Investing in a great dividend stock that pays monthly cash doesn’t have to be risky. In fact, there are plenty of options out there that are decidedly not risky. That’s why today I’m going to focus on an exchange-traded fund (ETF). We’re going to look at why ETFs can be an excellent way to get huge exposure to many great stocks while still bringing in high monthly income.
The right ETF
First off, Canadian investors need to look for the right ETF. That can look very different to everyone. Yet today we’re focusing on ETFs with high dividend yields that pay monthly. That certainly narrows the focus quite a bit.
So, what you then need to consider is the type of ETF you’re getting into. Don’t just pick a high-yield, monthly ETF. Consider what kind of stocks is it investing in. Does it include bonds as well? If you’re looking for high yields, it’s likely going to focus on equities.
So, then, are you looking for only Canadian exposure, or are you hoping to bring in some international exposure as well? Today, we’re going to focus on investing in the Canadian market. And in particular, companies that have a long history of paying dividends.
Canadian companies
What’s amazing about choosing an ETF with monthly payouts is you can get exposure to some of the best Canadian stocks money can buy. Yet many of these Canadian stocks, although they’re dividend payers, don’t actually pay out monthly dividends.
You can get a monthly dividend, even though you’re really just purchasing a portfolio of strong Canadian companies. This can include the Big Six banks, none of which pay out monthly. The same goes for utility companies, many energy companies, and even telecommunication and insurance companies!
That’s why if you’re going to invest in any Canadian ETF for high monthly income, I would choose BMO CA High Dividend Covered Call ETF (TSX:ZWC).
ZWC ETF
The ZWC ETF focuses on Canadian Dividend Aristocrats. These are dividend companies that have increased their dividend each year for at least the last five years. This includes companies such as the Big Six banks, insurance companies, energy companies, and more — all of which have long histories of dividend payouts and increases.
The ZWC ETF is a great choice as well for a massive 8.03% dividend yield, paid out monthly. That comes to $0.11 per share monthly, or $1.32 per share annually. Shares are down 3.9% in the last year but already recovering thanks to a wide range of Canadian companies. Really, if the market is doing well, this ETF will also do well. And when it isn’t, you still have that dividend coming in. Meanwhile, shares are up 8% in the last month.
So, let’s say you were going to put $5,000 into ZWC stock as of writing. You then could look forward to monthly dividend income, and here is how much that could turn into after a year.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
| ZWC – now | $16.70 | 299 | $1.32 | $394.68 | monthly | $5,000 |
| ZWC – high | $18.25 | 299 | $1.32 | $394.68 | monthly | $5,456.75 |
As you can see, you’ll receive $394.68 in dividend income annually. That comes to $32.89 per month! Further, you’ll earn returns of $456.75! In total, that comes to a passive income of $851.47 in a year, or $70.96 each month.
