3 Dividend ETFs that Are Well Suited for Beginners

New and old investors have opportunities to earn passive income in a volatile market from three dividend ETFs.

| More on:
exchange traded funds

Image source: Getty Images

Risk-averse or conservative investors have an option to buy an index instead of individual stocks to counter today’s market volatility. Buying an index means investing in exchange-traded funds (ETFs). You can gain access to a passively managed basket of assets through ETFs.   

Besides instant diversification, the asset class trades like regular stocks. You can sell ETFs anytime to liquidate. Right now, three dividend ETFs are standout choices and are even well suited for beginners.

TSX 60

The exposure of iShares S&P/TSX 60 Index ETF (TSX:XIU) is to large, established Canadian companies. XIU replicates the S&P/TSX 60 Index’s performance and seeks to provide long-term capital growth to investors. This pioneer ETF has holdings in nearly all primary sectors of the TSX except for healthcare.

Heavyweight sectors like financials (36.18%) and energy (17.58%) have the largest percentage representations. XIU’s holdings are industry leaders and TSX’s cream of the crop. The top five stocks are the Royal Bank of Canada, Toronto Dominion Bank, Enbridge, Canadian Pacific Railway, and Brookfield Asset Management.

At $30.08 per share, you have 60 different stocks in one basket. XIU’s dividend yield is a decent 3.07%, while the payout is quarterly.

Sustainable passive income

BMO Global Asset Management (BGAM) is the fund manager of BMO Canadian Dividend ETF (TSX:ZDV). Apart from lower volatility and exposure to higher dividend-paying Canadian stocks, ZDV aims to provide sustainable passive income to investors every month. At $19.73 per share, you can partake of the 4.33% dividend.

Currently, the fund holds 51 Canadian stocks with zero representations from healthcare, real estate, and technology sectors. Like XIU, financials (38.82%) and energy (16.72%) sectors have the largest representations. The top five stocks are RBC, Enbridge, TD, BCE, and Bank of Nova Scotia.

BGAM is a top ETF provider in Canada and its various funds cater to different categories of investors in the country. While ZDV carries a medium-risk rating, all stocks in the portfolio must pass the liquidity screening process. BGAM also maintains a weight-yielded portfolio and takes into account a three-year dividend growth rate.

Innovative selection process  

The third popular actively managed ETF is Horizons Active CDN Dividend ETF (TSX:HAL). According to the fund manager, its mandate is to deliver long-term total returns consisting of regular dividend income and modest long-term capital growth. HAL’s stock selection process combines dividend growth, payout, and sustainability.

Because of the mix of high dividend-paying mature companies and higher-growth companies in the fund, there’s potential for greater price appreciation. Furthermore, the aim is to outperform a passive investing strategy. As of this writing, HAL investors are up 6.7% year to date on top of the 4.97% dividend (quarterly payouts). The current share price is $20.73.

Canadian stocks (91.8%) dominate the portfolio, with minimal exposure to equities from the US (6%) and Bermuda (2.2%). The energy sector has the largest percentage weight (34.8%) followed by financial services (19.3%) and real estate (11.9%). Canadian Big Banks RBC and TD are HAL’s top two stocks.

Calm your fears

These three dividend ETFs should calm investors’ fears amid the massive headwinds in 2022. Furthermore, new and old investors have the opportunity to earn recurring passive income.

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA, Brookfield Asset Management Inc. CL.A LV, 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 »