Scotia International Equity Index Tracker ETF (SITI): A High-Yield Gateway to Global Markets

The Scotia International Equity Index Tracker ETF (SITI) has declared a CAD 0.348 dividend, reigniting interest in its compelling blend of income generation and broad international equity exposure. With its price recently hitting a 52-week high of CAD 30.33, SITI's dividend yield now stands at 2.75%, offering investors a rare combination of steady income and diversified access to developed markets outside North America. Let's dissect what makes this ETF an intriguing addition to income-focused portfolios.

The Dividend Yield: A Competitive Advantage

At 2.75%, SITI's weighted average dividend yield is notably higher than the trailing 12-month yield of the S&P 500 Index (1.56%) and competitive with many global equity ETF peers. While the declared dividend of CAD 0.348 translates to an annualized yield of approximately 2.94% based on the current share price (CAD 0.348 × 4 / CAD 30.33), this aligns closely with its stated yield.

This yield is bolstered by SITI's low net expense ratio of 0.22%, which is below the average for international equity ETFs. Lower fees mean more of the fund's returns flow to investors, enhancing its appeal for those seeking income without excessive costs.

Global Exposure at a Bargain Price

SITI tracks the Solactive GBS Developed Markets ex North America Large & Mid Cap CAD Index, which invests in large and mid-cap companies across developed markets outside the U.S. and Canada. This includes heavyweights in sectors like healthcare, technology, and consumer staples in regions such as Europe and Asia.

The fund's 98.41% stock allocation ensures robust equity exposure, while its CAD hedging mechanism reduces currency risk for Canadian investors. This hedging feature contrasts with unhedged rivals like the Vanguard FTSE Dev All Cap ex Nth Am Idx ETF CAD-hgd (VDAA), which may expose investors to fluctuations in foreign currencies.

Performance: Outpacing Canadian Benchmarks

Year-to-date, SITI has delivered a 10.68% total return, outperforming the S&P/TSX 60 Index Total Return (8.12%). This suggests the ETF's focus on non-North American markets is paying off in an environment where global economic recovery and corporate earnings are driving equity gains.

However, it's crucial to note that SITI's performance relative to peers like the Mackenzie International Equity Index ETF (MIE) and VDAA varies. For instance, VDAA, with its broader all-cap exposure, may capture growth opportunities SITI misses. Investors should assess their risk tolerance and growth-income balance before choosing between these options.

Risk Considerations and Technical Outlook

While SITI's yield and diversification are compelling, risks persist. Geopolitical tensions, inflationary pressures, or a strong Canadian dollar could dampen returns. Technical analysis currently signals a “Strong Buy”, with the ETF hovering near its 52-week high, but volatility remains a factor.

The fund's 6.60% turnover ratio suggests minimal trading costs, but its $575 million in assets under management is modest compared to larger ETFs, potentially impacting liquidity. The average daily volume of 1,353 units is low, so investors should consider trading costs when entering or exiting positions.

Investment Takeaway

SITI's 2.75% yield, low fees, and CAD-hedged global equity exposure make it a strong candidate for income-oriented portfolios seeking diversification beyond North America. Its recent outperformance versus Canadian benchmarks underscores its potential to capitalize on global growth.

Recommendation:
- Income-focused investors can hold SITI for steady dividends and long-term equity appreciation.
- Diversification seekers should pair it with domestic equities or fixed-income assets to balance risk.
- Avoid if: You prioritize liquidity, fear global market downturns, or prefer unhedged exposure to capture currency gains.

As global markets continue to rebound, SITI's blend of income and international reach positions it as a versatile tool for investors willing to look beyond their borders.

Disclaimer: Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.