There is also XDIV that has a slightly lower MER. Concentrates a little more into the financials but cuts back on the energy which is usually not a bad idea. Can't say it will work out the same in the future, but logically it makes sense that it will.

As for buying the stocks directly. I doubt I would do that just to save a few basis points in MERs. When one owns stocks directly it is difficult not to add some personal opinions to the management of them. Those personal opinions usually will cost you money in the long run. Probably more then the MER on the ETF will.

 

You might find this blog of interest. No ax to grind, and seems like a smart guy who has thought things through. The numbers are 2017 vintage and it would be great if someone would update them to 2020. XEI is mentioned and considered a good choice IF you must buy an ETF. I have small amounts of ZDV which he includes, but doesn't say much about. His conclusion, is to hold the actual stocks. That is what I have always done. Just using ZDV as a place to hold money after selling some stocks that I have lost confidence in (IPL, VET) or that I have too much of.

It is worthwhile reading the many comments at the end of the blog. Includes discussion of the point James often makes about selling stocks vs collecting dividends for income.

https://www.tawcan.com/top-canadian-dividend-etfs-dont/

 

When screening these, I would look at three main things

1. sector diversification, avoid concentration in one sector
2. dividend/payout quality of the top holdings
3. the total return compared to XIC

Ideally you want something that has good sector diversification, strong top holdings, and a total return comparable to XIC. If all of those are met, then choosing a dividend ETF should not be any worse than regular index investing.

One of the harder things might be actually sticking with the commitment over time. Since these are not index funds, the performance will eventually diverge from the index and you might even find it chronically lagging the index over multiple years. In that situation, you cannot sell! (but people do)

You also can't hop from one dividend ETF to another one under those circumstances. This is the classic mistake that mutual fund investors make as well. IMO this is one big reason that index investing wins in the long term... just by avoiding these behaviours.

 

Good information. These investments are held in a taxable account and allocation & diversification have been taken in to consideration. Because it is held in a taxable account, holding individual stocks allows for tax loss selling if and when applicable. I should add that our goal is for dividends to be our primary source of income when we retire.

I am curious if others limit the weighting of any one ETF or mutual fund. My single largest holding is MAW105 at 9%.

 

I am curious if others limit the weighting of any one ETF or mutual fund. My single largest holding is MAW105 at 9%.

Yes, but I don't have any mental numbers for it. I don't think they make a basket that will hold all my eggs, but for an ETF or mutual fund, that is fairly broad based with respect to number of holdings and industries, I would not worry until it went above 25% or so. An individual stock would start to worry me as it hit 5% and I would probably have to trim it in the 8% to 10% range.

 

My perspective is buy individual stocks.
Also, if I was young and looking to have dividend income in the future I'm not sure I would load up on dividend securities only. I'd tilt more towards growth, then as I got older, gradually shift into income oriented issues. So, as far as etf's go, if I was young and taking the etf path, I'd study the momentum type etf's to see if they are more promising than the dividend type.

My assets always grew faster with growth type securities, compared to the dividend issues. Lower dividend, more growth when young. Higher dividend less growth when retired.

 

That said, I'd probably spread it over 2-3 of those things with a $1M portfolio just because........

So perhaps a 35% weighting OR $350k max. Does a rule like this make sense? For example would you be comfortable holding 1m of Mawer105 or VBAL if you had a 3m portfolio or would you put a dollar cap on any one holding?

 

I'd still be comfortable with 35% weighting. I've had this argument in forums before and I think until someone actually is in this situation for a number of years, it is really hard to wrap one's head around it. The issue should always be proportional on a percentage basis because really, $300k on $1M is no different on a person's relative position than is $900k on $3M. It is only psychological.

I've seen that in 30 years of my own portfolio. I didn't see any point in a 1% stock holding 30 years ago any more than I see a point in a 1% stock holding today in a much larger portfolio. One person I provide some financial guidance too has considerably over $500k in one ETF. It is entirely appropriate given its relative proportion of the overall portfolio.

 

Thanks. I agree with not having small individual holdings. I find that the reward is not worth the effort/distraction.

 

Dollar amount is only relevant to your own psychological opinion. If you think $350K is too much then it probably is because it is you that will be managing it. Other then for emotional reasons dollar value is not relevant, only portfolio percentages, IMO.