Checking in on Vanguard VDY and Canadian blue chip stock portfolios.

The Vanguard High Dividend ETF (ticker VDY.TO) has accelerated its outperformance over the TSX Composite (XIC.TO). In 2026 VDY has more than doubled up on the returns of the TSX at 26.2% vs 10.1%. VDY is concentrated in Canadian financials. Energy then chips in, in a meaningful way. From 2021, financials and energy have greatly outperformed. That has lifted the Canadian stock market, but more so the Canadian high dividend ETFs such as VDY.TO, iShares XEI.TO and XDIV.TO.

As always this is not advice. And of course, keep greater diversification as the greater goal with exposure to non-Canadian equities. Those who are managing volatilty will consider their weighting to cash and bonds and defensive equities. For more on balanced portfolios and asset allocation be sure to check out the Canadian asset allocation ETF page.

Remember, the blue chips out perform, historically.

VDY vs XIC performance

From VDY inception, VDY is outperforming by almost 2% annual.

We can see that even a near 2% annual difference leaves the investor with 27% more from late 2012.

Here’s the annual returns bar chart …

As always, it’s about the sectors and the sector weights. Energy and financials are greatly outperforming. Remember, while the dividends help us find certain kinds of companies, they do not contribute to the wealth creation.

Dividends feel good, but they don’t contribution to wealth creation.

From 2021 …

I put oil and gas stocks on the table in late 2020, or about 650% ago, ha 🙂

We can see that VDY is a Canadian blue chip portfolio, but again, with that financials and energy concentration.

Top 25 Holdings Breakdown

• Royal Bank of Canada: 16.39%
• Toronto-Dominion Bank: 11.51%
• Bank of Montreal: 7.07%
• Enbridge Inc: 6.70%
• Bank of Nova Scotia: 6.06%
• Canadian Imperial Bank of Commerce: 5.99%
• Canadian Natural Resources Ltd: 4.57%
• TC Energy Corp: 3.90%
• Manulife Financial Corp: 3.84%
• Suncor Energy Inc: 3.62%
• National Bank of Canada: 3.45%
• Sun Life Financial Inc: 2.46%
• Cenovus Energy Inc: 1.87%
• Power Corp of Canada: 1.86%
• Nutrien Ltd: 1.72%
• Fortis Inc: 1.65%
• Pembina Pipeline Corp: 1.52%
• Restaurant Brands International Inc: 1.41%
• BCE Inc: 1.14%
• Magna International Inc: 0.97%
• Brookfield Asset Management Ltd: 0.96%
• TELUS Corp: 0.94%
• Emera Inc: 0.92%
• Great-West Lifeco Inc: 0.89%
• Tourmaline Oil Corp: 0.87

The Canadian banks are expensive

After a stock or sector goes on an incredible run, it’s common to see them move into a situation where they are expensive. We’re buying less earnings and free cash flow per share.

Measured against expected earnings over the next 12 months, the average Big Six bank price-to-earnings ratio (on July 16) sits at close to 16.5, well above the two-decade average of roughly 11. Does this mean the bank stock party is over? No one knows, of course. Though it does suggest some more muted return moving forward. In our next post at Cut The Crap Investing, we’ll go over how you might manage your bank and broader Canadian financials exposure.

Why did BMO’s ZLB Low Volatilty stop out performing?

On the flipside, the Canadian oil and gas stocks appear to offer wonderful value.

Breakdown of Canadian financials (XFN.TO) Asset Mix

• Banks: ~67.7% to 69.3% (holding major institutions like RBC, TD, BMO, and Scotiabank)
• Insurance: ~20.1% to 20.3% (including Manulife, Sun Life, and Intact)
• Financial Services: ~10.1% to 11.9% (including alternative asset managers and corporations like Brookfield)

The financials index is dominated by the banks but it does broaden out to insurance and financials services where greater value is available. The trailing PE ratio for XFN was a respectable 19.2 on June 30th.

Our VDY Plus stock portfolio

I hold VDY in my TFSA account. In my wife’s Canadian Dollar RRSP, she held VDY for over a decade. In June of 2023 we sold VDY and then skimmed enough of ’em to create a VDY portfolio. Skimming means buying enough of the individual stocks to potentially replicate the returns and qualities of the greater index. We save on the ETF fees which had become considerable given the size of the RRSP portfolio.

Given that my wife is in the retirement risk zone, we also added more of a defensive tilt. The consumer staples sector (XST.TO) was added in addition to greater utilities – (HUTS.TO) plus pipelines exposure. The result has been nothing short of pleasing and incredible.

Here’s a chart that I shared recently on Twitter. The RRSP portfolio is in racing green, the TSX in blue. It has been going up when the markets goes down, and it performs well during days and weeks where the energy shock is a concern. It offers an energy shock hedge.

The portfolio is “just” 31% financials with a more even mix of banks and insurance companies. Here’s a recent look at the holdings and weightings.

The VDY plus portfolio has matched the returns of VDY in 2026 even though the bonds and consumer staples (defensives) are a drag on returns. The VDY plus portfolio is certainly more defensive in nature.

To my eye, it feels and looks like a very good approach for retirement.

Consider joining us at Retirement Club for Canadians. We are accepting new members.

Of course, we can look to adding cash (CBIL.TO) and more bonds and more staples for an even greater defensive tilt. I follow a similar approach in my own Canadian RRSP portfolio.

Thanks for reading. Once again, I’ll be back with a look at how we might approach investing in Canadian stocks given the valuation “issues” of Canadian banks. Utilities and staples are pricey as well.

Join Cut The Crap Investing

You can follow this blog, it’s free. Newsletters, plus other free content and ‘ideas’ will be delivered to your email inbox. Enter your email in the subscribe area, or ‘join us today’ on the home page.

ETF Portfolios / Stock Portfolios / Retirement Strategies / Wealth Creation / Retirement Club

Retirement Club

You can also join us at Retirement Club for Canadians. It’s most everything you need to DIY your retirement. The Retirement Club offering …

Earn a break on fees by way of of this Justwealth partnership link.

Here’s Canada’s top-performing Robo Advisor, Justwealth. You can get advice, planning and low-fee ETF portfolios all at one shop. Canadians can have it all. That’s a wonderful shop for retirees who want planning and low-fee portfolios. Of course, it’s a great option for those in the accumulation stage as well.

Consider Justwealth for RESP accounts. That is THE option in Canada with target date funds that adjust the risk level as the student approaches the College or University start date.

Thanks for reading and watching. Have a great Sunday and week.

Dale