8 Best Monthly Dividend ETFs in Canada 2021: Earn Passive Income

It’s a dream to be at a point in your life where you can earn money even while you sleep.

As a Canadian investor, there are very few assets that come close to the consistency and comfort that come with earning passive income through dividends.

I know that creating and managing a portfolio of individual income-generating equity securities is not for everyone.

Fortunately, Canadian investors have the opportunity to invest in Exchange-Traded Funds (ETFs) that offer them exposure to a basket of dividend stocks that can let them enjoy consistent and safe returns that are typically higher than what you can get through interest.

Most dividend stocks and ETFs pay quarterly shareholder dividends, and that’s something I don’t particularly like. If you want to supplement your income through monthly passive income, there are ETFs in Canada that pay shareholders each month.

And if you’re looking for a way to earn a consistent monthly income through dividends, you might find this list of some of the best monthly dividend ETFs in Canada useful.

What Are Dividend ETFs?

ETFs are financial instruments that trade on stock exchanges like the Toronto Stock Exchange. These funds invest in and manage a group of stocks, allowing unitholders the ability to enjoy the safety of owning a diversified basket of assets without the hassle of managing a portfolio themselves.

Dividend ETFs, like the monthly dividend ETFs in this guide, invest in companies with a proven track record of dividend payouts that are supported by predictable earnings and stable cash flows. The companies may span across several sectors of the economy.

These ETFs provide risk-averse investors with the opportunity to earn higher passive income than with fixed-income assets and high-interest savings accounts.

Monthly dividend ETFs can typically hedge risks for investors, allowing many of them to mitigate the risk to their capital by adding these ETFs to their portfolios.

The Best Monthly Dividend ETFs In Canada

Canada is known for many things, like ice hockey and maple syrup. Very few people know that it was also the birthplace of the first ETF in 1990 that revolutionized the investment landscape. Today, ETFs have grown to become one of the most popular investment products worldwide.

With such a wealth of ETFs offering exposure to a wide range of equity securities, it can become challenging to find funds that align with your financial goals.

If you’re a Canadian investor looking to earn monthly passive income through a diversified basket of dividend stocks, this list will narrow down your options to help you make a well-informed decision on investing in Canadian monthly dividend ETFs trading on the TSX.

1. iShares Canadian Select Dividend Index ETF (XDV)

ishares logo

Key facts about iShares Canadian Select Dividend Index ETF:

  • Ticker: TSX:XDV
  • Inception Date: December 19, 2005
  • Management Fee: 0.50%
  • Management Expense Ratio (MER): 0.55%
  • Assets Under Management (AUM): $1.759 billion (as of September 1, 2021)
  • Distribution Yield: 3.96%

iShares Canadian Select Dividend Index ETF is a fund looking to emulate the performance of the Dow Jones Canada Select Dividend Index to the closest extent possible. The fund is managed by BlackRock Asset Management Canada, and it seeks to provide its investors with long-term capital appreciation.

A majority of the fund’s assets lie in its top ten holdings in the finance industry. XDV ETF’s top individual holdings include the Canadian Imperial Bank of Commerce, Canadian Tire Corp. Ltd., and the Bank of Montreal.

Check out my iShares XDV ETF review to learn more about this fund.

2. BMO Canadian Dividend ETF (ZDV)

Key facts about BMO Canadian Dividend ETF:

  • Ticker: TSX:ZDV
  • Inception Date: October 21, 2011
  • Management Fee: 0.35%
  • Management Expense Ratio (MER): 0.39%
  • Assets Under Management (AUM): $722.09 million (as of September 1, 2021)
  • Distribution Yield: 4.04%

BMO Canadian Dividend ETF is a fund issued by the Bank of Montreal, and it is managed by BMO Global Asset Management. The fund is a yield-weighted portfolio of Canadian dividend-paying equity securities trading on the TSX.

The fund looks to emulate the performance of the Dow Jones Canada Select Dividend Index.

ZDV ETF comprises the top 30 equity securities selected by Dow Hones, using a rules-based methodology to rebalance the portfolio each June and December. Its top holdings include the Bank of Nova Scotia, The Toronto-Dominion Bank, and the Royal Bank of Canada.

3. Horizons Active Canadian Dividend ETF (HAL)

horizons logo

Key facts about Horizons Active Canadian Dividend ETF:

  • Ticker: TSX:HAL
  • Inception Date: February 9, 2010
  • Management Fee: 0.55%
  • Management Expense Ratio (MER): 0.67%
  • Assets Under Management (AUM): $91.726 million (as of August 31, 2021)
  • Distribution Yield: 3.02%

The Horizons Active Canadian Dividend ETF is another excellent ETF that provides its investors with monthly dividend income. The fund is managed by Horizons, and its objective is to seek long-term total returns that comprise regular dividend income and modest long-term capital growth.

The ETF primarily focuses on stocks trading throughout North America that offer higher than average dividend yields.

HAL ETF seeks to hedge its US currency exposure to the Canadian dollar at all times, offering Canadian investors an excellent chance to build long-term wealth. The top holdings for the fund include the Royal Bank of Canada, the Toronto-Dominion Bank, and Constellation Software Inc.

4. iShares Core S&P/TSX Composite High Dividend ETF (XEI)

ishares logo

Key facts about iShares Core S&P/TSX Composite High Dividend ETF:

  • Ticker: TSX:XEI
  • Inception Date: April 12, 2011
  • Management Fee: 0.20%
  • Management Expense Ratio (MER): 0.22%
  • Assets Under Management (AUM): $1.049 billion (as of September 1, 2021)
  • Distribution Yield: 3.94%

iShares Core S&P/TSX Composite High Dividend ETF is a fund that seeks to replicate the performance of the S&P/TSX Equity Income Index and focuses on optimizing diversification that allows it to pay regular monthly dividends to its investors.

The fund is managed by BlackRock Asset Management Canada and has the primary aim of being a long-term foundational holding for its investors while minimizing the risk to their capital to the extent possible.

XEI ETF is a low-cost ETF that offers one of the lowest management fees and MERs on this list of the best monthly dividend ETFs in Canada. The fund’s top three holdings include the Toronto-Dominion Bank, Enbridge Inc., and the Royal Bank of Canada.

Check out my iShares XEI review to find out more about this fund.

5. BMO Equal Weight Banks Index ETF (ZEB)

Key facts about BMO Equal Weight Banks Index ETF:

  • Ticker: TSX:ZEB
  • Inception Date: October 20, 2009
  • Management Fee: 0.25%
  • Management Expense Ratio (MER): 0.28%
  • Assets Under Management (AUM): $2.255 billion (as of September 1, 2021)
  • Distribution Yield: 3.24%

BMO Equal Weight Banks Index ETF is a fund that seeks to replicate, to the extent possible, the performance of the Solactive Equal Weight Canada Banks Index, net of expenses.

The fund’s holdings include the top six banking stocks trading in Canada’s banking sector, providing investors with exposure to a focused basket of Canadian bank stocks. The fund’s holdings are equally weighted to reduce security-specific risk to investor capital.

While investors can earn greater dividend income by investing in the six banking stocks individually, the payouts would be quarterly instead of monthly. The fund’s top three holdings include the Canadian Imperial Bank of Commerce, the Bank of Montreal, and the National Bank of Canada.

6. iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (CDZ)

ishares logo

Key facts about iShares S&P/TSX Canadian Dividend Aristocrats Index ETF:

  • Ticker: TSX:CDZ
  • Inception Date: September 8, 2006
  • Management Fee: 0.60%
  • Management Expense Ratio (MER): 0.66%
  • Assets Under Management (AUM): $991.74 million (as of September 1, 2021)
  • Distribution Yield: 3.20%

iShares S&P/TSX Canadian Dividend Aristocrats Index ETF is a fund that seeks to emulate the performance of the S&P/TSX Canadian Dividend Aristocrats Index, to the extent possible, minus the fees and expenses.

The fund offers investors exposure to a diversified basket of high-quality Canadian dividend-paying stocks that have increased ordinary cash dividends every year for at least five years.

CDZ ETF is the easiest way to invest in a basket of Canadian Dividend Aristocrats trading on the TSX. The fund’s top holdings include Keyera Corp., SmartCentres REIT, and Enbridge Inc.

7. iShares Core MSCI Canadian Quality Dividend Index ETF (XDIV)

ishares logo

Key facts about iShares Core MSCI Canadian Quality Dividend Index ETF:

  • Ticker: TSX:XDIV
  • Inception Date: June 7, 2017
  • Management Fee: 0.10%
  • Management Expense Ratio (MER): 0.11%
  • Assets Under Management (AUM): $469.333 million (as of September 1, 2021)
  • Distribution Yield: 3.91%

iShares Core MSCI Canadian Quality Dividend Index ETF is a fund that seeks to emulate the performance of the MSCI Canada High Dividend Yield 10% Security Capped Index, to the extent possible, net of expenses.

The fund is managed by BlackRock Asset Management Canada, and it is a low-cost ETF, charging the lowest management fees and MER among this list of the best monthly dividend ETFs in Canada.

XDIV ETF focuses on investing in a basket of Canadian stocks with above-average dividend yields that have steady or increasing dividends. The fund’s top three holdings include TC Energy Corp., the Royal Bank of Canada, and the Canadian Imperial Bank of Commerce.

8. Vanguard FTSE Canadian High Dividend Yield Index ETF (VDY)

Vanguard Logo Transparent

Key facts about Vanguard FTSE Canadian High Dividend ETF:

  • Ticker: TSX:VDY
  • Inception Date: November 2, 2012
  • Management Fee: 0.20%
  • Management Expense Ratio (MER): 0.21%
  • Assets Under Management (AUM): $1.2 billion (as of August 31, 2021)
  • Distribution Yield: 3.84%

Vanguard FTSE Canadian High Dividend Yield Index ETF is another ideal option for investors looking for monthly returns from their investments to earn passive income.

The fund is managed by Vanguard, and it seeks to emulate, to the extent possible and net of expenses, the performance of the FTSE Canada High Dividend Yield Index, a broad Canadian equity index that measures the investment return of common stocks of Canadian companies with above-average dividend yields.

VDY ETF invests in a variety of high dividend-paying stocks across small-, mid-, and large-market capitalizations. VDY ETF is a passively managed fund that follows a full-replicated index strategy to diversify its capital across several industries in the economy.

The fund’s top three holdings include the Royal Bank of Canada, the Toronto-Dominion Bank, and the Bank of Nova Scotia.

Does Vanguard Have A Monthly Dividend ETF?

I have used several ETFs during my career in finance, and Vanguard has long been my favourite ETF provider. It is essentially a non-profit asset management firm because it uses all its profits to lower fees for its investors.

Vanguard’s ETFs epitomize how the asset management firm has contributed to making investing much simpler for Canadians.

Vanguard indeed has monthly dividend ETFs that trade on the TSX and NYSE, and Vanguard FTSE Canadian High Dividend Yield Index ETF is its monthly dividend ETF listed on the TSX that you can buy and hold in your investment portfolio.

How To Buy the Best Monthly Dividend ETFs In Canada

You can purchase the best monthly dividend ETFs in Canada through most Canadian brokerage platforms that offer stock and ETF trading. My top choices are Wealthsimple Trade and Questrade.

ImageProduct TitleFeaturesPrice
Editor's Choice
Wealthsimple Trade
Wealthsimple Trade
  • ETF buys and sells have $0 trading fees
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  • Reputable Brand
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Get $50 Signup Bonus
Reliable Pick
Questrade
Questrade
  • ETF buys have $0 trading fees
  • Desktop and mobile trading
  • Most types of accounts available
Get $50 Free Stock Trades

To learn more, check out my full breakdown of the best trading platforms in Canada here.

Conclusion

Finding and investing in the best monthly dividend ETFs in Canada can provide your portfolio with a considerable hedge against bear market conditions and offer you the chance to get a hands-off approach to put your money to work and generate income for you.

Investing in a monthly dividend ETF instead of creating a portfolio of individual stocks does not give you much control over your holdings. When you buy an ETF, you give your capital to an investment firm that holds the basket of securities on your behalf.

The fund’s management decides how and when to rebalance the portfolio to align with its objectives.

Suppose you are interested in creating your own portfolio of monthly dividend stocks and feel that you have a knack for managing it yourself. In that case, you can check out my list of the best monthly dividend stocks in Canada to find equity securities that you can use as foundations for such a 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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