If you’re looking for reliable sources of income with minimal risks and maximum returns, then you should consider investing in one of the best dividend ETFs in Canada.
Dividend ETFs combine different securities, sectors and industries into one portfolio, offering diversification and potentially higher yields. They track either broad stock indices or narrow them down to focus on specific industries, such as finance or technology.
By investing in dividend ETF, you invest in a package of securities and reduce the risk associated with holding a handful of individual stocks. They also give you different avenues into highly sought-after sectors such as finance and technology.
This article will provide an overview of what dividend ETFs are and some of the best dividend ETFs in Canada. It will also provide the pros and cons of using this investment strategy and how they can help you achieve your investment goals.
10 Best Dividend ETFs in Canada
With so many ETFs available, it can be difficult to determine which ones are the best dividend ETFs in Canada.
Fortunately, we’ve done the research and come up with a list of the top dividend ETFs in Canada so you can choose the one that meets your needs and investment goals.
Here are some of the best dividend ETFs in Canada:
1. BMO Canadian Dividend ETF
The BMO Canadian Dividend ETF (ZDV) is an ETF that allows investors to invest in a portfolio of high-yield dividend stocks.
The fund invests in Canadian stocks using a rules-based system that takes into account the three-year dividend growth rate, payout ratio and yield when making investment decisions.
This ETF represents an attractive option for investors looking for exposure to companies with sustainable cash flow growth and higher dividend yields.
Key Features
- Inception date: October 21, 2011
- Management fee: 0.35%
- MER: 0.39%
- Dividend yield: 4.26%
- Distribution frequency: Monthly
- Number of holdings: 52
2. Vanguard FTSE Canadian High Dividend Yield Index ETF
The Vanguard FTSE Canadian High Dividend Yield Index ETF is one of the most popular dividends ETFs in Canada and has an excellent track record.
The fund covers a wide range of high-dividend stocks from all sectors in Canada, which provides investors with a diverse portfolio that can be used for both growth and income.
This ETF offers a solution that minimizes the risk of holding individual stocks by holding an index of companies instead.
Key Features
- Inception date: November 02, 2012
- Management fee: 0.20%
- MER: 0.22%
- Dividend yield: 4.62%
- Distribution frequency: Monthly
- Number of holdings: 47
The iShares S&P/TSX 60 Index ETF is a fund that provides exposure to a broad range of large-cap Canadian dividend stocks, including telecommunications companies, energy stocks and utilities.
It is a relatively low-cost option to gain exposure to large-cap dividend stocks in Canada.
The fund is intended for investors targeting long-term growth by investing in well-established, high-yield stocks.
Key Features
- Inception date: September 28, 1999
- Management fee: 0.15%
- MER: 0.18%
- Dividend yield: 3.36%
- Distribution frequency: Quarterly
- Number of holdings: 61
4. BMO Canadian High Dividend Covered Call ETF
The BMO Canadian High Dividend Covered Call ETF (ZWC) is an ETF that seeks to provide unitholders with monthly cash distributions and the opportunity for capital appreciation.
The fund invests primarily in an actively managed portfolio of equity securities of high dividend-paying companies listed on eligible exchanges in Canada.
It writes call options over the portfolio, which generates additional income in the form of option premiums that can help to insulate the total return of the portfolio from a decline in equity prices.
The strategy aims to generate returns from both the dividend income and the option premium income while reducing its exposure to market risk and increasing its potential for income generation.
Key Features
- Inception date: February 09, 2017
- Management fee: 0.65%
- MER: 0.72%
- Dividend yield: 7.44%
- Distribution frequency: Monthly
- Number of holdings: 105
The iShares S&P/TSX Canadian Dividend Aristocrats Index Fund (CDZ) is designed to provide exposure to a portfolio of dividend-paying stocks from across all sectors whose dividends have improved for at least 5 years.
This is achieved by tracking the performance of the S&P/TSX Canadian Dividend Aristocrats Index which is comprised of several securities that meet these criteria.
This ETF has a market cap bias toward large caps but offers exposure to all sectors with financials and energy being the largest constituents.
Key Features
- Inception date: September 8, 2006
- Management fee: 0.60%
- MER: 0.66%
- Dividend yield: 4.04%
- Distribution frequency: Monthly
- Number of holdings: 91
6. Horizons Active Canadian Dividend ETF
The Horizons Active Canadian Dividend ETF (HAL) is an actively managed ETF that aims to provide investors with long-term dividend income along with the potential for capital appreciation.
The fund seeks to achieve its investment objective by providing unitholders with exposure to equity securities of major North American companies that have dividend yields that are above average while providing a hedged exposure to the U.S. dollar.
The ETF is designed for investors who seek a high level of income, and growth of income and capital over time.
Key Features
- Inception date: February 09, 2010
- Management fee: 0.55%
- MER: 0.68%
- Dividend yield: 5.4% (estimated)
- Distribution frequency: Quarterly
The iShares S&P/TSX Composite High Dividend Index ETF (XEI) aims to track the performance of the S&P/TSX Composite High Dividend Index.
The fund measures the performance of Canadian dividend-paying stocks that are characterized by relatively high dividend yields which are selected based on their dividend yield and adjusted market capitalization.
It is designed for investors who want to gain exposure to high dividend-paying stocks and can be used as a complement to a traditional core bond portfolio.
Key Features
- Inception date: April 12, 2011
- Management fee: 0.20%
- MER: 0.22%
- Dividend yield: 4.72%
- Distribution frequency: Monthly
- Number of holdings: 75
The ETF tracks an index that is comprised of Canadian domiciled equity securities that exhibit dividend growth characteristics, including a history of increasing dividends over time, and that are expected to continue paying dividends into the future.
The goal of the iShares Core MSCI Canadian Quality Dividend Index ETF (XDIV) is to provide broad exposure to high-quality Canadian dividend-paying companies.
Key Features
- Inception date: June 7, 2017
- Management fee: 0.10%
- MER: 0.11%
- Dividend yield: 4.13%
- Distribution frequency: Monthly
- Number of holdings: 21
9. CI WisdomTree Canada Quality Dividend Growth Index ETF
CI WisdomTree Canada Quality Dividend Growth Index ETF (DGRC) is a fund that tracks the performance of dividend-paying companies in the Canadian equity market that meet certain requirements for dividend growth.
The Index has a quality screen that is designed to select higher-quality companies based on long-term growth prospects, return on equity, and positive earnings trends.
Key Features
- Inception date: September 19, 2017
- Management fee: 0.21
- MER: 0.24
- Dividend yield: 0.96%
- Distribution frequency: Quarterly
- Number of holdings: 51
The iShares Canadian Select Dividend Index ETF (XDV) is passively managed, meaning that it does not have an active manager who makes decisions about which securities to buy or sell.
Instead, it invests in the securities contained in the Dow Jones Canada Select Dividend Index.
The index is composed of high-dividend-yielding stocks that are selected based on dividend growth, financial health and sustainability criteria.
This ETF seeks to outperform the broader market while providing investors with a high level of income.
Key Features
- Inception date: December 19, 2005
- Management fee: 0.50%
- MER: 0.55%
- Dividend yield: 4.18%
- Distribution frequency: Monthly
- Number of holdings: 30
How the Best Dividend ETFs in Canada Compare
Here is a highlight of how the best dividend ETFs in Canada compare.
| Name of ETF | Management Fee | MER | Dividend Yield | Distribution Frequency |
| BMO Canadian Dividend ETF | 0.35% | 0.39% | 4.26% | Monthly |
| Vanguard FTSE Canadian High Dividend Yield Index ETF is | 0.20% | 0.22% | 4.62% | Monthly |
| iShares S&P/TSX 60 Index ETF | 0.15% | 0.18% | 3.36% | Quarterly |
| BMO Canadian High Dividend Covered Call ETF | 0.65% | 0.72% | 7.44% | Monthly |
| iShares S&P/TSX Canadian Dividend Aristocrats Index Fund | 0.60% | 0.66% | 4.04% | Monthly |
| The Horizons Active Canadian Dividend ETF | 0.55% | 0.68% | 5.4% | Quarterly |
| iShares S&P/TSX Composite High Dividend Index ETF | 0.20% | 0.22% | 4.72% | Monthly |
| iShares Core MSCI Canadian Quality Dividend Index ETF | 0.10% | 0.11% | 4.13% | Monthly |
| CI WisdomTree Canada Quality Dividend Growth Index ETF | 0.21 | 0.24 | 0.96% | Quarterly |
| The iShares Canadian Select Dividend Index ETF | 0.50% | 0.55% | 4.18% | Monthly |
Tips on Choosing the Best Dividend ETFs in Canada
If you want to be a successful dividend ETF investor, you need to choose from the best dividend ETFs in Canada that meets your needs.
The following are key factors you need to consider when choosing the best dividend ETFs in Canada.
1. Diversification
The first thing that you need to consider when choosing the best dividend ETF in Canada is its diversification. Diversification is the best way to prevent losses and it also helps in reducing your risk.
A good dividend ETF should have a diversification strategy that allows it to spread its investment across different types of stocks with varying yields and risk levels.
2. Yield + Return
Your next consideration should be the cash flow (yield) and total returns you get from the fund. Look at how well the fund has done in previous years and how it has done in comparison to other similar funds.
You want to know that this is not only a high-yielding dividend ETF but one that will consistently deliver returns above inflation.
3. Fees
Fees are an integral part of dividend ETF investing. The fees you pay can make a huge difference to your investment returns over the long term.
As a result, It is crucial to choose a dividend ETF that has a low management fee and MER (management expense ratio) so that you keep more of your money invested.
4. Liquidity
Liquidity is the capacity to be converted into cash easily. In the context of ETFs, liquidity refers to the ease with which an investor can sell their shares.
A good liquidity level is important because it allows investors to have their money readily available when they need it, especially in times of financial need.
What is a Dividend ETF?
A dividend ETF is an exchange-traded fund (ETF) designed to make it easier for investors to find and invest in high-yield dividend stocks and other securities.
As an investment tool, a dividend ETF allows you to invest in a diversified portfolio of securities that pay dividends.
They are considered to be one of the best high-yield investments since they enable investors to compare performance and make investment decisions based on the companies that meet their selection criteria.
Additionally, they are one of the safest investments with guaranteed high returns because they invest in companies with long track records of performance and income distribution. And in general, they exhibit less volatility compared to ETFs that hold growth stocks.
Pros and Cons of Dividend ETFs
Dividend ETFs are funds that provide investors with a steady stream of income, as well as the potential for capital appreciation.
However, when you’re thinking about buying these funds, it’s important to know what you’re getting into. Below are some of the pros and cons of Dividend ETFs you need to know before investing:
Pros of Dividend ETFs
Diversification
Dividend ETFs tend to be sector-agnostic, meaning that you won’t be steered into a single sector because they invest in different sectors and industries.
Therefore, if you’re looking to hold different securities across a number of sectors, a dividend ETF is what you need. Diversification helps you avoid risk and maximize gains in the stock market.
Higher Yields
Another obvious benefit of investing in dividend ETFs is the higher yield. Dividend ETFs are generally less expensive than individual stocks, offering potentially higher yields.
They’re also less volatile than individual stocks, so they tend to perform better when markets are down.
Low-Cost Investing
Dividend ETFs typically have lower management fees than mutual funds, so they’re generally more cost-efficient than mutual funds.
If you’re looking for a way to invest in dividend-paying stocks without paying extra fees, this is worth considering.
Growing Passive Income
A dividend is a portion of the company’s profit allocated to shareholders. It’s usually distributed monthly or quarterly.
If you invest in companies that can see higher earnings over time, your dividend will also increase over time, giving you more passive income.
Cons of Dividend ETFs
Returns are Not Guaranteed
If a company’s earnings decline or the company runs into financial trouble, dividends may be cut or eliminated.
Recurring Fees
Like with other investment securities, there is a fee associated with investing in dividend ETFs. However, dividend ETFs’ MERs are generally higher than those of broad ETFs.
How to Buy Dividend ETFs in Canada
There are a lot of different ways of buying dividend ETFs in Canada, but I’ve identified two of the best options available right now: Wealthsimple Trade and Questrade.
They both have great features, but they’re slightly different in terms of fees and services provided. Let’s look at how you can buy the best dividend ETFs on the two platforms:
How to Buy Dividend ETFs on Wealthsimple Trade
Wealthsimple Trade is a commission-free trading platform that allows you to invest in thousands of stocks and ETFs without paying any fees.
To get started with Wealthsimple Trade, all you need to do is to:
- Log into your Wealthsimple Trade account. if you don’t have a Wealthsimple Trade account, you can create an account using our referral link to earn a welcome bonus of $25 when you make your first trade of $150 or more.
- Search for the ticker symbol of the ETF you want to buy.
- Click “Buy” and choose how many shares you’d like to purchase by entering an amount into the “Trade” box.
- Review your order
- Place your order
Learn more: Wealthsimple Trade Review
How to Buy Dividend ETFs on Questrade
Questrade is an online brokerage account that lets you invest in Canadian dividend stocks/ETFs without paying commissions on ETFs purchases.
However, while you can buy dividend ETFs on Questrade at no cost, you will have to pay a commission fee of $4.95- $9.95 for each trade after selling your ETFs.
Below are the steps on how to buy a dividend ETF on Questrade.
- Log in to your Questrade account. If you don’t have an account yet, get started by signing up at Questrade today using our referral link and get a $50 trade rebate.
- Search for the ticker symbol of the dividend ETF you wish to buy.
- Next, choose the number of units you want to buy then click Buy Now.
Congratulations, you’ve just bought your first dividend ETF!
Related: Best S&P 500 ETFs in Canada
Are Dividend ETFs Worth the High MERs?
Dividend ETFs charge a high fee for their services, but the fees are worth it. They are a great way to invest in a wide variety of dividend paying stocks without having to choose and monitor each individual stock.
The fees that these ETFs charge are generally lower than the fees charged by mutual funds, making them a more cost-effective option.
These dividend ETFs also offer the potential for higher returns than traditional index funds.
Additionally, dividend ETFs have experienced managers who know how to navigate through different market cycles.
For these reasons, dividend ETFs are a great choice for investors who are looking for a reliable way to invest in several dividend paying stocks.
Final Thoughts on the Best Dividend ETFs in Canada
There are different types of ETFs available on the Canadian stock market. Some focus on specific industries and sectors, while others look for high dividend-paying stocks to increase returns on your investment.
However, with so many options available on the market, it can be difficult to know which ones are the best for your needs. I hope that you have gained some insight into some of the best Canadian dividend ETFs, and which ones might be the perfect fit for your needs.
In the end, the choice is yours, but be sure to use this guide as a starting point for your investment portfolio.
Regardless of which ETF you choose, dividend-paying stocks can be an excellent way to supplement your income or meet your retirement needs.
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