The Rise of Dividend ETFs in Canada: A New Era of Investment

Sick of picking individual dividend stocks? These three ETFs cater to a wide range of dividend investing strategies.

| More on:
exchange-traded funds

Image source: Getty Images

Hey, you — are you licking your wounds from a dividend stock that turned sour? You’re in good company; even seasoned investors find themselves caught off guard every now and then.

But, let’s face it, constantly screening a plethora of stocks, tracking earnings reports, and analyzing financials can be downright exhausting.

If you’re ready to bypass this heavy lifting while still reaping the benefits of dividend investing, it might be time to consider a strategic pivot.

Enter dividend exchange-traded funds (ETFs). These nifty investment vehicles do the grunt work for you, packaging a selection of dividend-paying stocks into a single, tradeable fund that you can buy like any other stock.

Whether you’re seeking a steady stream of income, growth potential via reinvested dividends, or a balance between the two, there’s likely an ETF that aligns with your financial goals.

Today, I’ve sifted through the offerings and handpicked three iShares ETFs that stand out, each bringing a unique approach to Canadian dividend investing.

XEI for high yields

If you’re looking for higher than average dividend income from your Canadian stocks, consider iShares S&P/TSX Composite High Dividend Index ETF (TSX:XEI), which isolates the highest-yielding 74 TSX listed stocks.

As of November 1, investors can expect a 5.54% trailing yield. As a bonus, XEI also pays monthly dividends. The ETF charges a reasonable 0.22% expense ratio, making it the cheapest on today’s list.

CDZ for dividend growth

If you’re more of a dividend-growth investor, the ETF to watch instead is iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (TSX:CDZ). This ETF currently holds 90 stocks that have grown dividends for at least five years in a row.

Compared to XEI, CDZ has a slightly lower 12-month yield of 4.27%, but historically, it has provided a better total return. However, it is more expensive, with a 0.66% expense ratio, so be aware of that.

XDV for dividend quality

I personally like iShares Canadian Select Dividend Index ETF (TSX:XDV). This ETF tracks the Dow Jones Canada Select Dividend Index, which holds 30 stocks screened for dividend growth, yield, and payout ratio.

What this means is that you get a potent combination of high dividend yield, dividend growth, and dividend quality in a single ETF. XDV pays a 5.03% 12-month trailing yield and charges a 0.55% expense ratio.

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 Tony Dong has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Businessperson's Hand Putting Coin In Piggybank
Dividend Stocks

RRSP Ready: 2 Stellar Stocks for Your Annual Contribution

Two high-yield stocks are ideal options if you plan to maximize your annual RRSP contribution limits and reduce taxable income.

Read more »

grow dividends
Dividend Stocks

3 Stocks That Could Be Easy Wealth Builders

Long-term investors would be wise to have these three Canadian stocks on their radar.

Read more »

question marks written reminders tickets
Dividend Stocks

Dividend Investors: Is BCE Stock a Buy Now?

BCE now offers a 7.9% dividend yield.

Read more »

edit Taxes CRA
Dividend Stocks

CRA Money: 2 More Days to Boost Your Tax Refund!

Dividend stocks like Toronto-Dominion Bank (TSX:TD) can be great RRSP holdings.

Read more »

grow money, wealth build
Dividend Stocks

3 TSX Dividend Stocks With Yields Above 7% (But Are They Safe?)

These three dividend stocks all have ultra-high yields, making them some of the best to buy if you're looking to…

Read more »

Light bulb with jester hat perched on top
Dividend Stocks

3 Canadian Dividend Stocks With Payouts That Are No Joke 

Here are three top Canadian dividend stocks long-term investors would be remiss to ignore, particularly at these current valuations.

Read more »

clock time
Dividend Stocks

Is it Too Late to Buy These 3 Brilliant Passive Income Stocks?         

TD Bank stock is just one of three stocks that are well positioned to continue to provide passive income for…

Read more »

rail train
Dividend Stocks

Canadian National Railway Stock: Buy, Sell, or Hold?

Railways like Canadian National Railway (TSX:CNR) are great long-term options. But is now the time to buy Canadian National Railway…

Read more »