I recently took at took at Vanguard’s High Dividend Yield ETF VDY vs iShares High Yield ETF XEI. Those are both very solid options in the dividend space. I would give the nod to the more concentrated VDY. As per the previous post that fund is concentrated in Canadian financials and it largely takes a pass on energy exploration and production. Today we will take a look at the Invesco Dividend ETF – PDC.
As a backgrounder please have a read of the VDY vs XEI post.
And in the spirit of the season the ‘is it my favourite’ is a nod to our family favourite Christmas movie – Elf. Of course in the mix of holiday classics you’d also have to include Bad Santa and Home Alone.
Now I’m not sure if Invesco’s PDC will turn out to be my favourite, but it’s in the running. Smiling is Buddy’s favourite and certainly PDC has shareholders smiling. If juicy dividends and generous total returns are your favourite that fund is checking off those boxes.
Why are PDC shareholder’s smiling?
First off the total return history is impressive.
We see it beat the TSX Composite in the 1-year to 5-year time periods. More importantly we see the underlying benchmark the NASDAQ Select Dividend Index with a generous beat in the 10-year period.
From the inception period for the ETF of June of 2011 the out-performance vs the benchmarks is meaningful. The top Orange line is the return of the NASDAQ Index. The blue line below the NASDAQ line is the PDC ETF returns. We see the returns reduced by the fees and the tracking errors.
The benchmarks beneath the PDC returns is the TSX 60 and the TSX composite. The TSX 60 is in red, outpacing the returns of the the composite.
Here’s a link to the fund fact sheet for the Invesco Canadian dividend ETF – PDC.
Dividend Growth and High Yield.
The dividend recipe here is the combination of a dividend growth history of at least 5 years, and that juiced yield. You may remember we previously looked at dividend growth by way of those Canadian Dividend Aristocrats. PDC out-performs its dividend growth cousin iShares CDZ.
The top holdings and sectors.
The sector weightings appear to be the ‘difference maker’ in Canada. We know that the Canadian stock market is not very well diversified to say the least. And there can be considerable concentration in cyclical sectors such as energy and materials. Invecso PDC seems downright sensible.
I don’t like it because it outperformed. I like it because of the sector weights and because of the top holdings. That was the criteria I used when I selected Vanguard’s VDY for my wife’s RRSP account. And yes I accepted and embraced that concentration in financials. Hey, the big Canadian banks have been paying (and mostly growing) dividends well, since before Canada was Canada. I’m greedy and kinda conservative that way.
Once again we see that concentration in financials, pipelines, utilities, telco’s and a more generous allocation to REITs compared to the TSX composite. We see the Brookfield’s well represented in the fund.
What about those big dividends?
The dividends held up in Canada’s energy-inspired correction of 2015 and into 2016. Here’s a comparison vs VDY. The dividend income is based on a $10,000 investment. There is another monthly payment on the way for both funds in 2019.
- PDC Income is Portfolio 1.
- VDY Income is Portfolio 2.
The chart is shown without dividend reinvestment. PDC was able to grow the dividend modestly through the correction, while VDY offered a dividend cut. Certainly that’s only one move through a market correction, but that might be a strong sign of potential dividend and collective financial health.
Bigger dividends. Greater dividend sustainability. What’s not to like? Throw in that total return history and that might make it a favourite of many investors.
Thanks for reading and happy holidays. What are your thoughts on Invesco’s dividend ETF – PDC?
What’s your favourite?
Dale
