Archive for October, 2006

This and That

October 23, 2006

  1. I have to confess that I did not fare too well in Suze Orman’s test of Homeowners insurance smarts. I did know that our policy is adjusted for inflation, offers replacement cost for property and personal liability coverage. I was still not sure if we have guaranteed replacement coverage for the dwelling, so I will have to call the agent to find out.
  2. The latest rash of conversions of BCE and Telus into income trusts is once again bringing the tax leakage issue to the forefront. The latest quarterly outlook from Leith Wheeler tackles the issue and comes up with some possible solutions to address the problem.
  3. Automatic enrolment in a RRSP with a default contribution rate of 3% would be a splendid idea. They are implementing the idea for retirement plans in the United States. Why can’t we?
  4. Sun columnist Linda Leatherdale thinks the 40-year mortgage is a mortgage life sentence.

XDV versus CDZ

October 22, 2006


Among a handful of ETFs that Claymore Investments recently introduced is a dividend ETF: Claymore CDN Dividend and Income Achievers ETF (CDZ) that seeks to replicate Mergent’s Canadian Dividend and Income Achievers Index. Another dividend ETF that traded already on the TSX – iShares CDN Dividend Index Fund (XDV) – is based on the Dow Jones Canada Select Dividend Index.

I think that CDZ has a slight edge over XDV despite the fact that the MER is slightly higher and trading volume is lower. Both funds have almost half the portfolio in financials, but CDZ is better diversified with higher exposure to Industrials, Consumer Staples, Utilities and Energy and includes some income trusts and REITs.

The index methodology is also slightly different. The Dow Jones index is composed of stocks that have “consistently paid dividends” and the weights in the index is based on their proportionate dividend-per-share. The Mergent index, on the other hand, is made of stocks that have “consistently increased their annual dividends” and weighted based on yield. I think the Mergent version is slightly superior due to the emphasis on dividend growth.

iShares CDN Dividend Index Fund Claymore CDN Dividend and Income Achievers ETF
Ticker XDV CDZ
Approx. Yield 3.9% 4.9%
Number of Securities 30 57
MER 0.50% 0.60%
Average Volume 48,000 6,900
Top Holdings MBT, CM, RY, BMO, TD ROC, EMA, CM, BMO, BNS

Changes to Aeroplan Loyalty Program

October 19, 2006


Aeroplan has recently announced some changes to its loyalty program. The loyalty plan members need to make note of two points that negatively affect them:

  1. At least one transaction in the last 12 months to avoid expiry of all miles in the account.
  2. Miles accumulated on or after January 1, 2007 will expire in seven years.

Aeroplan also graciously reinstates expired miles for an administrative fee of just $30 plus 1¢ per restored mile. Of course, you almost never want to reinstate expired points because each mile has an economic value of about 0.83¢.

We don’t have many miles in our accounts (we fly very infrequently and we used to collect AirMiles but almost always use a cash-back credit card now), so I don’t feel the same outrage that some members who have been patiently collecting points for many years feel at this change. It is also fairly simple to get around the first restriction: you can just fill up your tank at an Esso gas station every once in a while. To get around the second restriction, I think I will just request some FutureShop gift certificates sometime before my current miles expire in 2013.