An unintended but welcome side effect of value investing is that many of the stocks you end up owning tend to pay above-average dividends.
This happens for a couple of reasons. Sometimes, the stock price has fallen, which pushes the dividend yield higher even if the payout hasn’t changed. Other times, it’s because the company is mature and doesn’t have high-growth opportunities, so it chooses to return capital to shareholders instead of reinvesting like a growth stock would.
Here’s an example of a value-focused exchange-traded fund (ETF) you could invest $8,000 for dividend income—but also my pick for a better alternative that pays monthly.
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Canadian value ETF
iShares Canadian Value Index ETF (TSX: XCV) is one of the more straightforward ways to gain exposure to value stocks in Canada. It tracks the Dow Jones Canada Select Value Index and holds 36 stocks, mostly from dividend-rich sectors like banks, energy, and mining.
The big draw here is the yield. As of the latest figures, XCV offers a 12-month trailing dividend yield of 3.88%—a solid number for income-focused investors. If you’re allocating $8,000, that’s roughly $310 per year in passive income before compounding.
That said, there are two downsides. First is the 0.55% management expense ratio (MER), which is on the higher side for a passive, index-tracking ETF. Second, the fund only pays dividends quarterly, which isn’t ideal if you’re looking to generate steady monthly income.
It’s a decent option if you’re chasing dividend yield from Canadian value stocks—but not the most efficient or convenient choice for monthly cash flow.
Canadian dividend ETF
A strong alternative I like is iShares S&P/TSX Composite High Dividend Index ETF (TSX: XEI), and it stands out for a few reasons.
First, its portfolio includes 75 stocks, making it much more diversified than XCV while still sharing many of the same top holdings. That’s because both ETFs lean into sectors like financials, energy, and utilities—where dividend payers tend to cluster.
Second, the yield is higher. XEI offers a trailing 12-month yield of 5.63%, and unlike XCV, it pays distributions monthly, which is ideal for building a consistent income stream.
Finally, XEI is half as expensive, with a management expense ratio of just 0.22%. If your focus is dividend income from Canadian value stocks, this is a more efficient and smoother-paying option.
