Exchange-traded funds (ETFs) are excellent options for new and old stock market players. The asset is also ideal for laid-back or passive investors seeking instant diversification. In fact, these three dividend ETFs are best friends of retirees. Besides the single exposure to a broad equities market, the funds pay monthly dividends.
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Diversified holdings
iShares Canadian Financial Monthly Income ETF (TSX: FIE) is best for investors seeking a diversified portfolio paying generous monthly dividends. If you invest today ($6.52 per share), you can partake in the 7.34% distribution yield. The target exposure of the fund is the Canadian financial sector.
While you can expect higher exposure to banks and insurance companies, the investments are not limited to common and preferred shares. The basket includes corporate bonds and income trust units issued by financial institutions. FIE’s top holding is an ETF, iShares S&P/TSX Canadian Preferred ETF (19.4%).
The asset manager, BlackRock, seeks to maximize total return and provide stable monthly cash distributions. The total underlying holdings is 1,212 but could change every quarter during the rebalancing of the portfolio. As of this writing, the amount of assets under management (AUM), or net asset value, is $916,848,270.
Yield-weighted portfolio
Canada’s oldest lender, the Bank of Montreal, is active in the ETF space and one of the largest ETF providers. BMO Global Asset Management serves as the bank’s ETF centre, where investors can choose from a range of ETFs with various risk ratings.
BMO Canadian Dividend ETF (TSX: ZDV) is attractive to retirees because the concentration on blue-chip stocks simplifies the selection. The holdings in the yield-weighted portfolio are higher dividend-paying Canadian banks (99.8%). At $18.93 per share, the dividend offer is 4.52%, while the payout frequency is monthly.
ZDV is a 100% Canadian ETF and carries a medium risk rating. The financial sector (39.9%) has the heaviest allocation of the 52 total holdings, followed by energy (18%) and communication services (10.4%). Only the healthcare, real estate, and technology sectors have zero representations.
The Toronto Dominion Bank, Enbridge, and Bank of Nova Scotia are the top three holdings. The rest are reliable passive income providers and mostly large-cap TSX stocks.
High-yield dividend payers
Vanguard Equity Index Group manages the Vanguard Canadian High Dividend Yield ETF (TSX: VDY). This ETF tracks the performance of the broad Canadian equity market and the holdings are common stocks, primarily high-yield dividend payers. The median market cap of the total holdings (53) today is $79.6 billion.
The fund manager can invest in all 11 primary sectors, although the current exposure has no constituents from the consumer staples, healthcare, and technology sectors. VDY’s highest weighted exposure is on the financial stocks (56%), with the Royal Bank of Canada as the top stock holding (13.9%).
This ETF also pays monthly dividends, although the price is relatively expensive. At $41.10 per share, the dividend yield is 4.41%.
Trustworthy ETF providers
BMO is Canada’s dividend pioneer with a dividend track record of 194 years and counting. Meanwhile, BlackRock Financial Management and Vanguard are two of the world’s largest asset management firms, with total AUMs of over $1 trillion.
Retirees with medium-risk investment appetites would have the confidence to invest in any of the three ETFs. However, yield-hungry investors will likely lean toward FIE for its over-the-top dividend yield.
