3 Dividend ETFs to Make Nice Income

Diversify your risk by investing your long-term capital in Canadian dividend ETFs. Here are a few you can explore in today’s market dip!

| More on:
exchange traded funds

Image source: Getty Images

Any Canadian investors with money that they don’t need for a long time can consider putting some in Canadian dividend exchange-traded funds (ETFs). ETFs provide immediate diversification compared with buying securities individually.

ETFs also make it easy to build positions. For example, in a market downturn, you can buy more units of ETFs, which is much less work than adding to multiple positions for a portfolio made up of individual stocks.

By using trading platforms like Wealthsimple and National Bank of Canada that charge no commission fees, you can easily build positions by dollar cost averaging. Essentially, ETFs are relatively low maintenance for investors.

Here are a few dividend ETFs you can explore for making nice income.

Canadian high-dividend yield ETF

As the name implies, Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX:VDY), aims to track the performance of the FTSE Canada High Dividend Yield Index before fees and expenses. Because the ETF employs a passive investing strategy, its management expense ratio (MER) is relatively low at 0.22%. It pays a monthly cash distribution that recently yielded 4.35%.

The ETF is popular with net assets of about $2 billion. Notably, its top 10 holdings make up roughly 71% of the ETF. They include the Big Five Canadian bank stocks that make up about 43% of the ETF. Its other top holdings include two large energy infrastructure stocks, BCE, Suncor, and Canadian Natural Resources.

The recent dip of about 8% from the $44 to the $40 level is a good place to consider buying some units for a higher yield.

Another Canadian high-yield ETF to consider

To get a similar yield, you can also consider iShares Canadian Select Dividend Index ETF (TSX:XDV). The ETF is made available by BlackRock. On BlackRock’s website, it explains that the ETF “seeks to provide long-term capital growth by replicating the performance of the Dow Jones Canada Select Dividend Index, net of expenses.” In other words, it provides exposure to the 30 highest-yielding Canadian stocks in the Dow Jones Canada Total Market Index.

The XDV ETF pays a monthly cash distribution that recently yielded 4.34%. The ETF is also popular with net assets of about $1.7 billion. Seeing that the underlying strategy provides potential value from seeking high yielders that could have an undervalued component, this ETF is more expensive than the previous one with a MER of 0.55%

Its top 10 holdings make up about 54% of the ETF, which consist of the Big Six Canadian bank stocks, BCE, Canadian Tire, iA Financial, and Labrador Iron Ore Royalty.

Highest-yielding ETF

Finally, I’ll last introduce iShares S&P/TSX Composite High Dividend Index ETF (TSX:XEI), which provides the highest yield of the three ETFs discussed. Its recent yield was 4.86%. BlackRock describes it as a low-cost monthly dividend ETF that’s designed to be a long-term foundational holding. Specifically, the ETF “seeks long-term capital growth by replicating the performance of the S&P/TSX Composite High Dividend Index, net of expenses.”

The XEI ETF has net assets of about $1.4 billion. Its MER of 0.22% is the same as the first ETF. Its top 10 holdings make up about 49% of the ETF. They include three big Canadian bank stocks, two large energy infrastructure stocks, two big telecom stocks, Barrick Gold, CNQ, and Suncor.

Investor takeaway

Canadian dividend ETFs are a great way to build wealth securely for long-term investing, especially if you aim to invest more money on market dips, such as the one we’re experiencing now.

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 Kay Ng has no position in any of the stocks mentioned. The Motley Fool recommends Canadian Natural Resources. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Canadian stocks are rising
Dividend Stocks

Looking for Big Passive Income? 2 Easy REITs to Consider

H&R REIT (TSX:HR.UN) and SmartCentres REIT (TSX:SRU.UN) could help fund your retirement.

Read more »

Family relationship with bond and care
Dividend Stocks

CPP Pension: 1 Move to Increase Your Payouts by $6,877 Per Year

Canadian retirees can consider boosting their CPP payouts by delaying the benefit and investing in blue-chip dividend stocks.

Read more »

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

This 8.6% Dividend Stock Pays Cash Every Month

Diversified Royalty is a high-dividend stock that offers a tasty yield in 2024. Is the TSX dividend stock a buy…

Read more »

rain rolls off a protective umbrella in a rainstorm
Dividend Stocks

3 Safe Canadian Dividend Stocks to Buy and Hold Forever

Here are three of the safest Canadian dividend stocks you can buy now and hold as long as you want.

Read more »

edit Taxes CRA
Dividend Stocks

Master Your Taxes: Get More Back from the CRA This Year

Mastering your taxes by knowing old and new tax deductions can lighten your tax burden in 2024.

Read more »

question marks written reminders tickets
Dividend Stocks

What’s the CPP Contribution Amount for 2024?

The second phase of CPP enhancement has begun. Know how much CPP contribution your employer will deduct from your 2024…

Read more »

Payday ringed on a calendar
Dividend Stocks

Buy 1,026 Shares of This Quality Dividend Stock for $100 in Monthly Passive Income

High-dividend TSX stocks such as Slate Grocery can help you generate stable passive income in 2024.

Read more »

top TSX stocks to buy
Dividend Stocks

How to Build a Bulletproof Monthly Passive-Income Portfolio With Just $7,000 in 2024

These monthly passive-income investments can turn your TFSA into a powerhouse passive-income producer -- all with just $7,000.

Read more »