2 High-Yield Dividend ETFs to Buy to Generate Passive Income

These two dividend ETFs both yield over 3.5% and feature monthly payouts.

Tony Dong, MSc, CETF®

Tony turned a series of 2017 marijuana stock losses into a freelance career advocating for ETF investing. He currently holds a Master’s in Risk Management from Columbia University and is a Certified ETF Advisor (CETF®). Tony is the founder of ETF Portfolio Blueprint (etfportfolioblueprint.com) and the Lead ETF Analyst for ETF Central, a partnership between Trackinsight and the NYSE. His analysis has also been featured in publications like Kiplinger, 24/7 Wall St., U.S. News & World Report, TheStreet, and Benzinga. Tony also provides independent content and marketing consulting services to various Canadian and U.S. ETF issuers. His editorial opinions for The Motley Fool remain independent and objective.

Published March 17, 2025 9:30 am EDT

| More on: CDZXEI

The Canadian stock market is already known for its above-average dividends. For example, the benchmark S&P/TSX 60 Index currently has a 3% trailing 12-month yield as of March 11.

But if you want more income, the easiest way is to buy a dividend exchange-traded fund (ETF) that focuses on high-yield stocks. Here’s a look at two longstanding ETFs that both pay monthly and yield more than the S&P/TSX 60.

exchange traded funds — Image source: Getty Images

S&P/TSX Composite High Dividend Index

The first option is the S&P/TSX Composite High Dividend Index, which serves as a higher-yielding counterpart to the broader S&P/TSX Composite.

This index specifically screens for 75 higher-yielding companies, which naturally tilts it more heavily toward financials and energy stocks—two of Canada’s most dominant dividend-paying sectors.

You can get exposure to this index by investing in iShares S&P/TSX Composite High Dividend Index ETF (TSX:XEI).

XEI is relatively affordable, with a 0.22% expense ratio, and currently offers a 5.49% trailing 12-month yield, paid out monthly.

S&P/TSX Canadian Dividend Aristocrats Index

If you’re comfortable with a slightly lower yield in exchange for higher share price appreciation, an alternative is S&P/TSX Canadian Dividend Aristocrats Index.

This index selects Canadian stocks that have increased their dividends for at least five consecutive years, ensuring a focus on consistent dividend growers rather than just high yield.

You can track this index through iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (TSX:CDZ).

CDZ comes with a higher 0.66% expense ratio and a lower 3.77% trailing 12-month yield, but historically, it has outperformed XEI in total return, making it a solid option for investors who want both dividend growth and capital appreciation.

The Foolish takeaway

There’s a smart way to own both XEI and CDZ so you can benefit from both high-yield and dividend-growth strategies

For instance, you could prioritize XEI in your Tax-Free Savings Account, where you can withdraw those high monthly dividends tax-free whenever you need them.

Meanwhile, CDZ fits well in a Registered Retirement Savings Plan, where you can reinvest its steadily growing dividends and let them compound into a sizable nest egg for retirement.

By using both ETFs strategically, you can maximize income now while also building long-term wealth for the future.