Are you looking to invest $15,000 or something close to that into dividend stocks?
If so, you’re making a wise choice. Dividend stocks, when held in Tax-Free Savings Accounts (TFSAs), often deliver excellent performance. Canadian dividend stocks, in particular, tend to be among the nation’s best performers (in the U.S. and some other markets, low/no-dividend tech stocks are more dominant).
But should you try your hand at picking individual dividend stocks that you like? According to most experts, no. No matter what kind of assets you want in your portfolio, you are better off getting your exposure through diversified exchange-traded funds (ETFs). In this article, I will share three dividend ETFs that could fill your TFSA or Registered Retirement Savings Plan with passive income starting with just $15,000.
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Canadian dividend stocks
BMO Canadian Dividend ETF (TSX: ZDV) is an ETF made up of dividend-paying Canadian stocks. It holds 54 stocks in different sectors (banking, energy, utilities, and more), giving it ample diversification. It has a 0.39% management expense ratio (fee), which is a little higher than that of a typical broad market fund but arguably worth it if you want high dividends in your portfolio. The fund is run by BMO Global Asset Management, a reputable and trustworthy asset management firm. All of these advantages combine to make ZDV a very appealing dividend fund, with a 3.7% yield that easily beats the TSX Composite Index.
Chinese banks
Global X MSCI China Financials ETF (NYSEMKT: CHIX) is an ETF made up of Chinese banks. The fund’s holdings are dirt cheap, with the portfolio having a 4.6 price-to-earnings ratio and a 0.5 price-to-book ratio. It also has a very high dividend yield of 5.3%, according to some sources. I held this fund in the past, and I collected pretty high dividends from it, as I recall. One downside with CHIX is the management fee. At 0.66%, it’s not low. However, you’re making much more than that just in dividends each and every year when you hold this fund. It could be worth it.
High-yield Canadian stocks
Last but not least, we have iShares S&P/TSX Composite High Dividend Index ETF (TSX: XEI). This a fund built on Canadian dividend stocks much like ZDV; however, this fund has a slightly stronger preference for high yields than that one does. The fund has a 6% trailing yield. If you look at the kinds of stocks that make up the fund — TSX banks, energy companies, and utilities — it’s not hard to see why it has so much yield. Also, the fund’s 0.22% MER is relatively low for a thematic high-yield fund. So, XEI is definitely worth a look.
Foolish takeaway
You don’t need to gamble to get a high yield in your portfolio. While much of the online discussion around high-yield investing focuses on individual stocks, you can find plenty of ETFs with above-average yields. Such funds give you the benefit of diversification along with the high yield you seek. So, get your yield from ETFs. It’s a prudent way to earn passive income.
