If you’ve got $50,000 burning a hole in your pocket, you could spend hours trying to pick individual dividend stocks – or you could let a dividend-focused exchange-traded fund (ETF) do the heavy lifting. These funds automatically spread your money across dozens of proven income payers, saving you time and reducing single-stock risk. Most even pay you monthly.
For this strategy, you can cover virtually every dividend stock worth owning in Canada with just two ETFs: one focused on high dividend yields and another on consistent dividend growth. Here are my picks.
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$25,000 in high dividend yields
The ETF to own here is the iShares S&P/TSX Composite High Dividend Index ETF (TSX: XEI).
It holds 75 companies chosen from the broader S&P/TSX Composite Index for their above-average dividend yields, with a natural tilt toward value stocks that trade at lower valuations relative to their earnings or cash flow.
Even compared to Canada’s financial- and energy-heavy stock market, this ETF doubles down on those sectors. That concentration comes with more volatility, but also strong income potential. The ETF delivers a 4.9% trailing 12-month yield, distributed monthly, making it a favourite among income-focused investors.
It’s also one of the lowest-cost options in its category, with a 0.22% management expense ratio (MER). On a $25,000 investment, that works out to roughly $55 a year in fees – a small price for broad, steady exposure to Canada’s biggest dividend payers.
$25,000 in dividend growth
The natural complement to XEI is the iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (TSX: CDZ).
This fund holds 89 large, established Canadian companies that have increased their ordinary cash dividends every year for at least five consecutive years. The yield isn’t as high – around 3.5% – but that’s not the main draw.
These companies are the ones growing their payouts steadily, building what’s often called a dividend snowball, where reinvested and rising dividends compound your income over time. Like XEI, this ETF also pays monthly distributions.
Despite its slightly higher MER and lower yield, CDZ has performed well. With dividends reinvested, its three-year annualized total return of 17% has edged out XEI’s 15.6%, showing the benefit of focusing on steady dividend growth.
A $50,000 dividend portfolio can be built with just two ETFs: one for yield (XEI) and one for growth (CDZ). You’ll earn monthly income, broad diversification, and long-term compounding – all without picking a single stock yourself.
The Foolish takeaway
If I had $50,000 to invest for dividends, I wouldn’t overcomplicate it. A split between XEI and CDZ covers nearly every major dividend stock in Canada, blending high-yield income with long-term growth potential. You get the steady cash flow of pipelines, utilities, and banks, plus the built-in discipline of companies that raise their payouts year after year.
The key is consistency. Reinvest the dividends if you don’t need the cash yet, and you’ll see that snowball start to roll faster over time. Skip the temptation to chase flashy new dividend ETFs or guess which bank will raise its payout next quarter – these two ETFs already do the work for you.
