XRE vs. ZRE vs. XIC - Top 3 Canadian ETFs Reviewed & Compared (2024)

When we talk about XRE, XIC or ZRE – we are talking about three great Canadian ETFs on the radar. All three are great picks and performers. However, they are fundamentally very different in the very way they function and how they track the index.

XRE, ZRE & XIC are all Canadian ETFs, tracking different sectors in the TSX index. While XRE And XIC are from Blackrock, ZRE is from BMO.

XRE tracks the S&P/TSX Capped REIT Index, a modified cap-weighted index while VRE tracks the FTSE Canada All Cap Real Estate Index Capped 25% Index, a cap-weighted index which prevents individual holdings from exceeding 25%.ZRE differs the most in that it tracks an equal-weighted index of Canadian REITs where each holding is held in an equal amount.

When it comes to XIC, it tracks the Toronto Stock Exchange, which represents the Canadian equity markets. Again this includes all the small, medium and large businesses throughout all the Canadian manufacturing sectors.

An interesting thing to note about XIC is that it caps exposure to any one security (sector in simple terms) at 10%, therefore reducing concentration risk.

As I said, all these three ETFs – XIC, XRE or ZRE are excellent performers in the market and have performed great over the years time and again. Now, then, let’s get started.

1. XRE – iShares S&P/TSX Capped REIT Index Fund

First of all, XRE is an excellent pick if you are a dividend investor/ have that mindset. Stock’s growth here is very minimal or negligible when or VCN which tracks the TSX 60 Index.

XRE currently trades at $15.02 CAD in the Toronto Stock Exchange (TSE). The dividend yield is a healthy 5.38% with a market cap of 1.4 Billion Dollars. The year to date returns of XRE stands at -20.5%.

Here’s XRE’s overall fund objective – “XRE seeks to provide long-term capital growth by replicating, to the extent possible, the performance of the S&P/TSX Capped REIT Index”

What that means to normal investors like you and me is – By buying one ETF or one stock of XRE, you are pretty much holding the entire REIT or Real Estate market in Canada and the US (partially).

All of the money in this ETF is invested in buying the individual REIT stocks, majorly Canadian and others from the rest of the world. As you might know, REIT stocks are mainly kept for their lucrative dividend yield and so does XRE.

XRE’s dividend is excellent at more than 5% monthly and the stock does well in terms of growth too. Not great, but ok.

If you are looking for growth + dividend stocks, I’ve covered many articles on this blog, so do check them out when you get time.

Why Invest In XRE?

Here are a couple of reasons why you might want to pick XRE over others:

1. Exposure to almost all of the Canadian Real Estate Income Trusts (REITs)

2. You’ll be exposed to different types of REITs in a single fund, such as the retail, residential, office and industrial

3. Receive monthly distributions (More than 5% monthly is the current distribution rate)

How Does XRE Invest Your Money?

Under the regular market conditions, XRE will primarily invest in equity securities issued by Canadian small-capitalization issuers and Canadian real estate investment trust issuers or in simple terms Canadian REITs.

Canadian REIT Index is mainly comprised of constituents of the S&P/TSX Composite Index with GICS Industry code 404020.

Key Fund Facts Of XRE

Below are some important numbers of XRE:

Top 10 Investment Holdings Of XRE

Below you can find the top 10 holdings of XRE. Again this is not the complete list of holdings by this ETF, it’s only the top 10 based on the overall portfolio.

All 10 of them are some of the biggest names in the Canadian REIT Index. That’s what I said earlier, buying one stock of XRE is similar to buying every Canadian REIT Stock out there in the market.

The majority of the banks usually charge anywhere between $6.95 (CIBC) to $9.95 (RBC) for the purchase of one ETF (buy or sell same charges)

Below is the dividend distribution chart over the years:

First of all, XIC holds 250+ Canadian equities representing 95% of the Canadian equity market. Compare that to 60 held by XIU.

With XIC, you are going to see more diversity because you have access to more companies.

The best part of investing in XIC is that it limits the overall sectoral weight to 10% of the total holdings. This means that the top 10 holdings in XIC account for only 33% of the total portfolio, while in XIU, the top 10 holdings make up 46% of the portfolio.

While the XIC currently trades at $26.65 CAD, its dividend yield is 2.57%.

5-year chart of XIC:

Why Invest In XIC?

Below are a couple of reason why you might want to Invest in XIC:

1. You can pretty much own the entire Canadian stock market with one share of XIC.

2. XIC is extremely low cost to own, compared to the entire Canadian market it offers at stake

3. XIC was designed to be a long-term core holding fund, making the returns robust over time

What Is The Investment Objective Of XIC?

Here’s the overall investment objective of XIC – ” XIC seeks long-term capital growth by replicating the performance of the S&P/TSX Capped Composite Index, net of expenses”

Important information regarding a unit split affecting this fund can be found by clickinghere.