Invesco Canadian Index Dividend ETF (TSX: PDC)
and its mirror
Invesco Canadian Dividend Index ETF Class
mutual fund are among my favourites in the Canadian Dividend & Income
Equity category, and I currently use it in my ETF portfolios. The mutual
fund simply holds shares of the ETF. (Formerly these funds were branded
under the PowerShares name, but Invesco last year phased out the
PowerShares name and switched to the Invesco name for its funds.) In this
article, I’ll refer to the ETF when detailing the fund’s holdings and
The fund invests in highly liquid Canadian stocks that have paid a stable
or rising dividend over the past five years. The managers screen for
dividends and then hold the 45 largest stocks ranked by market
The portfolio is in effect an adjusted market cap index that is
reconstituted annually to counter the danger of excessive single-company
weighting. And it is also rebalanced on a quarterly basis.
As of Dec. 31, 2018 fund was weighted 30% to the financial services sector,
21% to energy, and 17% to utilities. The fund has negligible exposure to
materials, which makes sense, given its focus on yield. It is also
underweight consumer names, healthcare, industrials, and technology.
Top holdings at the end of December included
Enbridge Inc. (TSX: ENB),
BCE Inc. (TSX: BCE),
Bank of Nova Scotia (TSX: BNS),
Canadian Imperial Bank of Commerce (TSX: CM), and
TransCanada Corp. (TSX: TRP), which is expected to be renamed TC Energy in the second quarter of this year (the
trading symbol will remain unchanged).
The underlying dividend yield is currently 5.25%. The portfolio is heavily
weighted to large-cap stocks, with average market cap at about $19 billion.
Longer-term performance has held up well, with 5-year average annual
compounded rate of return posted at 4.1% as of Dec. 31, while 3-year return
was 6.3%. As you’d expect, shorter-term performance lagged, along with the
general market, with the fund posting a 1-year loss of 11.9%.
Still, the portfolio’s overall earnings outlook is also one of the most
attractive of the dividend peer group, providing runway for share price
growth in addition to attractive yield. A potential drawback is the
concentration of the portfolio in energy stocks, with a 30% allocation to
the sector, compared with about an 18% weighting in the S&P/TSX
Composite Total Return Index.
Costs are reasonable, but not cheap, with an MER of 0.55% for the ETF. On
balance, this fund remains a solid way to play the Canadian market, while
offering an attractive yield.
Invesco Canadian Index Dividend Index ETF
Canadian Dividend & Income Equity
Large Cap Value
Invesco Capital Management
Dave Paterson, CFA, is the Director of Research, Investment Funds for
D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due
diligence on a variety of investment products. He is also the publisher
Dave Paterson’s Top Funds Report,
offering regular commentary and in-depth analysis of Canada’s top
investment funds. He uses a unique analytical approach to identify
funds with strong, risk-adjusted returns, and regularly publishes his
insights and analyses in Fund Library.
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before investing. Mutual funds are not guaranteed and are not covered by
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its net asset value per security at a constant amount or that the full
amount of your investment in the fund will be returned to you. Fund values
change frequently and past performance may not be repeated. No guarantee of
performance is made or implied. This article is for information purposes
only and is not intended as personalized investment advice.