International defensive income ETFs…

0
0

Greetings.

As an avid user of Stocktrades.ca I have a portfolio that is heavily weighted towards Canadian stocks (80% of portfolio). I do hold some US tech stocks as growth plays that I will not be selling anytime soon (20% portfolio). However, with many indicators of increasing inflation currently underway I am moving into a defensive position by focusing my new stock purchases on defensive income stocks, and some alternative investments. I currently have no international exposure – I am wondering if you guys would be willing to write a piece or give some suggestions on some of the best ETF options for Canadians that would like to add international stocks (particularly defensive and dividend paying) from outside of North American markets.

Thanks guys!

Marked as spam
Asked on March 21, 2021 2:44 pm
0 views
0
Private answer

Good question! Keep in mind, there are tons of defensive, high yielding companies here in Canada. In fact, we're home to some of the best companies on the planet in terms of economic moats.

Think of our Canadian financial institutions, our railways, our telecoms and our pipelines. It's why lots of investors flock to Canada when it comes to income investments. In fact, many are predicting the TSX Index could outperform it's American counterparts over the next year or two as more shift to these defensive options.

For me, I hold XAW for international exposure. It has 8000+ holdings, and it's ex-Canada, meaning it owns no Canadian holdings. However, that's not going to move the needle for you in terms of income I imagine, it only yields in the mid 1% range.

Have you ever looked at a international low volatility ETF like VVO? It yields in the high 1% range, but it contains stocks outside of North America with historically low betas.

https://www.vanguardcanada.ca/advisors/products/en/detail/etf/9828/equity

Or, maybe its BMO counterpart, ZLI. It yields closer to 3%, and aims to achieve the exact same thing.

https://www.bmogam.com/ca-en/advisors/zli-bmo-low-volatility-international-equity-etf/

Only issue I see with both of these is volume. ZLI has decent volume, but VVO is pretty low. What you're describing is a pretty niche ETF. And keep in mind, these ETFs have underperformed the broader markets quite a bit over the last while. But again, that's primarily because they are, as you highlighted, low beta defensive international options.

During the COVID crash, ZLI only dipped 14.8% while all other markets pretty much cratered. So, it's a give and take type situation!

I hope this helps you down the right path, I'm sure there are many more ETFs like this.

Marked as spam
Posted by Dan Kent
Answered on March 21, 2021 8:23 pm