There’s a lot of debate about what actually makes an exchange-traded fund (ETF) “the best.” Some investors lean heavily on past performance, but that’s a flawed approach. Returns are backward-looking and often reflect conditions that may not repeat.
In my view, the most reliable predictors of long-term success are low fees and broad diversification. Both help keep headwinds low and reduce the risk of permanent capital loss.
If you’re specifically looking for a monthly-paying dividend ETF, those principles still apply. Today, I’ll highlight two Canadian options that take different but complementary approaches.
One focuses on higher dividend yields today, while the other emphasizes dividend growth over time. One comes from Vanguard, and the other from Hamilton ETFs. Here’s what you need to know.
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Vanguard: High dividend yield
The first ETF is Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX:VDY). The name sounds complicated, but the strategy is simple. This is a passive ETF that tracks an index made up of the higher-yielding half of the Canadian stock market.
In practice, that results in a portfolio of about 56 stocks. Like the broader Canadian market, the fund is heavily tilted toward financials and energy. Financial exposure is dominated by large banks and life insurance companies, while energy exposure includes a mix of oil and gas producers and pipelines.
VDY pays distributions monthly, and on a trailing 12-month basis, the yield is about 3.36%. Finally, costs are also very low. The management expense ratio (MER) is 0.22%, which means a $10,000 investment costs about $22 per year in fees.
Hamilton: Dividend-growth stocks
If you don’t need the highest yield right away and instead want to focus on the dividend snowball effect, dividend growth can be more powerful over time. That’s where Hamilton CHAMPIONS Canadian Dividend Index ETF (TSX:CMVP) comes in.
This ETF holds an equal-weighted portfolio of blue-chip Canadian companies that have increased their dividends for at least six consecutive years. The focus isn’t on maximizing yield today, but on owning businesses with a consistent record of raising payouts. According to Hamilton, the portfolio has delivered an average dividend-growth rate of about 10% annually.
Sector exposure is still weighted toward financials, but it’s less energy-heavy than VDY. You also see more exposure to materials and industrials. The equal-weight methodology is another key difference. It avoids the heavy concentration seen in market-cap-weighted dividend ETFs like VDY, where Canada’s largest banks dominate the portfolio.
CMVP also pays monthly distributions. The current annualized yield as of December 17, according to Wealthsimple, is 2.47%, which is lower than VDY, but that’s by design. This ETF is about growing income year over year, not maximizing it upfront.
One added bonus is cost. CMVP currently has a 0% management fee through January 31, 2026. After that, the management fee will revert to 0.19%. Once the ETF has a full year of operating history, I think the overall MER will likely land closer to 0.25% or so.
