3 Dividend-Paying ETFs from TSX’s Top Sectors

Three sector-specific, dividend-paying ETFs are ideal options for risk-averse, price-conscious newbie investors.

| More on:
exchange traded funds

Image source: Getty Images

Risk-averse investors, including beginners, can opt for exchange-traded funds (ETFs) instead of picking individual stocks. This asset class was introduced in 1990 to provide Canadians with more flexibility when investing in the stock market. Furthermore, pooled investing is another strategy to better contain or manage risks.

The TSX has 11 primary sectors, with financial (31.7%) and energy (19%) as the heavyweights. Also, nearly all sectors have an ETF. While real estate stocks account for only 2.7% of the S&P/TSX Composite Index, the sector is stable despite headwinds in 2022. If you’re taking positions today, you can earn easy passive income from three sector-specific ETFs.

Financial (Banking)

Canada’s banking sector is known globally as a bedrock of stability. BMO Equal Weight Banks Index ETF (TSX:ZEB) is for investors looking to gain exposure to the country’s Big Six banks. ZEB replicates, to the extent possible, the performance of the Solactive Equal Weight Canada Banks Index.    

BMO Global Asset Management Group maintains or allocates equal weights in RBC, TD, BNS, BMO, CIBC, and the National Bank of Canada. This ETF trades at $34.36 per share (-9.55% year-to-date) and pays an attractive 4.13% dividend. Since the dividend frequency in a year is 12, this investment would garner you a monthly income.


Energy is the top-performing sector (+40.8% year-to-date) on the TSX in 2022 due to the favourable commodity pricing environment. As of this writing, iShares S&P/TSX Capped Energy Index ETF (TSX:XEG) outperforms both the energy sector and the broader market with its 43.90% year-to-date gain. Although the dividend yield is a modest 2.78%, the capital gain can adequately compensate.

XEG seeks to provide long-term capital growth to investors through exposure to the Canadian energy sector. The 28 stock holdings in the ETF lean more towards companies in the oil & gas exploration & development (59.24%) and integrated oil & gas (38.52%) sub-sectors. Pipeline operators have zero representation.

The top three holdings are Canadian Natural Resources (24.55%), Suncor Energy (21.36%), and Cenovus Energy (12.67%). In the last 3.01 years, XEG’s total return has been 78.77%, a compound annual growth rate (CAGR) of 21.32%. Unlike ZEB, this energy ETF pays quarterly dividends. The current share price is $15.03.  

Real estate

Real estate investment trusts (REITs) are alternatives to purchasing investment properties or direct ownership in real estate. The cash distributions from this asset class are the counterparts of stock dividends. BMO Equal Weight REITs Index ETF (TSX:ZRE) invests in Canadian REITs and allocates equal or fixed weights to lessen security-specific risks.  

The Fund replicates the performance of the Solactive Equal Weight Canada REIT Index. Each REIT holding should likewise meet certain minimum trading volume requirements. This medium-risk rated ETF has 24 stock holdings, including resilient REITs like Slate Grocery, Crombie, and Choice Properties.

At $22.04 per share, ZRE underperforms year-to-date (-18.77%). However, the dividend yield is a hefty 4.76%. A $25,225 investment will produce a $100 monthly passive income.

Ideal for newbies

ETFs trade like regular stocks, so you can sell your shares if you need to cash in or liquidate. With today’s uncertain market conditions, ZEB, XEG, and ZRE are ideal ETFs for newbie investors.

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 and CDN NATURAL RES. The Motley Fool has a disclosure policy.

More on Dividend Stocks

consider the options
Dividend Stocks

Better Buy: 2 Stocks or 1,000 Shares?

Stocks and shares can be the same, but knowing the difference can help you understand how to capitalize on better…

Read more »

Electricity high voltage pole and sky
Dividend Stocks

TFSA Investors: Steady Utility Stocks to Buy Now and Cash In for Life

Two Canadian utility stocks are ideal cornerstones in a TFSA, because of their recession-resistant nature and impressive dividend-growth streaks.

Read more »

grow money, wealth build
Dividend Stocks

2 Bargain Stocks You Can Buy Today and Hold Forever

These top Canadian dividend stocks look cheap right now for buy-and-hold investors.

Read more »

Glass piggy bank
Dividend Stocks

How to Turn a $30,000 TFSA or RRSP Into $550,000

Retirement investors have used this popular strategy to build retirement wealth.

Read more »

Retirement plan
Dividend Stocks

3 Dividend Stocks to Set Yourself Up for Retirement

Dividend stocks can be the best way to increase your income both for now and for retirement, and these are…

Read more »

Couple relaxing on a beach in front of a sunset
Dividend Stocks

Canadians: 3 Easy Stocks to Invest in for Retirement

It’s never too early to begin retirement planning. Adding the right mix of stocks to an RRSP can grow your…

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

2 Top Canadian Dividend Stocks for New TFSA or RRSP Investors

TFSA and RRSP investors can now get great yields from top Canadian dividend stocks.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

The Easiest Way to Make Cash and Start Investing

Do you want to invest but don't have the cash? Start saving, collect points, and use the cash to invest…

Read more »