Looking to invest in Canadian dividend-paying stocks?
A better option might be to purchase a Canadian dividend ETF.
In this iShares XEI review, let’s go over whether or not this dividend-paying investment is right for you.
All-Equity Exchange-Traded Fund
BlackRock iShares XEI is an Exchange-Traded Fund (ETF) that provides you with exposure to a basket of income-generating equities trading on the TSX.
- Is a low-cost ETF
- Exposure to a basket of Canadian dividend stocks
- Hands-on investors might think the MER isn’t worth it
iShares XEI is an exchange-traded fund designed to replicate the performance of the S&P/TSX Composite High Dividend Index.
As an all-equity ETF that allocates almost all of its funds to a basket of equity securities.
It’s a medium-risk investment for investors seeking a portfolio of dividend stocks.
Launched in 2011 by BlackRock Canada, iShares XEI ETF has a decade-long performance that you can refer to. It follows the performance of some of the top dividend-paying Canadian stocks trading on the Toronto Stock Exchange (TSX).
XEI.TO is currently trading at close to $23.86.
XEI Key Facts
As of October 5, 2023:
- Ticker Symbol: XEI.TO
- Exchange: Toronto Stock Exchange
- Assets Under Management: $1.36 Billion
- MER: 0.22%
- 12-Month Trailing Yield: 5.51%
- Currency Traded: CAD
- Registered Accounts Availability: Yes
Who Should Invest in XEI?
Generally, the iShares XEI ETF will be suitable for:
- Income Seekers: XEI focuses on high dividend-yielding companies from the S&P/TSX Composite Index, so it could be suitable for investors seeking regular income in the form of dividends.
- Diversification: This ETF offers broad exposure to Canadian companies, covering various sectors. Therefore, it might appeal to investors looking to diversify their portfolios with a mix of Canadian companies.
- Long-Term Investors: Like many ETFs, XEI is typically best suited for investors with a medium to long-term investment horizon. These investors can ride out market volatility and benefit from potential dividend reinvesting.
- Cost-Conscious Investors: ETFs generally come with lower management expense ratios (MERs) compared to actively managed mutual funds. So, investors who are cost-conscious and prefer passive investment strategies might consider this ETF.
- Canadian Market Believers: Investors who believe in the prospects of the Canadian market and wish to gain exposure to its high-dividend-yielding companies might find XEI suitable.
However, there are always risks associated with any investment:
- Market Risk: The value of the ETF can decline due to overall market movements.
- Interest Rate Risk: High dividend-paying stocks can sometimes act similar to bonds. When interest rates rise, the value of these stocks (and consequently the ETF) might decline.
- Concentration Risk: Even though the ETF is diversified, it still focuses on the Canadian market. Any adverse economic or market events in Canada could negatively impact the ETF’s performance.
iShares XEI has a Management Expense Ratio (MER) of 0.22%, making it costlier than some other ETFs offered by BlackRock.
Its MER is significantly lower than any mutual fund product that provides investors with similar features and benefits.
With the average mutual fund fees being 2% or higher, ETFs offering lower MERs – like iShares XEI – is also a crucial reason why many Canadians prefer ETFs over mutual funds in recent years.
iShares XEI’s dividend yield as of October 5, 2023:
- 12-month trailing yield: 5.51%
- Distribution yield: 5.49%
- Dividend schedule: Monthly
Here is the growth of a hypothetical $10,000 since XEI’s inception:
| 1y | 3y | 5y | 10y | Incept. | |
|---|---|---|---|---|---|
| Average Annual Return (%) | 4.11 | 15.45 | 7.45 | 6.25 | 6.17 |
| Benchmark (%) | 4.36 | 15.75 | 7.71 | 6.51 | 6.50 |
Go to the Blackrock website for real-time performance numbers of XEI.
iShares XEI is an all-equity ETF that diversifies its asset allocation across 75 dividend stocks from several Canadian economic sectors.
ETF reflects the performance of the top 75 dividend-paying stocks trading on the TSX.
iShares XEI focuses primarily on the financial, energy, and utility sectors.
As of October 5, 2023, iShares XEI ETF has allocated 99.64% of its funds to equity securities. It holds the remaining assets in cash.
| Asset Class | Investment (%) |
|---|---|
| Canadian Equity | 95.94 |
| U.S. Equity | 3.70 |
| International Equity | 0.00 |
| Fixed Income | 0.00 |
| Other | 0.00 |
| Cash | 0.36 |
As of October 6, 2023, BCE INC. is its most significant holding at a 5.32% asset allocation. It is followed closely by Enbridge INC. at a weighting of 5.15%. TC Energy Corp is its third most significant holding at 5.13%.
| Ticker | Name | Sector | Weight (%) |
|---|---|---|---|
| ENB | ENBRIDGE INC | Energy | 5.22 |
| TD | TORONTO DOMINION | Financials | 5.17 |
| T | TELUS CORP | Communication | 5.15 |
| RY | ROYAL BANK OF CANADA | Financials | 5.00 |
| SU | SUNCOR ENERGY INC | Energy | 4.93 |
| TRP | TC ENERGY CORP | Energy | 4.93 |
| CNQ | CANADIAN NATURAL RESOURCES LTD | Energy | 4.92 |
| BCE | BCE INC | Communication | 4.83 |
| FTS | FORTIS INC | Utilities | 4.66 |
| BMO | BANK OF MONTREAL | Financials | 4.54 |
As of July 13, 2022, its most significant asset allocation is towards the financial sector at 30.34%. Its second most significant sector exposure is towards the energy industry at 27.57%, while utilities come in third at a 14.46% weighting. Its lowest sector weighting is towards the healthcare sector at 0.40%.
| Type | Fund (%) |
|---|---|
| Financials | 30.20 |
| Energy | 29.83 |
| Utilities | 17.32 |
| Communication | 11.01 |
| Real Estate | 6.02 |
| Materials | 1.64 |
| Consumer Discretionary | 1.33 |
| Industrials | 1.09 |
| Cash and/or Derivatives | 0.68 |
| Health Care | 0.58 |
| Consumer Staples | 0.31 |
XEI is a medium risk ETF:
iShares XIU is another all-equity ETF offered by BlackRock Canada that you can consider adding to your portfolio.
Like iShares XEI ETF, iShares XIU ETF also tracks equity securities trading performance on the TSX. However, iShares XIU ETF tracks the performance of only the top 60 Canadian companies.
iShares XIU ETF holds the top 60 companies trading on the TSX in its portfolio based on market capitalization. Meanwhile, iShares XEI ETF has 75 of the best dividend-paying stocks trading on the TSX.
With this additional number of holdings, iShares XEI ETF provides more diversification for investors within the TSX.
iShares XIU ETF can be a viable alternative to iShares XEI ETF if you want exposure to a portfolio of top Canadian stocks based on market capitalization and don’t care as much about dividends.
Read my full iShares XIU ETF review here to find out more.
iShares XEU is another all-equity ETF offered by BlackRock Canada. It tracks the performance of equity securities in developed market countries across Europe.
Unlike iShares XEI ETF, iShares XEU ETF does not invest in any Canadian equity securities. It also diversifies its asset allocation across several countries, including the UK, France, Germany, Switzerland, Sweden, the Netherlands, and more.
iShares XEU ETF offers much more geographic diversity to your portfolio and has almost 1,300 stocks in its holdings compared to the 75 holdings of iShares XEI ETF.
Hence, iShares XEU ETF can be a viable alternative to iShares XEI ETF if you want to track the performance of some of the top equity securities trading worldwide.
Read my full iShares XEU review here to find out more.
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iShares XEI ETF’s performance is based on some of the top dividend-paying stocks in Canada. These equity securities are high-yield, dividend-paying stocks with an extensive history of disbursing reliable payouts.
It’s an excellent choice if your goal is to invest in dividend-paying companies in Canada.
If you want to learn about other options, check out these top dividend ETFs in Canada.
