Are you looking to increase the monthly dividend income in your Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA)?
If so, high-yield, monthly-paying exchange-traded funds (ETFs) are worth looking at.
Such funds offer above average dividend yields, while also paying out their dividends monthly.
This is in contrast to most individual stocks, and broad market ETFs, which typically pay quarterly.
With a portfolio of high-yield, monthly-paying Canadian ETFs, you can bring considerable passive income into your accounts each and every month. For those relying on dividends to pay their monthly expenses, such as retirees, that can be a major help. In this article, I’ll explore one monthly-paying Canadian ETF that can juice your portfolio income.
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Vanguard’s Canadian high dividend yield ETF
Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX: VDY) is a high-dividend ETF that currently has a 3.5% trailing yield. The fund invests primarily in high yield Canadian sectors, such as financials, energy, utilities and infrastructure. The fund is administered by Vanguard, one of the world’s largest and most popular index fund operators. VDY itself is an index fund, tracking the FTSE Canadian High Dividend Yield Index, a fact that helps lower the fund’s management fee compared to what it might otherwise be.
Dividend potential
Vanguard FTSE Canadian High Dividend Yield Index ETF has considerable dividend potential. Its trailing yield is approximately 3.5%, which is higher than average for the Canadian markets. While dividends on a fund like this one can never be guaranteed, they have steadily increased over the years. Were the last month’s dividend rate maintained long term, then a $50,000 investment in VDY would pay $1,660 per year, or $138.33 per month.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Vanguard FTSE Canadian High Dividend Yield Index ETF | $68.64 | 728 | $0.19 per month ($2.28 per year) | $138.32 per month ($1,659.84 per year) | Monthly |
Of course, the income above is not guaranteed. A quick look at VDY’s dividend history shows that it has been quite volatile, varying from $0.14 to $0.23 in just the last 12 months. Nothing is ever certain, but VDY’s broad diversification provides hope that the fund will keep paying and raising its dividends for a long time to come.
Holdings
VDY consists of a number of high-yield Canadian stocks. In a way, it’s a lot like a broad market TSX fund, except excluding low dividend and non-dividend stocks. Some of those low/non-dividend stocks are large TSX components, so their careful exclusion increases VDYs yield considerably compared to that of a broad market TSX fund. Some examples of stocks in VDY’s portfolio include:
- Royal Bank of Canada, large cap bank and current largest publicly traded Canadian company.
- Suncor Energy, and integrated energy company.
- Enbridge, a midstream energy company.
These high-yield stocks make a significant contribution to VDY’s above-average yield.
Foolish takeaway
As we’ve seen, it’s quite possible to get above average dividend income in your RRSP or TFSA, without investing in speculative “ultra-high-yield” names. And with monthly pay ETFs like VDY, you can get that income monthly.
