October 2016 Update: Little has changed since this past year and since the original 2013 post. The various collateral ETFs continue to power before bonds, both in conditions of total results and of cash distributions. Thankfully, all the ETFs, including bonds, are handily beating inflation. Many would think of bonds as resources of steady cash but ironically, the positive return for the bond ETF (symbol XBB in the graphs) has come from capital gains. Financials still rule, far outstripping the other types of ETFs and the common market in cumulative total return within the last five years. Energy has continued to be a severe disappointment for traders, not handling to outdo inflation even.
October 2015 Update: The same design described in the initial article below has continuing. Equity distributions have continued to rise while bond distributions in the XBB ETF remain falling. Some of the charts updated to include 2014 distributions show how cash distributions from numerous kinds of collateral ETFs have continuing on a steady upward path. The big exclusion is the highly volatile energy ETF XEG, whose distributions have been way up and also have now fallen back significantly.
After the best fall in 2009 2009, REIT distributions have taken care of an upward path. All of the equity ETFs have outstripped inflation much. 30 Sept 2015 for these ETFs. First, we remember that XBB’s results are not all bad – its total return has been positive despite dropping cash distributions. Next, we see that XEG’s comes back have been strongly negative to go with the fall in distributions.
Energy is a inadequate investment. It has done worse than inflation, unlike almost every other ETF, both equities and bonds. Ironically, one ETF with weak growth in cash distributions – CDZ – is the main one explicitly targeting companies which have shown strong dividend growth. The ETF appears to pick up companies after a burst has been had by them of increases, a fine exemplory case of previous results not being indicative into the future necessarily.
Neverheless CDZ’s total return has been quite strong, second best overall. The clear overall winner has been the financials – the XFN ETF has had both healthy cash distribution increases and excellent capital appreciation to produce a superb total return of 9.3% per season compounded. The graph below shows how distributions per unit / talk about have advanced from the inception of each of the next ETFs.
ETF, the yellowish line, and the various equity funds has narrowed through the years considerably. The orange type of the power ETF XEG is up on the long-term but they have seen wild upward then drastic downward movement, not so attractive to anyone seeking steady cash income. The deep red of the REITs XRE began quite high but there was a huge drop through the financial crisis with some recovery since but the overall income level is slightly down from its 2003 start yr. That’s a shock for a sector that is often portrayed as a reliable high-income investment. We explore more why this happened below.
The mid-blue line of the financials in XFN is the best performer of the great deal. Another shock is that it took the least hit during the financial crisis. The big banking institutions simply held their dividends for a couple of years then began enhancing dividends again steady. Now the sector has recovered all the lost ground and reaches a new peak.
The broad TSX 60 XIU fund, which contains a big dose of energy and financials as well as other sectors like mining, resources and industrials that we do not have data, went but slower forward overall continuously. The ETF with the broadest diversification across financial sectors has already established the steadiest payout record.
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100k) by the end of the year 2002 and simply collected the money payouts. We ignore total return and do not determine any re-investment of the distributions. The distributions are real cash in the investor’s hand, net of any management and administrative fees. The graph below shows what could have happened.
The REIT finance XRE began well prior to the pack and is still way forward after 10 years but its lead has narrowed substantially. The erratic path of XEG might have caused many investors heartburn even though overall the web upsurge in distributions since 2003 has considerably outstripped inflation. The financials XFN and the blended collateral XIU have followed quite a parallel path, though XFN has inched forward. Why did REIT distributions fall so much?