Interest rates are coming down pretty quickly, but the opportunity to snag some pretty nice high-yield heavyweights in REITs (real estate investment trusts) or dividend stocks still seems to be very much on the table. With the recent Trump rally in full speed, rates on the 10-year U.S. note have crept higher. All the while, various REITs and high-yield stocks have also seen their yields swell up slightly as their share prices fell.
Undoubtedly, there’s no telling how quickly the Bank of Canada will cut rates from here. Even as rates on the 10-year move higher, I still think that rates will settle at a much lower level by this time next year. Of course, the biggest risk is a return in inflation, which could limit central banks’ ability to cut into rates more aggressively. And in such a scenario, there’s a good chance that today’s higher-yielding securities could yield a bit more over the medium term.
As always, don’t play near-term fluctuations in the 10-year note. Instead, look to seize opportunities (think the dips in REITs and other higher-yielders in recent weeks) so that you can give yourself a modest passive income raise. Additionally, make sure you put in the homework to ensure the dividend or distribution you’re enticed by is on sound financial footing.
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Opt for safety and yield with tried and true dividend blue chips!
That means evaluating whether free cash flows are sufficient enough to cover the payout, even should Canada’s economy get hit with setbacks at some point over the next two years or so. That way, you won’t position yourself to panic once a firm’s cash flow payout ratio rises to levels that warrant a significant reduction in the dividend.
Without further ado, here’s a top high-yield ETF (exchange-traded fund) that I believe boasts handsome but safe yields. Indeed, with the name, you’re getting instant diversification across some of the most bountiful, robust dividend payers out there.
While I’m not against buying individual dividend payers, I’d much rather go for an ETF if you’re a new investor seeking a quick, simple, and cheap way to get the job done.
BMO Canadian Dividend ETF: A low-cost passive-income booster!
As you may know, I’m a big fan of Bank of Montreal (TSX:BMO) ETFs for their low fees, respectable liquidity, and wide range of options. When it comes to high-yield offerings, BMO Canadian Dividend ETF (TSX:ZDV) is at the top of my list going into year’s end. At writing, the yield sits at an attractive 3.91%.
Moreover, the ETF is flirting with new highs and could be in a position to deliver on the front of capital gains and dividends over time. With a modest 0.39% management expense ratio and exposure to top-notch Canadian dividend payers, I’d look no further than the name if you want a bigger passive income boost relative to a TSX Index or S&P 500 index fund.
With ZDV, you’re gaining exposure to the big banks, the cash-rich pipeline plays, and the telecoms with sky-high yields. Indeed, if you’ve got a limited amount to put to work, the ZDV seems like a magnificent one-stop-shop type of ETF.
