Dividend ETFs are among the best assets for retirees to invest in. Offering high yield and ample diversification in one package, they can add a lot of income potential to retirement portfolios. With a combination of dividend ETFs, money market funds and guaranteed investment certificates (GICs), you can establish a stream of cash flows that lasts through your golden years. With that in mind, here are three dividend ETFs that are worth holding in retirement.
FTSE dividend stocks
The Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX: VDY) is a Canadian dividend ETF that specializes in high yield stocks. This ETF tracks the FTSE Canada High Dividend Yield Index. The index consists of 47 Canadian dividend stocks hand-picked for their high yields. Among these names you’ll find plenty of banks, utilities, and pipelines. Bank stocks, which are among the best performing equities on the TSX over the last 10 years, make up about 55% of the fund.
Having explored VDY’s portfolio, we can now look at its features. VDY boasts a relatively low 0.2% management fee, $41.46 in net asset value (NAV), and a 4.71% trailing distribution yield. Overall, it is a high yield fund that you can count on to add some much needed income to your portfolio.
Even higher yields
The iShares S&P/TSX Composite High Dividends Index ETF (TSX: XEI) is a high yield fund that has an even higher yield than VDY does. XEI is based on the Canadian Dividend Aristocrats Index – that is, Canadian stocks that have raised their dividends 25 years in a row. Not very many stocks have that distinction. Many dividend aristocrats have high yields. As a result, XEI’s portfolio has a somewhat higher yield than VDY’s does. XEI yields 5.12%, which means that if you invest $100,000 in it, you get $5,120 in cash back annually. You may get a lot more than that over the long run, as many of the largest XEI portfolio stocks are raising their dividend payouts.
Some key characteristics of XEI include:
- 75 stocks
- A 5.12% distribution yield
- A 5.16% trailing yield
- A 0.2% management fee
- A 0.22% MER
The TSX 60
Last but least, we have the iShares S&P/TSX 60 Index ETF (TSX: XIU). This fund is not marketed as a dividend ETF, but the TSX 60 Index has a high enough yield that we could consider it one.
XIU is the one fund on this list that I personally own. I’ve owned it since 2018 and have no plans of selling.
The fund tracks the TSX 60 Index, which consists of the 60 largest publicly traded Canadian companies by market cap. This group consists of a lot of financials and utilities – two sectors that are pretty cheap and high yielding at the moment.
XIU has a 3% distribution yield, 60 stocks, and very high trading volume (meaning you don’t lose much money to the bid-ask spread). It is managed by Blackrock, a very reputable asset management company. Overall, it’s one of the best Canadian equity funds to hold.
