2019 was certainly the year of the total return portfolios. Markets in Canada, the US and around the globe delivered stellar returns. We’ll check in on the high dividend yield ETF portfolios for 2019.
As a benchmark please have a read of the core ETF portfolio returns for 2019.
The high dividend yield portfolio on the ETF Model Portfolio page starts with these North American assets. They are both Canadian dollar funds.
Here’s the index methodology demonstrated by way of the Canadian offering page.
While the funds demand a higher yield, they are smart beta funds that apply screens to seek greater financial health. In Canada those screens find just a few sectors. It’s certainly a concentrated portfolio. We see financials, pipelines, utilities and telco’s. There are 23 companies in the fund.
The trailing 12 month yield is 4.18%.
The index methodology has a history of beating the large cap indices in the US and Canada. That’s by way of back tests of course. And as always, past performance does not guarantee future success.
South of the border.
The US fund is certainly not as concentrated as the Canadian offering.
Thanks to the 10-year stock run up in the US yields are suppressed. This is hardly a high dividend yield portfolio with a trailing yield of just 2.5%. For inclusion the MSCI indices demand a yield at least 20% above the core parent market index average. While the yields are ‘juiced’ slightly, this is a total return approach.
Core large cap equity funds in the US currently have a yield below 2%.
Total returns in 2019.
- Canada XDIV 25%
- US XDU 15.5%
We see some out-performance for the Canadian market, and under-performance for the US fund. Once again, very solid performance. It was hard to go wrong in 2019.
In Canada the insurers and pipelines helped to drive those returns. 2019 was a rare year in that the big Canadian banks under-performed the market. Ditto for the telco’s.
International high dividend.
iShares offers the Global quality dividend fund ticker XDG.
The trailing yield is 3.2%
That Global offering delivered 17.2% in 2019. If a Canadian was to act on the typical home bias to the tune of 50%, the returns would be in the area of 21%.
As a comparison point, in one of my wife’s accounts we use Vanguard’s High Dividend Yield VDY. That offered returns of 21.2% in 2019.
South of the border Vanguard’s High Dividend ETF VYM delivered 24.2%. That is a US Dollar fund. Account for currency and the returns are 19% CAD.
For Canadian Dollar International dividend options you might consider BMO’s International Dividend ETF ZDI. That fund does not include Canadian holdings. That index is also available in a currency-hedged version ZDH.
Please ensure that you understand all tax implications. And of course we need to know what goes where with respect to plan types. At some point you might consider consulting an advice-only planner. With that option you can obtain conflict-free advice.
Thanks for reading. Don’t forget to follow Cut The Crap Investing to receive email notifications of future posts.
Happy Sunday, Dale