Are you a Canadian looking to earn a reliable passive-income stream every month during the second half of 2024 and beyond? A multi-asset exchange-traded fund (ETF), iShares Canadian Financial Monthly Income ETF (TSX: FIE), offers an attractive opportunity for a lifetime of high-yield monthly dividend streams. It boasts a high annual dividend yield of 6.6% and provides a stable and diversified income stream each month.
Let’s explore why the FIE ETF is a solid low-cost choice for income-oriented investors and how it could help you make $250 a month in passive income.
A high-yield monthly dividend ETF to buy for passive income
iShares Canadian Financial Monthly Income ETF is a moderate-risk rated passive-income-generating fund that invests in regular cash flow-generating assets, including preferred shares, corporate bonds, and dividend-paying stocks within the financial services sector. It seeks to maximize total return and provide a stable stream of monthly cash distributions. The ETF has excelled in its mandate since its inception in 2010 and generated a compound annual total return of 7.2% per annum. It could do better in 2024, given its 9.2% total return year to date.
Why invest?
Canadians are falling in love with the monthly dividend-paying ETF this year. Passive-income-seeking investors keep adding more capital to the fund, and its net assets have grown from around $980 million in February this year to more than $1 billion at the time of writing. But what makes it so appealing?
Beyond the 6.6% dividend yield and a high payout frequency (monthly), iShares Canadian Financial Monthly Income ETF offers the diversification necessary to reduce total risk on an investment without sacrificing yields. It has a reasonably low management fee and can be held as a core position in a registered retirement portfolio.
The fund’s wide diversification is seen in its 20.2% allocation to preferred stocks (a sub-asset class of stocks best known for its relative price stability and stable dividend payouts) and a 9.9% allocation to corporate bonds that produce contractual fixed income streams while the rest of its capital is deployed into financial sector stocks including banks, insurance, financial services stocks that pay regular dividends. The financial sector is best known for stable dividend stocks, and they seldom disappoint — generally.
Most noteworthy, iShares Canadian Financial Monthly Income ETF is a low-cost investment that incurs a management expense ratio (MER) of 0.8. Investors pay as little as $8 annually for every $1,000 invested. Directly investing in the preferred shares and corporate bonds could require active portfolio management and cost investors much more than 0.8% in annual investment expenses. The ETF minimizes value losses.
What’s more, the passive-income investment is eligible for inclusion in your registered accounts to gain a layer of added efficiency as investors build retirement nest eggs that can withstand market shocks.
How to make $250 per month in passive income
To generate $250 a month in passive income from the ETF, investors could buy 6,250 shares, as shown in the table below.
| Investment Fund | Recent Price | Investment | Number of Shares | Dividend rate | Total Dividend | Frequency | Annual Dividend |
| iShares Canadian Financial Monthly Income ETF (TSX: FIE) | $7.29 | $45,562.50 | 6,250 | $0.04 | $250.00 | Monthly | $3,000.00 |
Remember, dividend reinvestment can compound the total rate of return on your investment over time. The ETF offers investors a distribution-reinvestment plan to effortlessly reinvest monthly dividends and accelerate the growth rate of their invested capital.
A $45,000 investment in the iShares Canadian Financial Monthly Income ETF 10 years ago could have grown to more than $87,000 today.
