3 Dividend-Paying ETFs Canadians Can Buy in 2022

These three dividend-paying exchange-traded funds allow Canadians to generate a stable stream of passive income.

| More on:
exchange traded funds

Image source: Getty Images

The Canadian stock markets witnessed the worst selloff in more than two years last Friday due to a sharp decline in energy prices. The S&P/TSX 60 index fell 6.6% last week, recording the largest drop since the pandemic-driven selloff in March 2020.

Oil prices plunged in recent days following the Fed’s monumental rate hike. Also, concerns surrounding the potential 75-basis-point rate hike by the Bank of Canada have impacted equities, with money market experts predicting a 75% chance of approval.

While Canadian stocks have performed better than their counterparts south of the border, the markets continue to remain volatile. Though the Canadian equity market is not currently in bear market territory, analysts are predicting a market downside going forward, given fluctuating energy prices and aggressive rate hikes.

Dividend-paying ETFs, or exchange-traded funds, can hedge the risk of such rampant fluctuations. Not only can you diversify your portfolio through ETFs, but you also generate passive income. Another benefit of such ETFs is the dividend tax credits.

iShares Canadian Financial Monthly Income ETF

iShares Canadian Financial Monthly Income ETF (TSX:FIE) aims to maximize an investor’s total returns as well as distribute stable dividend payouts on a monthly basis. The ETF primarily invests in Canadian financial services companies and related ETFs.

With more than $870 million in net assets, FIE’s total return over the past three years is 10.71% (as of May 31, 2022). As the name suggests, the ETF distributes dividends every month.

FIE’s top holdings include shares of Royal Bank of Canada, Toronto-Dominion Bank, iShares S&P/TSX Canadian Preferred Share Index ETF, and Power Corporation of Canada. These holdings have a combined weightage of 43.58% in FIE.

FIE distributed $0.04 per share on June 17, 2022, yielding 6.97% on the prevailing price.

Vanguard Canadian High Dividend Yield ETF

With $1.792 billion worth of assets under management (as of June 10), Vanguard Canadian High Dividend Yield ETF (TSX:VDY) is one of the most popular dividend ETFs in Canada. It is a passively managed ETF that seeks to replicate the performance of the benchmark FTSE Canada High Dividend Yield Index.

The ETF’s stock price has risen 21.31% over the past year and 9.19% year to date. In fact, VDY gained 2.72% over the past month, outperforming the benchmark index’s 2.66% returns.

The ETF has invested 54.1% of its total funds in the financial sector and 28.4% in the energy sector. It has substantial investments in Royal Bank of Canada, Enbridge, and Canadian Natural Resources.

The ETF distributes dividends monthly. It paid $0.14 per share to investors on June 7, yielding 3.64%. In addition, VDY’s 12-month trailing yield is 3.46%, as of May 31.

iShares S&P/TSX Composite High Dividend Index ETF

iShares S&P/TSX Composite High Dividend ETF (TSX:XEI) is a low-cost passively managed index tracking the benchmark S&P/TSX Composite High Dividend Index to generate capital growth and pay monthly dividend income to shareholders. More than 30% of its investments are in the financials sector, followed by 28.20% in the energy sector, and 13.61% in the utilities sector.

It has 75 stocks in its portfolio (as of June 17, 2022), which are rebalanced quarterly. XEI’s top holdings include Barrick Gold, Suncor Energy, and Bank of Nova Scotia. The ETF also has impressive sustainability characteristics, as evident from its MSCI ESG Fund Rating of AAA. The ETF’s latest dividend payout was on June 17, 2022. It paid $0.08 to shareholders, indicating a 3.94% distribution yield. XEI’s 12-month trailing yield is 3.83%.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Aditya Raghunath has positions in CAPITAL POWER CORPORATION and ENBRIDGE INC. The Motley Fool recommends BANK OF NOVA SCOTIA, CDN NATURAL RES, and Enbridge.

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »