| Fund Company | Claymore Investments Inc. |
| Fund Type | Canadian Dividend & Income Equity ETF |
| Rating | $$$ |
| Style | Index |
| Risk Level | Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Fair |
| TFSA Suitability | Fair |
| Manager | Claymore Investments since April 2007 |
| MER | 0.50% |
| Code | TSX: CPD |
| Minimum Investment | N/A |
Analysis: This ETF is designed to match the returns of the S&P/TSX Preferred Share Index after fees. The index invests more than 150 individual preferred share issues. The quality of the portfolio is high, with more than 54% invested in the highest quality preferred shares.
The top 10 names in the portfolio are made up of very well known Canadian blue chips such as TransCanada Corp, Enbridge, Manulife, Bank of Nova Scotia, BMO and TD.
The ETF pays investors a monthly dividend of $0.069 per share, which works out to an annualized yield of approximately 4.8% at current prices. The dividend appears to be sustainable, based on a weighted average coupon rate of 5.1% for the stocks in the portfolio.
The costs are reasonable, with an MER of 0.50%, well below the MERs of mutual funds that invest in preferred shares. Volume appears to be reasonable and bid ask spreads have been fairly tight, which indicates that liquidity should not be a problem in most situations. As of March 20, it is trading at a slight premium to its asset value by $0.05.
Performance has been respectable, posting a one year return of 5.0%, which outpaced most of the available Canadian equity funds and ETFs, as well as the broader S&P/TSX Composite Index. Longer term, performance has lagged the broader market, but this is largely attributable to the 2007 and 2008 period where preferred shares posted their worst performance in memory. The three year return has been 12.1%.
Volatility has been modest and in line with other preferred focused funds. However, we have noticed that the actively managed mutual funds, BMO Guardian Monthly Dividend Fund and Omega Preferred Equity, have provided better downside protection than the ETF in volatile markets.
On balance, this is a decent choice for conservative investors looking for a relatively low volatility ETF that provides a monthly income. It is currently our top ETF that invests in preferred stocks. Investors looking for better downside protection may want to consider one of the two preferred focused mutual funds mentioned earlier.