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iShares S&P/TSX Composite High Dividend Index ETF (XEI)
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Harvest Diversified Monthly Income ETF (HDIF)
Q: What do you think of these two etfs looking at the charts hdif has done better then xei and pays double the dividend. With a dividend over 10% is it safe which one would you prefer for a dividend investor.
5i Research Answer:
HDIV is a covered call ETF and XEI a high dividend ETF. We would not consider them equivalent, as HDIF sells call options on up to 33% of its portfolio, which enhances yield. The call premium also provides a 'bit' of a cushion in a market decline. The dividend can vary and primarily consists of return of capital and capital gains. We are comfortable with it, but investors will give up some upside in a market rally. For a dividend growth investor, XEI should do better over the longer term, assuming the markets rise over time. We would prefer XEI for a long term investment, but are comfortable with HDIF if an investor does want higher income and understands the product.