Are you a Tax-Free Savings Account (TFSA) investor looking for monthly paying dividend stocks to add to your account?
Among individual stocks, the “monthly pay” characteristic is fairly rare, the reason being that companies prefer to keep cash around for a while for capital allocation purposes. Additionally, those stocks that do pay monthly are sometimes seen as questionable or “desperate” to attract shareholders with a “novel” payout schedule.
In the world of exchange-traded funds (ETFs), however, monthly payment schedules are fairly common and not a “red flag.” There are countless ETFs out there paying dividends on a monthly basis, many of them with diversified portfolios, reasonable fees and high yields. In this article, I will explore one such fund that may be a wise portfolio addition today.
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BMO Canadian Dividend ETF
BMO Canadian Dividend ETF (TSX: ZDV) is a high-dividend ETF offered by Bank of Montreal. The fund holds 50 dividend stocks across sectors like banking, utilities and energy. It focuses on high-yield stocks; as a result, it has a 3.8% yield itself. Its 50 holdings provide a decent amount of diversification. Finally, its 0.39% management expense ratio — though not the lowest of the low — is definitely within reason. All in all, ZDV could make a worthy addition to a diversified TFSA portfolio.
BMO’s Canadian Dividend ETF pays a dividend of $0.07 per quarter. That is $0.84 per year. If you invest $10,000 in the fund, you get $377 worth of dividends back each and every year. Here’s how the math on that works.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| ZDV ETF | $22.30 | 449 | $0.07 per month ($0.84 per year) | $31.43/month ($377 per year) | Monthly |
Why dividend stocks look good right now
Having explored ZDV’s basic characteristics, it’s time to move on to the economic characteristics that make its holdings desirable today.
ZDV is an ETF focused on high-yield sectors like banking, energy and utilities. These sectors have many characteristics that make them desirable for investment today. For one thing, they are much cheaper than the big tech stocks that have been leading the market for years. For another thing, they typically pay high yields. Finally, they are often stable “blue chips” that investors can count on for a relatively “smooth” stress-free ride. These characteristics make ZDV the type of investment that retirees or other income-conscious investors may feel comfortable holding.
Foolish takeaway
In the world of ETFs, you can find almost anything your heart desires. Monthly payments, high yields, high potential returns, high diversification, and the list goes on. With thousands of ETFs out there, the fund world is almost as diverse as the stock market it’s built on.
Of course, not all ETFs are winners. Sometimes, thematic or leveraged ETFs deliver inferior performance, which is why un-leveraged broad market funds are usually preferred. Conservatively managed dividend funds can be an okay addition to your portfolio, though, if you’re willing to accept slightly higher fees. With a very sensible 0.39% management expense ratio, ZDV could make a lot of sense for Canadians looking for income in their TFSAs.
