High Canadian Dividend stocks may be a 2016 contrarian idea

High Canadian dividend stocks were the worst performers – when compared to low or no dividend paying stocks in 2015 in Canada. Witness the Canadian market dividend ETF from BMO (ZDV.TO). After peaking in the late summer of 2014, this ETF has been in a defined downtrend. The attractive current yield of around 4.8% did little to offset the 20% + loss since 2014’s peak price. This ETF was influenced by energy – note its coinciding peak with energy. The index currently holds about 22% in that sector – the balance being spread between financials, utilities and the like. Obviously, energy’s impact on other sectors in the economy – particularly the blue chips – had a corresponding negative impact. See my blog Keith’s rant  for more discussion on the economic impact of the energy sector.

high Canadian dividend stocks example chart for zdv

Canadian growth stocks, which tend to be less dividend orientated, experienced a 15% drawdown since early 2015. Growth stocks – as illustrated by the iShares (XCG) ETF has a 15% exposure to the energy sector, with less focus on dividends in its holdings. Further, the ETF has far less financial exposure, no utilities, and more exposure to industrials, consumer staples and discretionary stocks, and healthcare. I am sure the 10%+ exposure to Valiant and the 15% exposure to our two railways (CNR, CP)  had an overly negative impact on this ETF.

Dow Jones Canada example of high Canadian dividend stocks

The broader TSX 300 was beaten down by over 16% from its early 2015 peak (only slightly lower than its late 2014 peak – so let’s call that a wash), which was similar to the Canadian growth ETF. Again, compared to the 22% drawdown by the higher dividend paying stocks – the TSX’s drawdown was comparatively tame.


The US dividend stocks didn’t fare as poorly as our Canadian divvy payers. Vanguards (VYM-US)  ETF and iShares (DVY-US) ETF–both hold such blue chips as GE, Microsoft, and Johnson & Johnson as well as utilities (more so for DVY).  There’s a much smaller emphasis on energy in those two ETF’s than the Canadian ETF equivalents noted above (only 10% of VYM’s holdings, for example, is in energy). In fact, these ETF’s performed pretty much in line with the broad markets – only down about 3% from their peak price in early 2015. The 3% yield on these ETF’s offset that minor loss to create a break even year for investors who bought at the top.


It will be interesting to keep an eye on the chief sectors within the dividend ETF’s holdings. Students of technical analysis might be aware of “regression analysis” studies. In essence, regression analysis suggests that markets and sectors move up and down within a defined number of standard deviations from their mean return over time. If a sector is trading at the lower end of its expected long termed deviation from the mean – it will ultimately become a buying opportunity. Similarly, if a sector is trading too far over its mean, a correction will eventually ensue to bring the sector back in line with its long termed returns.


I’ll post some regression studies in coming blogs to illustrate sectors that are trading at the top or bottom ends of their expected ranges. While not a short termed timing tool, regression analysis can offer a heads-up on upcoming opportunities, or upcoming pain. You still have to await a consolidation and breakout (or breakdown) to establish a trend change. But having overbought or oversold securities on your watch list can be an excellent starting point. Stay tuned for some ideas that come out of these studies – posted in future blogs.


ValueTrend performance for year end 2015 now posted

Click here to see our numbers for 2015.  Technical analysis  combined with fundamental analysis works.


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  • Keith and VT Team, a Happy New Year to everyone and Thank You for sharing your analysis over the years to retail investors like us who need the guidance so much (exceptional analysis!).

    My take away from this recent blog is that XDV.TO has several tail winds that support a near-future buy. That is, a good mix of, 1) financial sector with good fundamentals (assuming your partner agrees), 2) energy sector hovering around its support level, and 3) a potential reversion to the mean.

    Aside for the lower lows and highs, are there any other negative that prevents us from investing in XDV.TO this month? Any signs of a base forming or what should I be looking for before jumping in?

    Best Regards

    • Thanks John–Happy new year too!
      Only on the daily chart does XDV show any sign of potentially basing–$20.50 must hold, $2150 is current resistance. I’d only buy over that level


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