iShares XHY US High Yield Corporates in Cdn $
Horizons HPR Active Cdn Preferreds
Total Return Year to Date 1 year
XHY 3.77 0.25
HPR -4.01 -14.50
The current dividend yield is 5.61% for XHY and 4.79% for HPR
The difference in performance is quite dramatic.
The High Yield Corporate ETF, XHY, does well when economy is strong and does poorly in a recession
Rate reset preferreds perform well when rates are rising and perform poorly when rates fall
Canadian preferreds eligible for dividend tax credit while the High Yield bonds are not.
Despite the tax advantage for preferreds, I do not recommend them.
In a recession neither ETF will perform well
In a slow growth economy with flat to declining rates but no recession, the High Yield ETF XHY will outperform rate reset preferreds
Currently we are not in a recession, but in a slower growth environment going forward.
In this environment High yield will continue to outperform Rate reset preferreds.