VDY Beats The Market - Copy That?

Jan. 06, 2019 11:23 AM ET9 Comments
Dale Roberts profile picture
Dale Roberts


  • The Vanguard FTSE Canadian High Dividend Yield Fund now has a 6 year history.
  • The fund has beat the composite index by 1% annual. Go Dividends!
  • US investors might add some non-US assets by way of skimming these large cap stocks listed on US exchanges.
  • My research shows that it often does not take many to track an index.

OK, let's skip the introductions and get right to the good stuff. Here's the chart. Portfolio 1 is the Vanguard High Dividend Yield Index Fund, ticker VDY on the TSX Toronto Stock Exchange.

Portfolio 2 is the TSX composite, ticker XIC from iShares.

The chart is courtesy of portfoliovisualizer.com. As always, past performance does not guarantee future returns.

We can see that while the Canadian market correction of 2015 and into 2016 took down the big dividend payers more than market, the fund likes to battle back. It wants to outperform the market as it did out of the gate, and from the 2016 recovery.

The fund is heavily weighted to the Canadian financials at 66% currently. The outperformance credit might go to the big Canadian banks, insurance companies and other financial institutional wealth managers.

The Canadian market is not very well diversified, and this fund exaggerates the concentration in financials and oil and gas and utilities.

That said, the financial sector (and banking in particular) is perhaps Canada's greatest strength. If that trend continues, this fund will outperform the more 'diversified' composite index.

Here are the top 10 holdings.

These top ten companies are all available on US markets. Royal Bank (RY), Toronto-Dominion Bank (TD), Scotiabank (BNS), Enbridge (ENB), Bank of Montreal (BMO), Canadian Imperial Bank of Commerce (CM), TransCanada (TRP), Manulife (MFC), Sun Life (SLF) Pembina Pipelines (PBA).

Out of the gate the top ten gives us the Big Canadians banks, 2 insurance 'giants' and two of the biggest pipeline/energy companies in Canada, with Enbridge being the largest pipeline operator in North America. Enbridge operates the most miles of oil and gas pipeline globally. We also find Pembina Pipelines, more of a local 'player'.

Those 2 pipelines are in my concentrated Canadian Dividend Portfolio that I like to

This article was written by

Dale Roberts profile picture
Dale Roberts is the Chief Disruptor at the Cut The Crap Investing blog. Cut The Crap will introduce Canadians to the many sensible low fee investment options in Canada. Canadians currently pay some of highest investment fees in the world. Dale will help Canadians on the path to creating their own low fee portfolios or direct them to the lower fee managed portfolio solutions. Dale was a former Investment Funds Advisor and Trainer at Tangerine Investments, and is a still recovering former award-winning advertising writer and creative director. Dale has been writing on Seeking Alpha from 2013, covering asset allocation, dividend investing and retirement. As always past performance is not guaranteed to repeat. You should always conduct your own research or speak to a financial advisor. If you don't know what you're doing, don't do it. Dale's articles are not investment advice.

Disclosure: I am/we are long BNS, TD, RY, AAPL, NKE, BCE, TU, ENB, TRP, CVS, WBA, MSFT, MMM, CL, JNJ, QCOM, MDT, BRK.B, ABT, PEP, TXN, BLK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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