Passive-income investors looking for a way to generate passive income should check out the many exchange-traded fund (ETF) products, many of which can allow the perfect balance of growth and dividends (or distributions). Undoubtedly, it’s tough to keep up with the many new ETF offerings that have been popping up on the TSX Index over the past few years.
Though you don’t need to analyze or even be aware of all of them as they land, I think that more competition for the investment dollars of Canadian passive investors means pressure to lower management expense ratios (MERs) and offer even more value to the hands-off types of investors who’d rather set and forget.
Indeed, the TSX Index has slipped a bit in recent trading sessions, now down close to 2% over the past week, while the S&P 500 has continued zooming higher on the strength of the red-hot tech sector. Indeed, Canada’s stock market tends to sit out those red-hot, tech-driven Nasdaq 100 surges. And with the threat of 25% Trump tariffs up ahead, questions linger as to where the TSX Index will start the year and whether a correction will be in the cards in the first quarter of 2025.
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The S&P 500 is surging while the TSX Index cools: Time to stick with Canadian stocks?
As opposition leaders call for Prime Minister Justin Trudeau to step down grow louder, there’s a great deal of uncertainty as Team Canada looks to bounce back and formulate a plan to tackle Trump tariffs and the start of a potential trade war.
Undoubtedly, if tariffs get imposed, the S&P 500 may very well leave the TSX Index behind. While it may be tempting to ditch your Canadian-focused ETFs for a simple one that follows either the S&P 500 or Nasdaq 100, I still think there’s a strong value case for staying invested in Canadian ETFs.
Though the momentum could falter at the hands of unique risks, I view plenty of value and outsized dividends (and distributions) to be had on this side of the border.
BMO MSCI Canada ESG Leaders Index ETF
BMO MSCI Canada ESG Leaders Index ETF (TSX: ESGA) is a highly underrated ETF that looks to be a great fit for ESG (environmental, social, and governance) investors seeking value and dividends. At writing, shares of the ETF sport a decent 2.43% yield.
While it’s a lower-yielding dividend ETF, I view the product as having more potential to grow its payout over time. Indeed, if you’re looking to focus a bit more on improving total returns (dividends and capital appreciation), I’d look no further than the name. With a slight weighting towards some excellent growth companies, I view ESGA as having the potential to outperform the TSX Index over the next two to three years.
So, if you seek ESG-friendliness, growth, dividend growth, and a still-decent yield, look no further than the ESGA, a fairly low-cost (0.17% management expense ratio (MER)) solution for investors looking to start their new year on solid footing.
