fund, and as a result, there isn't sufficient data available to compute the Compound Annual Growth Rate (CAGR) or yearly dividend increase. However, as of today, XDIV has delivered C$0.411 in distributions in 2017. It's worth mentioning that between July 2017 and May 2018, XDIV exhibited a CAGR of -7.53%. Additionally, XDIV pays monthly dividends, adding to its appeal for income-focused investors. With a relatively concentrated portfolio of 21 positions, this ETF offers limited sector diversification, resulting in a notably high exposure to the financials sector. While the fund's performance history is still evolving, its focus on financially strong stocks makes it an intriguing option for investors seeking stability and quality within their portfolio.

iShares Core S&P/TSX Composite High Dividend Index ETF (XEI)

The iShares Core S&P/TSX Composite High Dividend Index ETF offers investors exposure to a selection of 50 to 75 stocks chosen from the S&P/TSX Composite index, with a primary focus on dividend yield. Since its inception, XEI has demonstrated a consistent average annualized return of 5.27%. For example, an initial $10,000 investment made in February 2012 would now be valued at $13,566, reflecting a commendable Compound Annual Growth Rate (CAGR) of 5.79%. It's notable that the most significant decline in value occurred between September 2014 and December 2015, resulting in a decrease of -21.73%. When examining the dividend history, XEI reveals an impressive average (yearly) dividend increase of 45.83% (on three occasions) and a relatively moderate average (yearly) dividend decrease of 15.36% (noted three times). On the whole, XEI maintains a strong average dividend increase of 18.28% and currently provides an attractive trailing twelve-month (TTM) yield of 4.73%. These factors position XEI as an appealing choice for investors seeking a balance between dividend income and potential capital growth within their portfolio.

First Asset Morningstar Canada Dividend Target 30 Index ETF (DXM)

The First Asset Morningstar Canada Dividend Target 30 Index ETF provides investors with exposure to 30 of the most fundamentally sound dividend-paying stocks in Canada, closely replicating the Morningstar Canada Target Dividend Index. DXM takes into account a range of key factors, including expected dividend yield (33.33%), cash flow-to-debt ratio (20%), 5-year normal EPS growth (13.33%), return on equity (20%), and 3-month EPS estimate revision (13.33%). Since its inception, DXM has delivered an average annualized return of 3.97%. For instance, a $10,000 investment made in March 2012 would now be valued at $12,984, showcasing a commendable Compound Annual Growth Rate (CAGR) of 4.94%. Notably, the most significant decline in value occurred between September 2014 and December 2015, resulting in a decline of -23.40%. When assessing the dividend history, DXM exhibits a noteworthy average (yearly) dividend increase of 17.76% (on four occasions) and a relatively modest average (yearly) dividend decrease of 27.85% (recorded once). On the whole, DXM maintains an average dividend increase of 10.80% and presently offers an attractive trailing twelve-month (TTM) yield of 4.09%. These attributes collectively position DXM as an intriguing choice for investors seeking a well-rounded dividend-focused investment that emphasizes financial stability and growth potential within their portfolio.

PowerShares Canadian Dividend Index ETF (PDC)

The iShares Core S&P/TSX Capped Composite Index ETF offers an economical means to gain exposure to Canadian stocks with a strong track record of increasing dividend payments, typically having at least five consecutive years of increasing annual regular dividends. Since its inception, PDC has consistently delivered an average annualized return of 8.36%. To put this into perspective, a $10,000 investment made in March 2012 would now be valued at $15,577, demonstrating an impressive Compound Annual Growth Rate (CAGR) of 8.53%. It's worth noting that the most significant decline in value occurred between May 2015 and December 2015, with a limited dip of -11.42%. Delving into the dividend history, PDC displays a substantial average (yearly) dividend increase of 36.72% (on two occasions) and a singular average (yearly) dividend decrease of -42.28%. On the whole, PDC maintains an average increase of 10.39% and currently boasts an enticing trailing twelve-month (TTM) yield of 5.09%. These attributes collectively position PDC as an attractive choice for investors seeking both dividend income and the potential for capital appreciation within their investment portfolio.

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