I'm not well versed in Excel, but I thought what the hell, I'll give it a try, to compare VFV vs HXS, and see which would come out ahead. Mind you, I have based it on a few assumptions.
I'm using 1.5% as the annual dividend, 5.5% stock growth, to arrive at a 7% total return. HXS's MER is 0.47% (0.15% MER plus swap fee of 0.3%). For VFV I based on the Canadian Couch Potato's calculation, and assumed that 3/4 of foreign dividend tax credit is lost when it's held within CCPC. The link so the white paper from PWL Capital is here:
https://www.pwlcapital.com/pwl/media/pw ... f?ext=.pdf
Along with the lost of FDTC, I'm using a MER of 0.33% for VFV.
For tax, based on what my accountant told me (I could be wrong, please correct me if I made any mistake), once I draw foreign dividend/interest/capital gain from my CCPC to myself through non-eligible dividends, after the refund from RDTOH, the net tax will be 18%/18%/9% respectively (only 50% of capital gain is taxed, thus 18%/2 = 9%). These are BC numbers.
So I'm assuming that with VFV, the foreign dividend is withdrawn from the CCPC annually, taxed at 18%. VFV will therefore grow at a rate of 5.5%, plus 1.5% dividend with 18% tax (1.5% * 0.82% = 1.23%), total growth will be 6.73%.
With HXS, it'll grow tax free at 7%, because it's a total return swap ETF.
At year 20, I'll liquidate everything, pay capital gain tax. So the total at the end of 20 years minus $200,000 of principle will be the capital gain, taxed at 9%.
From my spreadsheet, there is a 3% advantage of using HXS over VFV. It doesn't sound like a lot, but the nominal value is over $11,000. I adjusted VFV's MER to see if it plays a significant role, even when I set it to 0%, it still lags HXS by about 2.3%. Seems to me the annual taxable event plays a bigger role than I thought.
What do you guys think? I'm thinking instead of VTI/VUN, I'm now tempted to slowly switch to a HXS(HXS.U)/VXF formation. Is there any reason why you don't think it's a good idea besides counterparty risk and CRA risk?