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XDV versus CDZ

October 22nd, 2006 · 16 Comments

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

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16 responses so far ↓

  • 1 0xcc // Oct 23, 2006 at 8:11 am

    That Claymore fund looks fairly attractive if it weren’t for ROC (Rothmans)although XDV also has Rothman’s but it only makes up 2.66% of the XDV and it makes up 5.33% of CDZ which I guess isn’t too much of a difference.

  • 2 Guillaume // Oct 23, 2006 at 10:36 am

    I’m a big fan on index funds, but I’m wondering in this case: why not buy TD Dividend Income instead? It’s 1,3,5,10 years avg returns are better than the group avg and the indexes. It seems to pursue more or less the same objectives as XDV and CDZ. It definitely beats their yields even when MER is taken into account.

    What do you think? Am I missing anything in my analysis?

    (note: I currently only hold XDV)

    http://globefunddb.theglobeandmail.com/gishome/plsql/gis.fund_pro?fundname=TD+Dividend+Income&pi_universe=PUBLIC_FUND&product_id=

  • 3 Canadian Capitalist // Oct 23, 2006 at 10:56 am

    I avoid mutual funds entirely with the exception of index funds and some ultra-low cost funds. TD Dividend Income reports 10-year returns of 11.8%, whereas CDZ’s over the same term is 17.7%. Would it continue to outperform going forward? I don’t know but I do know for sure it will be much cheaper to own, so I would place my bets on the ETF instead.

  • 4 farron // Oct 23, 2006 at 11:03 am

    that’s so funny. I was just about to add this etf to my rrsp.

  • 5 MikeB // Oct 23, 2006 at 4:51 pm

    Both of these ETF’s may be better suited for investment outside of the RRSP. Dividends are best earned outside the tax shelter.

  • 6 growth in value // Oct 24, 2006 at 11:20 am

    Thanks for your insights, CC. I only need one more pay period to have amassed enough cash to jump into a new equity, and I was thinking (after having done my own research) of buying CDZ for it’s dividend focus, and the fact that I think it’s a good defensive holding.

    Plus it gives me good exposure to the financial sector — I must be the only Canadian investor who doesn’t have any oil or financials in my portfolio yet!!!

    The fact that you seem to like it too is another plus in my book.

    Oh and as for this: MikeB Says: Dividends are best earned outside the tax shelter.

    Here we go again….

    I’ll be putting my CDZ outside my RRSP but as always, I’m interested in viewpoints for and against. I’m in the middle tax bracket.

  • 7 JShah // Nov 14, 2006 at 10:52 pm

    Are people of the same view for CDZ after tax changes for income trust ? i.e. is XDV now more preferable?

  • 8 Blitzkrieg // Oct 21, 2008 at 5:53 pm

    Isn’t the relatively low volume of CDZ a problem? I notice the spread can be quite large. I like the methodology of CDZ more than XDV, but the low volume makes me reluctant.

  • 9 Amit // Jan 15, 2009 at 4:34 pm

    I use Questrade to trade securities, and QT has a DRIP plan in which if the dividends received at any time are greater than the value of the security then QT automatically buys the whole shares from the dividends received.

    Since CDZ has monthly dividends at around 7 cents a share, usually, with the amount that I would have invested (100 shares for example) will not be enough to automatically reinvest my dividends when I do receive the dividends. If I had 1000 shares, QT would have bought 4 shares automatically. At the same price for XDV, that gives out quarterly shares, at 100 shares, QT would have automatically bought 1 extra share for me every 3 months, or at 1000 shares, it would have bought around 14-15 shares for me automatically without any extra fees.

    So, if my goal is long-term investment with dividend re-investment, then XDV is probably a better choice. But then again this situation is only applicable if you are using a broker like QT that offers that kind of a plan.

  • 10 ArtS // Oct 17, 2009 at 6:21 pm

    Claymore now has a DRIP as well.

  • 11 RonV // Nov 16, 2009 at 12:21 am

    Why would you add this to your RRSP? You lose the dividend tax credit. Better to hold it within a non-registered portfolio and leave the bonds/GICs to the RRSP.

  • 12 Amit // Sep 27, 2010 at 6:41 pm

    Update: XDV also now pays monthly dividends, and over the past 2 years (in recession), both CDZ and XDV have done pretty well, however, XDV currently only yields 2.29% while CDZ yields 4.27%. Low volume of CDZ is definitely an issue. Still unsure which to keep or to keep both in the coming years.

    Also, plan to open a TFSA account at QT so that can keep these in that account as well.

  • 13 rosi // Jun 15, 2011 at 1:29 pm

    Love to have more information on Claymore (CDZ) & their DRIP’s program

  • 14 Slacker // Aug 17, 2011 at 11:40 pm

    Worth a revisit?

    XDV: yield = 6.8%, MER = 0.50%
    CDZ: yield = 3.2%, MER = 0.66%

    I currently have CDZ in a non-registered account, but considering switching over to XDV for the higher yield, and better tax treatment.

  • 15 Slacker // Aug 17, 2011 at 11:42 pm

    Also, I’m finding that the recent drop serves as a good catalyst to re-examine my portfolio allocation in my taxable account. Not out of fear, but most of my capital gain had been wiped out, and some even have capital loss. Good opportunity to start fresh.

  • 16 Canadian Capitalist // Aug 19, 2011 at 12:39 am

    @Slacker: This topic is definitely worth a revisit. CDZ is a completely different beast now compared to what it was when I first wrote this post.

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