2 Canadian ETFs to Buy and Hold Forever in Your TFSA

Both of these Vanguard ETFs pay above-average dividend yields on a monthly basis.

| More on:
Piggy bank with word TFSA for tax-free savings accounts.

Source: Getty Images

Your Tax-Free Savings Account (TFSA) is an excellent venue for housing income-generating assets, especially since the dividends you receive are entirely tax-free!

If your account is sufficiently funded and the yields are high enough, you can effectively create a secondary stream of passive income.

Whether you’re in the accumulation phase of your life and reinvesting dividends or in need of income and planning to make withdrawals, these dividends can significantly enhance your financial strategy.

In this guide, I’ll introduce you to two Canadian exchange-traded funds (ETFs) that not only offer higher-than-average yields but have also historically delivered strong total returns. Here’s how these can be valuable long-term holdings in your TFSA.

A Canadian dividend ETF

First up is the Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX:VDY).

This ETF specifically targets the higher-yielding segments of the Canadian stock market, predominantly focusing on the financial and energy sectors with 56 holdings.

What makes VDY particularly appealing for a TFSA is its distribution structure; it pays out dividends monthly. Currently, it boasts a 12-month trailing yield of 4.6%.

Additionally, it’s cost-effective for investors, with a management expense ratio (MER) of only 0.22% – that’s just $22 annually on a $10,000 investment.

A Canadian REIT ETF

Real Estate Investment Trusts (REITs) are another astute choice for a TFSA. They typically offer higher yields, and since these aren’t taxed as favourably as Canadian dividends, placing them in a TFSA can maximize your returns.

For those interested in REITs, consider the Vanguard FTSE Canadian Capped REIT Index ETF (TSX:VRE).

This ETF encompasses a diversified mix of 15 REITs spanning various sub-sectors, including retail, residential, industrial, office, diversified holdings, development, and healthcare.

Like VDY, VRE also distributes dividends monthly. Currently, it provides a yield of 2.8% and carries a management expense ratio (MER) of 0.39%.

The Foolish takeaway

Both VDY and VRE are affordable, pay above-average dividend yields, and have monthly payout schedules. In a TFSA, you can keep 100% of the dividends received from either ETF. You can withdraw this as passive income, or reinvest it in more shares of either ETF to grow your portfolio faster.

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

rain rolls off a protective umbrella in a rainstorm
Dividend Stocks

Buy These Canadian Dividend Stocks for Safe Monthly Income

Do you want to earn some steady monthly income? These three REITs are a good bet if you want safe,…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

Got $7,000? 4 Quality Stocks to Buy and Hold Forever in a TFSA

These four Canadian stocks are some of the best businesses you can buy, making them ideal long-term investments for your…

Read more »

Piggy bank and Canadian coins
Dividend Stocks

How to Use Your TFSA to Earn $227 Per Month in Tax-Free Income

These TSX dividend stocks offer high yields and monthly payouts. These stocks can help you earn over $227 in tax-free…

Read more »

man shops in a drugstore
Dividend Stocks

Got $3,500? 5 Consumer Stocks to Buy and Hold Forever

Five consumer staple stocks are suitable long-term holdings for their defensive qualities.

Read more »

coins jump into piggy bank
Dividend Stocks

Don’t Watch Your Savings Shrink: 2 Dividend Stocks to Help Pay the Bills

Canadians can protect their savings by investing in high-quality dividend stocks that pay out "sufficient high" but safe dividends.

Read more »

dividends can compound over time
Dividend Stocks

TFSA: 4 Canadian Stocks to Buy and Hold Forever

These four top TFSA stocks not only pay dividends but also offer strong long-term upside potential.

Read more »

Hourglass and stock price chart
Dividend Stocks

Outlook for Nutrien Stock in 2025

Nutrien stock has gone through a rough patch, but that could mean there is value to be found.

Read more »

Hourglass projecting a dollar sign as shadow
Dividend Stocks

2 Affordable TSX Stocks That Pay Monthly Dividends

Two affordable, high-yield TSX stocks pay consistent monthly dividends.

Read more »