This is a review of Tangerine Dividend Portfolio, one of the 5 Tangerine Core Portfolios.
The portfolio provides a means for investors to quickly invest in a portfolio of dividend paying companies, professionally managed using an indexing strategy.
In this post, you’ll learn everything you need to know about the dividend portfolio to decide if it is a right fit for you.
But first, a quick overview…
Fund Overview
The Tangerine dividend portfolio is a passively managed fund with global diversification and quarterly rebalancing.
Instead of building a dividend portfolio with individual stocks one at a time, the fund gives you access to over 270 companies with a single purchase.
And getting started is easy with a low starting investment of just $25.
Here are some quick facts about the dividend portfolio:
- Date fund started: Nov, 2016
- Total value of the fund (August 31, 2023): $306.6 million
- MER: 1.06%
- Distribution: Annually, December
- Fund and Portfolio Manager: Tangerine Investment Management Inc
The Tangerine Dividend portfolio has a dividend yield of 2.94% as of August 2021.
Portfolio Allocation
The portfolio is designed to provide both dividend income and capital appreciation. And these objectives are achieved by investing in shares of companies with a track record of paying dividends.
The portfolio has a 100% allocation to equities but diversified geographically to Canada, U.S and Internationally.
Each of the components of the portfolio track the Morgan Stanley Capital International (MSCI) dividend index for their respective location.
The indices are constructed using a multi-level dividend screening process that starts with identifying companies that pay dividends consistently and have the ability to sustain them.
Next, the stocks are screened using quality factors like return on equity, debt to equity ratio, price performance over the previous 12 months and so on.
And finally, only the companies with higher than average dividend yields are selected and included in the indices.
The indices are rebalanced semi-annually, and market cap weighted.
| Asset Class | Weight | Benchmark |
|---|---|---|
| Canadian Stocks | 50.8% | MSCI Canada High Dividend Yield Index |
| U.S. Stocks | 22.6% | MSCI USA High Dividend Yield Index |
| International Stocks | 26% | MSCI EAFE High Dividend Yield Index |
Depending on how the stocks within each asset class perform, the weights above may vary slightly from the target.
Check here to see the current allocations to each asset class (geography) and the individual stocks.
Tangerine Dividend Portfolio Holdings
The portfolio is well diversified if you look at the count of investment alone. Its asset was invested in 290 different investments as at August 31, 2023.
But the investments are not equally weighted so a few, top companies receive the bulk of the portfolio’s fund. The top 10 holdings collectively weigh 42.2% of the fund value.
Note: You can view the fund’s current top holdings here.
This is not necessarily a bad thing though. The top companies are well established, matured companies in financials, energy, utilities and telecoms with a long track record of not just paying, but also increasing, dividends.
If you want a more recent listing of the portfolio’s make-up, you can visit tangerine.ca/investments or call Tangerine at 1-877-464-5678.
Historical Performance
Tangerine publishes the performance of its fund periodically, so we have an idea of how the dividend portfolio has performed since inception in late 2016.
- 2017: 9.7%
- 2018: -6.6%
- 2019: 20%
- 2020: -5.5%
- 2021: 22.2%
- 2022: 1.0%
According to Tangerine, $1,000 invested in the fund at inception would have grown to $1,600 in August 2023.
The usual disclaimer applies here: past performance is not a guarantee of future results.
Portfolio Risk
You should note that the portfolio can be exposed to wide volatility. Like I mentioned earlier, it’s 100% invested in equities. So you should be willing to accept some short term swings.
In fact, the fund dropped 18.9% for the quarter ended March 2020 due to COVID-19 induced sell off. And interestingly, the drop is worse than the 15.2% drop in the Tangerine Equity Growth Portfolio with 100% allocation to stocks.
In other words, the Tangerine dividend portfolio is NOT low risk, and you should only consider investing in it if your risk appetite and time horizon aligns with the portfolio risk.
Fund Fees
Like the other Tangerine Investment funds, there are no transaction or maintenance fees for the dividend portfolio.
Setting up your account, placing online trades, making withdrawals, switching between different funds and many more can be done completely free.
You will only pay a fee of $125 if you decide to move your investment to another financial institution.
Why Invest In Dividend Stocks?
A few reasons why dividend investing is attractive to some investors include:
- More predictable cash flow from your investments
- Dividends have a tax advantage compared to interest income.
Investors that fund their cash need using their investment portfolio have two options: sell some of the stocks or receive dividends/interest income.
Dividend investors prioritize the latter; so they choose to focus on the dividend yield of their portfolio. But other investors think that total return is more important.
With total returns, you invest with an eye on both the dividends you may receive and the price appreciation. That is, your total returns on any stock is the sum of:
- Dividends
- Increase (or decrease) in the stock price.
Usually, companies that pay dividends are matured with limited opportunity to reinvest the cash generated by the business. So by investing in only dividend paying companies, your investment may be less diversified than you think.
Your portfolio would be under-weight several high-quality growth stocks that don’t pay dividends across many sectors.
Alphabet (Google’s parent), Amazon, Facebook are examples of quality stocks within the Tech sector that still don’t pay dividends but have given their investors some excellent returns over the years and continue to do so.
Whichever investment strategy you chose, it is important to stick to your investment plans and follow basic investment principles:
- Invest periodically no matter what the market is doing
- Keep your investment costs low
- Invest according to your risk appetite and time horizon
- Be disciplined and only invest in what you understand
Check this paper for an overview of the Dividend Yield vs Total Return Debate.
Why Invest in Tangerine Dividend Portfolio?
Dividend investing can be time-consuming.
Think about all the time you’ll spend researching each stock, placing the trades and monitoring the individual investments on an on-going basis and even rebalancing. There is also the brokerage fees you may have to pay for placing trades.
The cost and time commitment can quickly add up.
By investing through a dividend fund though, you effectively outsource all the portfolio management to the portfolio manager.
Your investment is professional managed and rebalanced back to your desired asset mix periodically.
But of course, there’s a cost for the service and convenience.
So who is the Tangerine Dividend portfolio right for?
The investment fund may be for you if:
- You’re a retiree looking for better yield on your investments.
- You want to invest in dividend paying companies but don’t want the time commitment.
Pros and Cons of the Tangerine Dividend Portfolio
Pros:
- It is diversified outside of Canada, with 50 percent allocation to U.S. and international equities
- The portfolio makes it easy to get started with dividend investing.
- It provides a quick and low-cost diversification
- The fund provides a good balance between getting a high yield and return
- No transaction or maintenance fees unless you’re transferring your account to another financial institution.
Cons:
- The allocation to Canada at 50.8% may be to high
- At an MER of over 1.06%, it is a little more expensive than other options.
How to Invest in Tangerine Dividend Portfolio?
To get started, simply visit the Tangerine Investment page. You’ll be prompted to login to your account if you’re an existing client or create one if you’re new.
You can open any of the accounts below:
- Non-registered account
- Tax-free Investment Fund (TFSA)
- RSP Investment Fund (RRSP)
- RIF Investment Fund (RRIF)
Related Posts:
Other Tangerine Investment Funds
Tangerine currently has a total of 8 investment funds. There are 5 funds under the Core Portfolio and 3 under the recently launched Tangerine Global ETF Portfolios.
So if the dividend portfolio doesn’t look like a good fit for you, here are a few other options to consider.
Tangerine Core Portfolios, MER of 1.06%
Balanced Income Portfolio: 30% stocks and 70% in Bonds
Balanced Portfolio: 60% stocks and 40% in Bonds
Balanced Growth Portfolio: 75% Stocks and 25% in bonds
Equity Growth Portfolio: 100% Stocks
Tangerine Global ETF Portfolios, with MER of 0.76%
Balanced ETF Portfolio: 60% stocks and 40% in Bonds
Balanced Growth ETF Portfolio: 75% stocks and 25% in Bonds
Equity Growth ETF Portfolio: 100% stocks
Related Post: Tangerine Global ETF Portfolios Review
If you have any questions about the Tangerine Dividend portfolio or any of the other Tangerine Investment funds, you can visit the Tangerine Investment page or get in touch with them through:
Phone: 1-877-464-5678
Email: [email protected]
Alternatives to the Tangerine Dividend Portfolio
With a little extra effort, you can replicate the dividend portfolio by buying 3 ETFs with exposures to the asset classes of the Tangerine investment fund.
Why would you want to do this?
- You want to pay lower fees. Each of the ETFs below are a fraction of the MER of the Tangerine dividend fund.
- You want to change the allocation for each of the components. For example, if you decide to make the U.S. allocation higher and reduce your Canadian exposure. But the tax impact may be a concern depending on the account you’re investing in.
Here are some dividend ETFs to consider as Tangerine alternative.
Canadian Dividend ETFs
- BMO Canadian Dividend ETF (ZDV)
- iShares Core S&P/TSX Composite High Dividend Index ETF (XEI)
- Vanguard Canadian High Dividend Yield Index ETF (VDY)
US Dividend ETFs
- Vanguard High Dividend Yield ETF (VYM)
- iShares Core High Dividend ETF (HDV)
- iShares Core Dividend Growth ETF (DGRO)
- Schwab U.S Dividend Equity ETF (SCHD)
International Dividend ETFs
- Vanguard International High Dividend Yield ETF (VYMI)
- iShares International Select Dividend ETF (IDV)
- State Street SPDR S&P International Dividend ETF (DWX)
Further Readings
To learn more about dividend investing, here are some Canadian blogs with a focus on dividends.
- Dividend Growth Investing and Retirement
- Tawcan
- Passive Canadian Income
- My Own Advisor
- The Dividend Girl
- Dividend Growth Investor (U.S. Blog)
The list is no where close to being exhaustive. There are several other dividend blogs out there.
But if there is any other blog for dividend investors you think I should include, let me know in the comments and I’ll update the list.
Final Thoughts
My review of the Tangerine Dividend Portfolio is mixed. It offers a quick and easy way to get started with dividend investing.
But you can build a portfolio with lower cost with a little more effort.
Related: Best Dividend ETFs in Canada
Tangerine Dividend Portfolio
Summary
The Tangerine dividend portfolio is a passively managed fund that lets Canadians build a dividend portfolio with global diversification quickly and conveniently.
