A Yield to Caution

Article Excerpt

ISHARES CORE MSCI CANADIAN QUALITY DIVIDEND INDEX ETF $30.08 (Toronto symbol XDIV; Units o/s: 57.8 million; Market cap: $1.7 billion; Dividend yield: 4.5%; www.blackrock.com/ca) aims to invest in Canadian stocks with above-average dividend yields and steady or increasing dividends. It also targets stocks with strong overall financials, including solid balance sheets and less volatile earnings. The weight of any one stock in the portfolio is capped at 10%. The ETF’s top investments are in Manulife, 9.8%; Royal Bank, 9.4%; Sun Life, 9.2%; Enbridge, 9.0%; Pembina Pipeline, 8.7%; Suncor, 8.2%; TD, 8.0%; Fortis, 7.8%; Power Corp., 6.3%; and Magna International, 4.2%. The fund launched in July 2017 and charges a 0.11% MER. The ETF yields a high 4.5%. All top 10 stocks of the fund are among our recommendations, and we like most of the other stocks it holds. However, the “capped” aspect of the ETF’s mandate introduces a filtering mechanism: the fund rebalances its portfolio every quarter; if a stock has risen above its 10%…