Are you a Canadian looking for a way to grow your wealth and generate a consistent passive income stream? Investing in TSX dividend-paying stocks is a great option. Canadian dividend stocks are companies that regularly share portions of their earnings with shareholders, providing a powerful tool for building long-term wealth and streams of regular dividend payouts – sometimes as frequently as every month!
Researching the best quality dividend stocks could be a daunting task. However, the iShares Core MSCI Canadian Quality Dividend Index ETF (TSX:XDIV) is an exchange-traded fund (ETF) providing passive-income-oriented investors with low-cost access to a basket of 17 good dividend stocks.
The ETF invests in profitable Canadian companies with strong financial positions and a proven track record of paying and growing their dividends. It pays monthly dividends, and recently raised its payouts to record levels – increasing its yield from 4.6% to nearly 6% for 2024.
The elevated dividend yield and a medium risk profile are two of many attractive attributes of the dividend ETF that make it a glorious investment for passive income purposes.
Unveiling the iShares Core MSCI Canadian Quality Dividend Index ETF (XDIV)
The iShares Core MSCI Canadian Quality Dividend Index ETF has nearly $1.1 billion in net assets under the professional management of Blackrock, the world’s largest ETF issuer by assets under management. The fund seeks to replicate the performance of the MSCI High Dividend Yield 10% Security Capped Index – an index of Canadian dividend growth stocks with above-average dividend yields, high returns on equity (ROE), low earnings variability, and high financial stamina.
Investing in the XDIV ETF buys you a stake in a diversified portfolio of 17 financially strong Canadian dividend stocks with a proven capacity and commitment to keep raising their regular payouts.
To maintain wide diversification and minimize risks of dividend cuts to the portfolio, the fund limits its exposure to a single dividend payer to a maximum of 10% of the portfolio weight. Your income sources will be widely diversified to minimize risks of payout cuts or dividend suspensions.
Currently, the ETF’s largest holdings include Suncor, a revived dividend growth behemoth; Pembina Pipeline stock, a resilient cash flow generating pipelines giant; Royal Bank of Canada, the country’s largest chartered bank; and a top performing utility, Fortis.
Financial industry stocks, which are a traditional source of reliable dividend income, comprise 42.8% of total portfolio holdings, while energy stocks (22.6%) and utilities (17.5%) also make significant contributions to the ETF’s dividend cash flows.
The ETF makes monthly dividend distributions. Its payout has recently grown to $0.13 per unit in 2024, raising the yield from 4.8% a year ago to nearly 6% this year. Its entrenched history of annual dividend growth is encouraging.
XDIV Dividend data by YCharts
A cheap way to earn 6% in annual passive income and grow capital
Most noteworthy, investors pay minimal expenses to the fund manager. The ETF has a low-cost profile. It has a management fee of 0.10% annually and a total management expense ratio (MER) of 0.11%, or $1.10 annually on every $1,000 invested. It’s affordable to earn a 6% passive income yield on the professionally managed ETF.
The XDIV ETF has historically generated a compound total return of 9.5% for investors (including dividend reinvestment) over the past half-decade. It grew investors’ capital by 58.7% over the past five years.
Returns will vary each year depending mostly on stock market performance. However, the fund’s investment strategy has proven to work by generating above-average dividend yields every year to income-oriented investors’ delight.
How a $10,000 investment could earn you $595.92 in passive income annually
To earn $49.66 each month for the remainder of 2024, or $595.92 in annual passive income, you could buy 382 units or shares in the iShares Core MSCI Canadian Quality Dividend Index ETF, as shown in the table below.
| Company | Recent Price | Investment | Number of Shares | Dividend Rate | Monthly Payout | Total Annual Dividend |
| iShares Core MSCI Canadian Quality Dividend Index ETF (TSX:XDIV) | $26.17 | $10,000 | 382 | $0.13 | $49.66 | $595.92 |
The medium-risk ETF is eligible for inclusion in your registered investment accounts, including the Tax-Free Savings Account (TFSA) and your Registered Retirement Savings Plan (RRSP) portfolios.
