Some of the higher-yielding dividend exchange-traded fund (ETF) products certainly look attractive going into year’s end, especially before the Bank of Canada (BoC) can slash interest rates again (lower rates could act as a drag on yields). Undoubtedly, if you’re looking to de-risk with better value and dividend plays ahead of what could be a volatile new year, there are plenty of ETFs out there that can get the job done quite well.
Regarding the BoC’s next moves, I’d say it’s way too tricky to predict the pace of rate cuts or the reaction of the interest rate-sensitive securities (think bonds, real estate investment trusts (REITs), and some of the more capital-intensive, higher-yielding dividend plays).
In this piece, we’ll check in on two intriguing dividend-focused ETFs that have generous yields and can help any investor give themselves a nice passive-income jolt, regardless of when the BoC cuts rates next. As always, check out the top holdings of any passive investment product before picking up a few shares.
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BMO High Dividend ETF (ZDV)
BMO High Dividend ETF (TSX: ZDV) is a low-cost, simple way to expose yourself to higher-yielding Canadian dividend stocks with a solid 3.8% yield. With the ZDV, you’re getting a slightly heavier weighting in Canada’s best-known large-cap dividend heavyweights (the ETF is quite heavy on the big banks, insurers, and energy stocks). It’s an all-Canadian ETF that’s a perfect fit for a Canadian investor who wants just a bit more yield than the broader TSX Index can provide.
Though the 0.39% management expense ratio (MER) is slightly higher than your run-of-the-mill index fund that mirrors the TSX Index, I think the added fee is worth paying if passive income is important to you.
Further, it’s also a great passive option for fans of Canadian financials (nearly 40% of the portfolio is allocated to stocks within the financial sector). Going into 2025, look for these financial plays to add to their recent strengths. Personally, I think its heft bank and insurance exposure is key to helping the ZDV outdo the TSX Index over the next 18 months.
Either way, I prefer the ETF over a TSX index fund and think the huge dividend could make for a smoother ride once the stock market rally runs into a wall.
BMO Equal Weight Canadian Banks ETF (ZEB)
Speaking of the big banks, I think the Big Six are worth banking on going into 2025. BMO Covered Call Canadian Banks ETF (TSX: ZEB) may be the way to play a big bank rebound going into the new year.
As the name of the ETF notes, you’re spreading your bets quite evenly across Canada’s Big Six banks. Given how tricky it can be to value individual banks, I’d argue it’s best to own a few, if not all, of the big Canadian banks. And there’s no easier way to do it than with the ZEB.
The ZEB yields 3.9% and charges a modest MER of 0.28%. Sure, you could avoid the MER by buying shares of the banks themselves, but if you value convenience and want to save yourself on commissions, the ZEB is a solid bet.
