XEI vs VDY: Comparing High Dividend Yield ETFs for Canadians

The main difference between XEI and VDY is that XEI aims to replicate the performance of the S&P/TSX Composite High Dividend Index while VDY aims to replicate the performance of the FTSE Canada High Dividend Yield Index.

The iShares S&P/TSX Composite High Yield Dividend Index ETF is managed by BlackRock while the Vanguard FTSE Canadian High Dividend Yield Index ETF is managed by Vanguard.

The S&P/TSX Composite Hield Yield Dividend Index is a float-adjusted market capitalization-weighted index that is designed to mirror the returns of 50 to 75 stocks from the S&P/TSX index that generate the highest dividend yield.

In other words, the higher the market capitalization of a particular company, the greater its influence on the total return of the index.

The FTSE Canadian High Dividend Yield Index has some similarities in that it is also a market capitalization-weighted index.

Additionally, it holds 56 stocks that provide high dividend yields to investors.

However, its constituents are stocks selected from the FTSE Canada All Cap Domestic Index which holds a wide range of Canadian large-cap, mid-cap and small-cap stocks, essentially providing broader exposure to the Canadian markets beyond the S&P/TSX.

Both the XEI and VDY ETFs are denominated in CAD and are suitable for income-seeking investors who hold a bullish view on the long-term cash flow generation prospects of publicly-traded Canadian companies.

XEI

Launched in 2011, XEI tracks the performance of the S&P/TSX Composite High Dividend Index.

Through the ETF, investors can receive monthly dividend income through indirect exposure to high dividend-yielding stocks paying out regular distributions to shareholders.

Classified as a long-term foundational holding by BlackRock, XEI allows investors to access some of Canada’s largest and most successful companies generating strong free cash flow.

XEI is rated as medium risk given that it is entirely comprised of 100% equities, which are classified as ‘risk assets’.

However, the underlying equities in the S&P/TSX Composite High Dividend Index are diversified by sector, region and customer base, thereby reducing the overall risk of any one company or sector on total returns.

For investors seeking an investment that provides a safe and relatively low-risk source of income, XEI offers a solid option with a low-cost management fee.

Since inception, XEI has delivered 6.62% annualized growth with a 5-year annual performance of 8.06% (as at April 30, 2024). As at the same date, XEI had total assets of $1.6 billion.

VDY

VDY was launched in November 2012 and replicates the performance of the FTSE Canadian High Dividend Yield Index.

When comparing between VDY and XEI, many holdings are shared between the two ETFs.

However, the top 10 names make up 70%+ of VDY while XEI is more well-diversified at ~50%.

In addition, XEI is more geared towards energy stocks while the VDY is more heavily weighted towards financial services stocks.

By purchasing the VDY, investors receive indirect exposure to 56 of Canada’s highest dividend-yielding stocks across the size spectrum from small-cap to mega-cap names.

Based on the characteristics of each ETF, the VDY is ideal for investors who have a more bullish view on Canadian financial institutions than Canadian energy companies.

As of April 30, 2024, the ETF had $2.5 billion in assets under management.

Since its inception, VDY has delivered 9.08% annualized returns with a 5-year return of 9.36%.

Performance: XEI vs. VDY

XEI Annualized Performance (as of April 30, 2024):

  • 3-Year: 8.06%
  • 5-Year: 8.06%
  • 10-Year: 5.81%
  • Since inception: 6.62%

VDY Annualized Performance (as of April 30, 2024):

  • 3-Year: 8.95%
  • 5-Year: 9.36%
  • 10-Year: 7.48%
  • Since inception: 9.08%

 

Fees

XEI has a Management Expense Ratio (MER) of 0.22% which is largely comprised of its 0.20% management fee.

VDY also has a Management Expense Ratio (MER) of 0.22%.

Holdings

Below are the recent top security holdings within XEI (top 10 holdings as a % of asset value)

  • Suncor Energy Inc. (5.6%)
  • Canadian Natural Resources Ltd. (5.3%)
  • Enbridge Inc. (5.2%)
  • Royal Bank of Canada (5.1%)
  • Nutrien Ltd. (5.0%)
  • TD Bank (4.9%)
  • Telus Corp (4.7%)
  • TC Energy Corp (4.6%)
  • BCE Inc (4.6%)
  • Bank of Montreal (4.3%)

As of April 30, 2024
 

Within XEI , sector and industry concentration recently is as follows:

  • Energy (31.2%)
  • Financial Services (29.6%)
  • Utilities (14.6%)
  • Communication Services (10.2%)
  • Materials (6.2%)
  • Real Estate (5.0%)
  • Consumer Discretionary (1.0%)
  • Industrials (0.9%)
  • Health Care (0.6%)
  • Cash and/or Derivatives (0.3%)
  • Consumer Staples (0.3%)

As of April 30, 2024
 

The top security holdings within VDY (top 10 holdings as a % of asset value) recently are as follows:

  • Royal Bank of Canada (14.0%)
  • TD Bank (10.6%)
  • Canadian Natural Resources Ltd. (8.1%)
  • Enbridge Inc. (7.6%)
  • Bank of Montreal (7.0%)
  • Bank of Nova Scotia (6.2%)
  • Suncor Energy Inc. (4.8%)
  • Canadian Imperial Bank of Commerce (4.5%)
  • Manulife Financial Corp. (4.5%)
  • TC Energy Corp. (4.1%)

As of March 31, 2024
 

Within VDY, sector and industry concentration recently is as follows:

  • Financial Services (56.2%)
  • Energy (29.5%)
  • Communication Services (5.9%)
  • Utilities (5.9%)
  • Materials (1.5%)
  • Consumer Discretionary (0.6%)
  • Real Estate (0.2%)
  • Industrials (0.2%)
  • Other (0.0%)

As of March 31, 2024
 

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Harshil Dhanky

Harshil Dhanky is a financial services professional based out of Toronto, Ontario with extensive experience in the Canadian banking industry across Toronto, Calgary, and Vancouver in the capital markets, asset management, and lending sectors.

In the past, Harshil has worked with a range of consumer lending websites, personal finance advisors, investment managers, insurance companies, and other financial institutions to write and edit whitepapers, articles, blog posts, and other collateral read by consumer audiences to help them make better financial decisions.

His work spans a wide range of Canadian personal finance topics including savings and retirement programs, debt management tips, mortgages and personal loans, and other key financial issues for Canadian consumers at each stage of their life.