Dividend investing has become a hot trend in recent years.
High-profile investors like Warren Buffett shower praise on dividend-paying companies.
Dividend stocks have also been popularized by the financial independence, retire early (FIRE) movement.
But what if you don’t want to pick your own dividend stocks to earn an income every month?
Then, consider investing in these best monthly dividend ETFs in Canada.
Investing in Dividend ETFs and Stocks
Investing in dividend stocks offers dual benefits: you can reap the benefits of a rising stock price while also receiving a steady stream of income.
One advantage of dividend stocks is their historical resilience. In economic downturns, these stocks tend to be less volatile compared to growth stocks. Also, companies that consistently pay dividends often have stable financial metrics and a track record of profitability.
However, selecting the right dividend stocks requires in-depth research. Factors to consider include the company’s payout ratio, dividend yield, dividend growth rate, and the sustainability of its business model.
For those who prefer a hands-off approach or are unsure about selecting individual stocks, dividend ETFs can be an attractive alternative.
The Top Monthly Dividend ETFs In Canada
- iShares Canadian Select Dividend Index ETF (XDV.TO)
- BMO Canadian Dividend ETF (ZDV.TO)
- Horizons Active Canadian Dividend ETF (HAL.TO)
- iShares Core S&P/TSX Composite High Dividend ETF (XEI.TO)
- BMO Equal Weight Banks Index ETF (ZEB.TO)
- iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (CDZ.TO)
- iShares Core MSCI Canadian Quality Dividend Index ETF (XDIV.TO)
- Vanguard FTSE Canadian High Dividend Yield Index ETF (VDY.TO)
- Ticker: XDV.TO
- Inception Date: December 19, 2005
- Management Fee: 0.50%
- Management Expense Ratio (MER): 0.55%
- Assets Under Management (AUM): $1.54 billion
- Distribution Yield: 4.61%
- Stock Price: $26.06
- YTD Return: 1.57%
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)
- Ticker: ZDV.TO
- Inception Date: October 21, 2011
- Management Fee: 0.35%
- Management Expense Ratio (MER): 0.35%
- Assets Under Management (AUM): $979.08 Million
- Distribution Yield: 4.47%
- Stock Price: $18.81
- YTD Return: -4.41%
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)
- Ticker: HAL.TO
- Inception Date: February 9, 2010
- Management Fee: 0.55%
- Management Expense Ratio (MER): 0.68%
- Assets Under Management (AUM): $132.35 million
- Distribution Yield: 4.60%
- Stock Price: $18.33
- YTD Return: -3.44%
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.
- Ticker: XEI.TO
- Inception Date: April 12, 2011
- Management Fee: 0.20%
- Management Expense Ratio (MER): 0.22%
- Assets Under Management (AUM): $1.42 billion
- Distribution Yield: 5.22%
- Stock Price: $23.8
- YTD Return: 2.1%
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)
- Ticker: ZEB.TO
- Inception Date: October 20, 2009
- Management Fee: 0.25%
- Management Expense Ratio (MER): 0.28%
- Assets Under Management (AUM): $3.78 billion
- Distribution Yield: 4.93%
- Stock Price: $31.73
- YTD Return: -1.43%
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.
- Ticker: CDZ.TO
- Inception Date: September 8, 2006
- Management Fee: 0.60%
- Management Expense Ratio (MER): 0.66%
- Assets Under Management (AUM): $887.63 million
- Distribution Yield: 4.10%
- Stock Price: $29.1
- YTD Return: -5.47%
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.
- Ticker: XDIV.TO
- Inception Date: June 7, 2017
- Management Fee: 0.10%
- Management Expense Ratio (MER): 0.11%
- Assets Under Management (AUM): $837.4 million
- Distribution Yield: 4.25%
- Stock Price: $24.94
- YTD Return: 8.64%
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)
- Ticker: VDY.TO
- Inception Date: November 2, 2012
- Management Fee: 0.20%
- Management Expense Ratio (MER): 0.22%
- Assets Under Management (AUM): $2.13 billion
- Distribution Yield: 4.75%
- Stock Price: $40.62
- YTD Return: -4.56%
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.
Are Monthly Dividend ETFs Worth it?
As you can see in the previous list, the MERs for these dividend stocks are quite low. Here is who I see should be the ideal purchasers of monthly dividend ETFs:
- Beginner investors who want to dabble in dividend investing without having to pick the stocks themselves
- Advanced investors who are tired of or don’t have the time to manage a dividend stock portfolio.
If you’re a hands-on investor though, you probably won’t like using these dividend ETFs.
Retirement and Dividend ETFs
For individuals nearing retirement, maintaining a consistent stream of income becomes paramount. Here’s where dividend ETFs can play a crucial role. These funds offer a diversified exposure to dividend-paying stocks, minimizing the risks associated with individual stock picking.
Retirees can benefit in multiple ways from dividend ETFs:
- Steady Income: Monthly dividend ETFs ensure a regular flow of income, which can be crucial for retirees to manage their expenses.
- Diversification: Since these ETFs invest in multiple stocks across different sectors, they offer broad diversification, reducing the impact of any single stock’s poor performance.
- Tax Efficiency: In some jurisdictions, dividends may be taxed at a lower rate compared to interest income, making it a more tax-efficient form of returns for retirees.
- Inflation Protection: Companies that have a consistent track record of raising dividends can offer protection against inflation. As the cost of living increases, these dividends can potentially rise as well, preserving the purchasing power of the retiree’s income.
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.
| Image | Product Title | Features | Price |
|---|---|---|---|
Editor's Choice  |
| Get $25 Signup Bonus | |
Reliable Pick  |
| Get $50 Free Stock Trades |
To learn more, check out my full breakdown of the best trading platforms in Canada here.
Conclusion
It’s great earning passive income, and there aren’t many easier ways to do it than these monthly dividend ETFs.
For those who want to pick out their own stocks, look at our picks for the best dividend stocks in Canada.
What about HDIF? It’s a new ETF from Harvest with a good track record on the underlying holdings. Monthly dividend and no mgmt fee except for the underlying ETF. Add some HCAL for canadian bank exposure and you’re all set to collect a nice paycheck every month.