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Wondering if anyone has experience with this form of ETF? Should this form part of one's ETF portfolio or should I just stay with the indexes? Don't know if there are any advantages over index ETF's (i.e. more distributions b/c of higher dividends paid by these companies). Any assistance is appreciated.
 

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Benefit - greater dividends paid out.

Shortcoming - lower sector diversification (I believe XDV has over 50% in the Financials sector).

I think it depends on what else is in your portfolio, we use XDV in our portfolio, but also have other ETF's (XCS, XTR, XRE) to get more diversification in the Canadian market.
 

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I hold about $50K of XDV. However, I have started buying some of its components directly in order to "unbundle" the ETF, because I'm not a huge fan of the half-percentage point annual fee. For instance, I have added 5K each of NatBank and BMO instead of a $10K investment in the ETF. If the investable amount is sufficient, it makes sense at some point to buy directly the index components, hold them and collect dividends with no additional fee.
 

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We also hold XDV and XRE in our portfolio in addition to holding some dividend paying stocks directly. I agree with DrStan that it can make sense to make do-it-yourself ETFs when your portfolio is large enough (at least we feel it does for us) - the management fee of an ETF may be comparatively small, but every little bit counts, right?
 

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Wondering if anyone has experience with this form of ETF? Should this form part of one's ETF portfolio or should I just stay with the indexes? Don't know if there are any advantages over index ETF's (i.e. more distributions b/c of higher dividends paid by these companies). Any assistance is appreciated.
What's your objective? What's your risk tolerance? Will this be part of a registered plan? What other investments do you hold? All these questions should be answered before investing. For example, if you own XIU, the ETF for the S&P 60, then you already own the big 5 banks and other big financial companies. Therefore, also owning XDV, which is ~ 50-60% financials, would give you overlapping interests in Canadian financials. The expense ratio is 0.17% for retail investors holding XIU and 0.5% for XDV.

What's your objective? Growth, income, or a bit of both? XDV and CPZ, a dividend ETF from Claymore, both include common stocks that pay dividends. CPD, another dividend ETF from Claymore, holds only preferred shares. CPD will pay high dividends but won't offer capital gains. You are more likely to get capital gains (or losses!) from XDV or CPZ. The expense ratio is 0.6% for CPZ.

If you hold these ETFs in a TFSA, then there is no tax payable on the dividends, even when withdrawn from the TFSA. That's why you need to be clear about your objectives and how you will hold these investments. If you want income only, why not hold the REIT ETF (XRE) in a TFSA? The income from XRE is partly interest, very tax-inefficient in a non-registered account. However, held in a TFSA, the yield is tax-free. You could also hold the REITs directly and avoid the expense ratio of 0.55%. If you hold dividend ETFs in a RRSP, the dividends are not taxed on an ongoing basis, but at withdrawal they are taxed like interest - a huge disadvantage for RRSPs.

If you want growth only, then you may want to bypass dividend ETFs and use a DRIP - a dividend reinvestment plan. You can buy common shares and have the dividends automatically reinvested. Some will even offer a discount for investors doing so. Canadian Moneysaver (only $20 for an online subscription) has articles about DRIPs and the stocks that offer them. A DRIP is more work but cuts out the "middleman," the ETF company, which leaves more money for you.
 
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