Canadian Financial ETFs

Canadian Financial ETFs can provide a higher yield than a broader Canadian index ETF or some dividend ETFs. Depending on your goals (portfolio accumulation or retirement income), there are different options to consider.

When it comes to funds or ETFs, you want to be aware of the MER and the constitution of the the fund as well as understand the strategy. For example, some funds pay a high yield than the stocks they hold and it has to do with the active nature of the fund which leads to a higher MER.

What is a Financial ETF?

Financial ETFs are the ETFs that focus on the financial or the banking sector. Canadian Financial ETFs are a good way to invest in Canada’s banks since the banks play a major role in the Canadian economy. Canada’s banking stocks are characterized by attractive yields and dividend payouts thus offering a good investment proposal to the investors.

Financial ETFs provide an option to invest in the lucrative banking sector on one hand and gain a diversified exposure on the other. These ETFs eliminate the need to choose between different banks which now have differentiated business strategies and operate in diversified geographies. Investors can find out about the investment objectives, the top ten holdings, distribution frequency (if any), cost and expenses associated with investing in these ETFs, etc. from this guide.

Here are some of the top Canadian financial ETFs

wdt_IDETFNameInceptionCompany
1ZWBBMO Covered Call Canadian Banks12/02/2012BMO Asset Management
2ZEBBMO Equal Weight Banks Index ETF26/10/2009BMO Asset Management
3CICCI First Asset CanBanc Income Class ETF18/08/2010First Asset Investment Management Inc.
4XFNiShares S&P/TSX Capped Financials Index ETF23/03/2001BlackRock
5CEWiShares Equal Weight Banc & Lifeco ETF06/02/2008BlackRock
6FIEiShares Canadian Financial Monthly Income ETF06/04/2010BlackRock
7HXFHorizons S&P/TSX Capped Financials Index ETF16/09/2013Horizons ETFs Management
12HEFHorizons Enhanced Income Financials ETF16/05/2011Horizons ETFs Management

Banks or Financial ETFs

When looking at the Canadian financial ETFs, you have the choice to focus on just the major banks, the banking industry or the overall financial industry which includes life insurance and mortgage companies.

What makes it interesting to invest in a Canadian Bank ETF is the active management by the fund manager that can increase your income if income is what you seek. If you were to just buy the 6 Big Banks on your own, you would have a dividend yield average of 4.5% with an expected dividend growth of approximately 8%. It makes for a set of core holdings for a Canadian portfolio.

If you want more income than you need to become creative and either you start selling covered calls on your own or you let the Bank ETFs managers do that for you. I believe it’s a better option than buying into high flying dividend yield stocks since they only fly high for a short time.

wdt_IDETFYieldFeesMERFrequencyNet AssetsIndustry
1HXF3.870.250.28Monthly20MFinancials
2ZWB5.050.650.72Monthly 1,844MBig Banks
3CIC4.460.250.84Quarterly150MBig Banks
5HEF5.560.650.83Monthly15MFinancials
6XFN2.990.550.61Monthly1,039MFinancials
7FIE7.020.650.97Monthly653MFinancials & REITs
8ZEB3.770.550.62Monthly1,347MBig Banks
9CEW2.890.550.60Monthly148MBig Banks & Insurance

Financial ETFs Comparison

FIE – iShares Canadian Financial Monthly Income

iShares Canadian Financial Monthly Income ETF comprises of a diversified portfolio consisting primarily of common shares, preferred shares, corporate bonds and income trust units from the Canadian financial sector. The ETF seeks to maximize investors’ total return in the form of distributions and capital appreciation and provides a stable stream of monthly cash distributions. It has a medium risk rating.

  1. iShares S&P/TSX Canadian Preffered
  2. iShares Canadian Corp Bnd Idx ETF
  3. Royal Bank of Canada TSE:RY
  4. Bank of Montreal TSE:BMO
  5. CIBC TSE:CM
  6. Bank of Nova Scotia TSE:BNS
  7. TD Bank TSE:TD
  8. National Bank TSE:NA
  9. Genworth MI Canada Inc. TSE:MIC
  10. Sun-Life Financials TSE:SLF

HEF – Horizons Enhanced Income Financials

Horizons Enhanced Income Financials ETF invests in a portfolio of equity and equity related securities of Canadian companies in the banking, finance and financial services sectors. The ETF provides investors with monthly distributions of dividend and call option income. HEF also writes covered call options on 100% of the portfolio securities to mitigate downside risk and generate income. Horizons ETFs management (Canada) Inc. is the fund manager.

Top 10 Holdings:

  1. CI Financials TSE:CIX
  2. Intact Financial TSE:IFC
  3. Sun-Life Financials TSE:SLF
  4. Brookfield Asset Management TSE:BAM.A
  5. Manulife Financial Corporation TSE:MFC
  6. Great-West Lifeco TSE:GWO
  7. TD Bank TSE:TD
  8. National Bank TSE:NA
  9. Canadian Western Bank TSE:CWB
  10. Bank of Montreal TSE:BMO

ZWB – BMO Covered Call Canadian Banks

BMO Covered Call Canadian Banks ETF seeks to provide an exposure to the performance of a portfolio of Canadian banks while earning call option premiums. The ETF primarily invests in securities of Canadian banks as well as writes covered call options. The options are rolled forward upon expiry. This ETF is designed for investors looking for higher income from equity portfolios, while the call option writing reduces volatility. BMO Asset Management is the fund manager and this ETF belongs to the specialty income sector. The ETF distributes monthly income and has a medium risk rating.

Top 10 Holdings:

  1. Royal Bank of Canada TSE:RY
  2. TD Bank TSE:TD
  3. Bank of Montreal TSE:BMO
  4. Bank of Nova Scotia TSE:BNS
  5. CIBC TSE:CM
  6. National Bank TSE:NA

CIC – First Asset CanBanc Income Class

First Asset CanBanc Income Class ETF seeks to lower the overall volatility of portfolio returns by owning a portfolio of leading Canadian Banks’ shares. The fund’s investment objective is to provide shareholders with quarterly distributions and the opportunity for capital appreciation. The Fund sells call options on a maximum of 25% of the common shares of each bank held in the portfolio as part of its investment strategy each month. The ETF is 100% exposed to the financial sector.

Top 10 Holdings:

  1. Royal Bank of Canada TSE:RY
  2. TD Bank TSE:TD
  3. Bank of Montreal TSE:BMO
  4. Bank of Nova Scotia TSE:BNS
  5. CIBC TSE:CM
  6. National Bank TSE:NA

HXF – Horizons S&P/TSX Capped Financials Index

Horizons S&P/TSX Capped Financials Index ETF seeks to replicate the performance of the S&P/TSX Capped Financials Index net of expenses. The S&P/TSX Capped Financials Index is designed to measure the performance of equity securities of the Canadian financial sector included in the S&P/TSX Composite Index. Horizons ETFs Management (Canada) Inc. is the fund manager.

Top 10 Holdings:

  1. Royal Bank of Canada TSE:RY
  2. TD Bank TSE:TD
  3. Bank of Montreal TSE:BMO
  4. Bank of Nova Scotia TSE:BNS
  5. Brookfield Asset Management TSE:BAM.A
  6. CIBC TSE:CM
  7. Manulife Financial Corporation TSE:MFC
  8. Sun-Life Financials TSE:SLF
  9. National Bank TSE:NA
  10. Fairfax Financials TSE:FFH

ZEB – BMO S&P/TSX Equal Weight Banks Index

BMO Equal Weight Banks Index ETF has been designed to replicate the performance of the Solactive Equal Weight Canada Banks Index, excluding expenses. The fund seeks to invest and hold the Constituent Securities of the index. BMO Asset Management is the fund manager.

The ETF’s objective is growth and income equity. The ETF distributes monthly income and has a medium risk rating. It is designed for investors looking for growth solutions and provides 100% exposure to Canadian bank stocks.

Top 10 Holdings:

  1. Royal Bank of Canada TSE:RY
  2. TD Bank TSE:TD
  3. Bank of Montreal TSE:BMO
  4. Bank of Nova Scotia TSE:BNS
  5. CIBC TSE:CM
  6. National Bank TSE:NA

XFN – iShares S&P/TSX Capped Financials

iShares S&P/TSX Capped Financials ETF seeks long-term capital growth by replicating the performance of the S&P/TSX Capped Financials Index, net of expenses. The ETF provides an exposure to the Canadian financial companies. BlackRock has rated the volatility of this ETF as medium.

Top 10 Holdings:

  1. Royal Bank of Canada TSE:RY
  2. TD Bank TSE:TD
  3. Bank of Nova Scotia TSE:BNS
  4. Bank of Montreal TSE:BMO
  5. Brookfield Asset Management TSE:BAM.A
  6. Manulife Financial Corporation TSE:MFC
  7. CIBC TSE:CM
  8. Sun-Life Financials TSE:SLF
  9. National Bank TSE:NA
  10. Fairfax Financials TSE:FFH

CEW – iShares Equal Weight Banc & Lifeco ETF

iShares Equal Weight Banc & Lifeco ETF comprises of a diversified and equally weighted portfolio of shares of the largest banks and life insurance companies in Canada. These banks have a minimum market capitalization of $5 billion, while Canadian life insurance companies have a minimum $1.5 billion as market capitalization value. The ETF provides an exposure to specific subsectors of the Canadian financial services industry while giving a chance to earn regular monthly dividend income to its unitholders. BlackRock has rated the volatility of this ETF as medium to high and it is the perfect choice for investors seeking long-term capital growth.

Top 10 Holdings:

  1. TD Bank TSE:TD
  2. Bank of Nova Scotia TSE:BNS
  3. Royal Bank of Canada TSE:RY
  4. Sun-Life Financials TSE:SLF
  5. iA Financial Corporation TSE:IAG
  6. Manulife Financial Corporation TSE:MFC
  7. National Bank TSE:NA
  8. Great-West Lifeco TSE:GWO
  9. Bank of Montreal TSE:BMO
  10. CIBC TSE:CM

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.
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