13 Best Dividend ETFs in Canada (2021): Passive Income Made Easy

Looking for an easy way to generate some passive income? Buying dividend stocks is a good way to go. Better yet, look at buying dividend ETFs.

Tracking indices of dividend-paying stocks, Canadian dividend ETFs provide investors with the chance to grow your overall wealth by capital appreciation and monthly income through dividends from underlying companies. 

Picking out the best dividend ETFs in Canada can be challenging because the number of available ETFs keeps increasing each year. Each ETF has a unique strategy for providing investors with exposure to dividend income.

Here’s my list of the best Canadian dividend ETFs currently available.

13 Best Dividend ETFs in Canada

Best Dividend ETFs in Canada Infographic

1. Horizons Active Canadian Dividend ETF

horizons logo
  • Ticker: TSX:HAL
  • Fees: 0.67% MER
  • Dividend Yield: 3.25%
  • AUM: $59.6 million (July 24, 2020)

Horizons Active Canadian Dividend ETF is one of the best Canadian dividend ETFs. Seeking long-term total returns, its approach consists of using reliable dividend-paying assets. The idea is to use consistent income and modest, long-term capital growth assets for consistent capital growth for investors. 

The ETF targets companies that do not just provide excellent appreciation, but also long-term dividend growth. It focuses on companies across various sectors and industries. The ETF focuses on stocks of major companies in North America that offer a higher than average dividend yield and have excellent prospects of increasing dividends. To this end, the ETF can hold up to 10% of fixed-income securities as well.

2. BMO Canadian Dividend ETF

  • Ticker: TSX:ZDV
  • Fees: 0.38% MER
  • Dividend Yield: 5.29%
  • AUM: $431.2 million (July 24, 2020)

BMO Canadian Dividend ETF is another excellent entry on the list of the best dividend ETFs in Canada. Issued by the Bank of Montreal, this income-producing asset seeks to provide investors with the chance to benefit from exposure to the performance of a yield-weighted portfolio of Canadian dividend-paying stocks. 

The ETF focuses on targeting a portfolio of Canadian equity securities with the potential of healthy long-term appreciation and dividend growth. The ETF provides its investors with monthly dividend income from the underlying diversified dividend-paying assets. The medium-risk ETF has had a fantastic performance over the years, and it provides investors with a relatively reliable income.

3. iShares S&P/TSX Canadian Dividend Aristocrats Index ETF

ishares logo
  • Ticker: TSX:CDZ
  • Fees: 0.66% MER
  • Dividend Yield: 4.74%
  • AUM: $742.2 million (July 24, 2020)

iShares S&P/TSX Canadian Dividend Aristocrats Index ETF is among the best dividend ETFs in Canada that seeks to replicate the performance of the S&P/TSX Canadian Dividend Aristocrat Index before expenses and fees. 

This index primarily consists of dividend-paying stocks or income trusts listed on the Toronto Stock Exchange that are constituents of the S&P Canada Broad Market index. The equity securities in the index are selected based on a reliable track record of annually increasing dividend payments for at least the last five years, providing investors with a growing overall income with each passing year. The ETF pays its investors their dividends every month.

Related reading: Best All-In-One ETFs in Canada

4. iShares Core S&P/TSX Composite High Dividend Index ETF

  • Ticker: TSX:XEI
  • Fees: 0.22% MER
  • Dividend Yield: 5.89%
  • AUM: $597.4 million (July 24, 2020)

iShares Core S&P/TSX Composite High Dividend Index ETF is an ETF managed by BlackRock Asset Management Canada Ltd., and it seeks to provide investors with an exposure to the income from high-quality dividend-paying stocks in Canada. 

The ETF provides a monthly dividend income to investors through its focus on a diversified portfolio of Canadian companies in its holding that have excellent long-term capital growth potential across various sectors of the economy. 

Designed to be a long-term foundational holding, it is a low-cost ETF with a relatively high risk and high reward approach by replicating, to the extent possible, the performance of the S&P/TSX Equity Income Index.

5. iShares S&P/TSX 60 Index ETF

  • Ticker: TSX:XIU
  • Fees: 0.18% MER
  • Dividend Yield: 2.84%
  • AUM: $9 billion (July 24, 2020)

iShares S&P/TSX 60 Index ETF is among the best Canadian dividend ETFs that seeks to provide investors with a dividend income by replicating the performance of the S&P/TSX 60 Index, to the extent possible. 

Launched and managed by BlackRock Asset Management Canada Ltd., the ETF has a significant place in history as being the first-ever ETF to begin trading in the world. It is also the largest and most liquid ETF. 

It has a focus on long-term capital appreciation by replicating the S&P/TSX 60 Index, which consists of 60 of the largest companies listed on the Toronto Stock Exchange, and it provides investors with exposure to each of the ten sectors through its portfolio.

6. iShares Canadian Select Dividend Index ETF

  • Ticker: TSX:XDV
  • Fees: 0.55% MER
  • Dividend Yield: 5.00%
  • AUM: $1.1 billion (July 24, 2020)

iShares Canadian Select Dividend Index ETF seeks to replicate, to the extent possible, the performance of the Dow Jones Canada Select Dividend Index, net of expenses. It is another ETF launched and managed by BlackRock Asset Management Canada Ltd., and it seeks to provide investors with strong long-term capital appreciation. 

While the underlying assets within the ETFs holdings consist of diversified assets across various sectors of the economy, there is a larger share of investment in the financial sector, with more than 50% weightage for the finance sector. The ETF seeks to provide exposure to 30 high-quality companies in Canada that have a high dividend yield.

7. Vanguard FTSE Canadian High Dividend Yield Index ETF

  • Ticker: TSX:VDY
  • Fees: 0.22% MER
  • Dividend Yield: 4.67%
  • AUM: $567.2 million (July 24, 2020)

The Vanguard FTSE Canadian High Dividend Yield Index ETF is the next entry on the list of the best dividend ETFs in Canada. This ETF tracks, to the extent possible, the performance of the FTSE Canada High Dividend Yield Index before fees and expenses. The index consists of various Canadian equity securities that have a high dividend yield. 

The ETF employs a passively managed approach to high dividend yield large-, mid-, and small-market capitalization Canadian stocks diversified across various sectors of the economy. The ETF uses efficient and cost-effective index management techniques and pays investors monthly dividends.

Related reading: Best Bond ETFs in Canada

8. iShares Core MSCI Canadian Quality Dividend Index ETF

  • Ticker: TSX:XDIV
  • Fees: 0.11% MER
  • Dividend Yield: 5.20%
  • AUM: $221.5 million (July 24, 2020)

The iShares Core MSCI Canadian Quality Dividend Index ETF seeks to replicate, to the extent possible, the performance of the MSCI Canada High Dividend Yield 10% Security Capped Index. It seeks to provide investors with long-term capital appreciation by selecting a portfolio of securities with a high-quality balance sheet and a track record of consistent earnings in the past. 

The stocks that comprise the ETF have the common characteristic of growing dividends and above-average dividend yields. Designed to be a long-term core holding, XDIV focuses entirely on Canadian assets in its portfolio with a significant allocation to equities in the financial sector.

9. Invesco Canadian Dividend Index ETF

  • Ticker: TSX:PDC
  • Fees: 0.55% MER
  • Dividend Yield: 5.30%
  • AUM: $606.1 million (July 24, 2020)

Invesco Canadian Dividend Index ETF seeks to replicate, to the extent possible, the performance of the NASDAQ Select Canadian Dividend Index before expenses and fees. The fund’s portfolio primarily consists of Canadian equity securities with a high liquidity and a reliable track record of growing dividend payouts. 

The fund has a 95% exposure to Canadian companies divided between equities and income trusts, but it also allocates 5% to companies from other countries around the world. It has a portfolio diversified across various sectors, and it pays investors monthly dividends.

10. BMO Canada High Dividend Covered Call ETF

  • Ticker: TSX:ZWC
  • Fees: 0.72% MER
  • Dividend Yield: 8.09%
  • AUM: $597.2 million (July 24, 2020)

The BMO Canada High Dividend Covered Call ETF is a fund that invests in some of the highest quality companies in Canada that provide substantial dividend income to investors and provide long-term portfolio growth through capital appreciation. 

The ETF typically has a higher yield, and it would carry a more substantial degree of risk, but it mitigates the downside risk for investors by using covered call options. It holds long positions on the assets within its portfolio and writes call options on the assets. 

The strategy also diminishes gains if the price moves above the strike price, but the fund’s high dividend yield compensates for it. The fund’s focus on Canadian dividend-paying stocks also makes it eligible to benefit from tax credits through accounts like the Tax-Free Savings Account (TFSA).

11. First Asset Morningstar Canada Dividend Target 30 Index ETF

  • Ticker: TSX:DXM
  • Fees: 0.65% MER
  • Dividend Yield: 4.66%
  • AUM: $10.1 million (July 24, 2020)

The First Asset Morningstar Canada Dividend Target 30 Index ETF is a fund that seeks to replicate, to the extent possible, the performance of the Morningstar Canada Target Dividend Index, net of fees and expenses. 

The fund invests in equity securities of the largest Canadian companies with high liquidity, based on the proprietary research generated by Morningstar. Ideal for investors who seek regular quarterly cash flow and can handle medium risk to their portfolios, the fund provides investors with exposure to a diversified portfolio of Canadian dividend-paying companies.

12. BMO Ultra Short-Term Bond ETF

  • Ticker: TSX:ZST
  • Fees: 0.17% MER
  • Dividend Yield: 3.58%
  • AUM: $x million (July 24, 2020)

The BMO Ultra Short-Term Bond ETF is a fund that seeks to provide investors with exposure to a wide moat of fixed-income securities that have a year or less for reaching effective term to maturity. ZST may invest directly in fixed income securities, including government bonds, corporate bonds, provincial bonds, and municipal bonds. 

It may also invest in money market instruments, other ETFs, or public investment funds and derivative instruments. The fund may also invest in floating rate instruments and preferred shares as well as other fixed-income securities. While it is not a high-yield product, it provides predictable, stable, and nearly guaranteed positive returns for unitholders.

Related Reading: Best ETFs in Canada

13. CI First Asset Active Canadian Dividend Common Unit ETF

  • Ticker: TSX:FDV
  • Fees: 0.77% MER
  • Dividend Yield: 4.06%
  • AUM: $16.3 million (July 24, 2020)

The CI First Asset Active Canadian Dividend Common Unit ETF is a fund that seeks to provide unitholders with long-term returns through healthy capital appreciation and regular dividend income. The fund consists of an actively managed portfolio of primarily dividend-paying and other securities issued by Canadian companies on the Toronto Stock Exchange. 

Providing monthly dividend payments to unitholders, up to 30% of the fund’s asset allocation can be towards foreign securities. The overall portfolio is heavily diversified across all ten sectors of the economy.

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Conclusion

A majority of the best Canadian dividend ETFs consists of ETFs launched by BlackRock Asset Management because it is one of the country’s most prominent portfolio managers, and it manages some of the leading funds in Canada.

There are significant ETFs issued by other providers available as well. Each of them has a unique strategy to provide unitholders with capital growth through the appreciation of underlying stocks and dividend growth.

The right knowledge of the best Canadian dividend ETFs in Canada should make it easier to pick out the ideal ETFs that you can add to your portfolio. I hope you found this article useful to help you meet your goals of creating a robust overall ETF portfolio.

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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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19 thoughts on “13 Best Dividend ETFs in Canada (2021): Passive Income Made Easy”

  1. The BMO Canadian High Dividend Covered Call ETF just cut its June/2021 dividend from 11 cents to 10 cents per share. That’s a surprise since the markets, especially the Canadian ones, have been pretty good for the past year.

    Reply
  2. Chirtospher,

    While you were finding the BMO document on Call Options, I found this excellent YouTube video which reinforces what the BMO document states.

    https://www.youtube.com/watch?v=1gXlr18gWSY

    I have a much better understanding of how covered calls work, but it leaves me with many more questions.

    From what I learned, When a fund manager sells a covered call option, it receives income for that sales cointract. When that contract expires, that income lowers the cost base of the stock which contributes to higher capital gains when the stock is sold. Likewise, that same income can also reduce capital losses.

    That said, I do not see how the income from the covered call can contribute to dividend income nor interest income unless the fund manager is holding cash. Yet interest income is common in all the dividend ETFs I have seen.

    Reply
  3. Does the high dividend yield of the BMO Canada High Dividend ETF come entirely from the ETF’s holdings or does some of it come from the covered call options? And where does its interest income come from?

    Reply
  4. Was of great interest to read your list of divided ETFs.

    Do you have a list of Canadian dividend ETFs that pay monthly dividends that you can post?

    Look forward to seeing your list!

    Reply
  5. Very informative. I’ve just recently retired and just getting my feet wet in trading investment. I heard of dividend investing and now the monthly dividend ETF’s. I need a regular monthly return on my investment. How would I know if an ETF is giving monthly dividend? Please let me know. I’m new to this and I’m still feeling my way around. Thanks a lot.

    Reply
  6. For a 60 year old who doesn’t care about the stock price increasing but looking at the dividends … it sounds like zwc would be a safer etf than xei .. but I am giving up growth of etf?

    Reply
  7. Awesome read, as both my wife and I as well as our 20yr young daughter all have atleast 2 of these etf stocks in our portfolio.

    Looking towards building our passive income towards financial freedom.

    Reply

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