The best dividend ETFs in Canada use investor funds to buy and hold a basket of high-paying dividend stocks.
Instead of picking individual dividend stocks on your own and worrying about diversification, dividend ETFs are pre-designed to be diversified across various sectors and industries.
In this article, I cover some of the best Canadian dividend ETFs you can buy and their benefits and downsides.
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What is a Dividend ETF?
A dividend ETF holds dividend-paying assets, usually stocks, and distributes regular income to its shareholders.
Dividend ETF fund managers screen for reliable (blue-chip) companies with a solid history of paying and increasing dividends over the years. They also screen these stocks for other performance criteria (e.g. size, liquidity, ROE, yield, debt levels, etc.) before adding them to the ETF.
Dividend ETFs issue dividends to investors periodically, either monthly, quarterly, or annually.
You can either take the cash or reinvest the dividends to increase your stake in the ETF.
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Best Dividend ETFs in Canada
The top 10 dividend ETFs in Canada you can buy on the Toronto Stock Exchange are:
- Vanguard FTSE Canadian High Dividend Yield Index ETF
- iShares S&P/TSX 60 Index ETF
- iShares S&P/TSX Canadian Dividend Aristocrats Index ETF
- BMO Canadian Dividend ETF
- iShares S&P/TSX Composite High Dividend Index ETF
- Fidelity Canadian High Dividend Index ETF Fund
- iShares Core MSCI Canadian Quality Dividend Index ETF
- iShares Canadian Select Dividend Index ETF
- Horizons Active Dividend ETF
- Tesla Yield Shares Purpose ETF
1. Vanguard FTSE Canadian High Dividend Yield Index ETF
Vanguard FTSE Canadian High Dividend Yield Index ETF (VDY) invests in the common stocks of high-yield Canadian companies.
It tracks and seeks to replicate the performance of the FTSE Canada High Dividend Yield Index after accounting for fees and expenses.
VDY provides exposure to 52 different stocks across various sectors, including financials (54.09%), energy (29.33%), telecommunications (7.04%), utilities (5.37%), and several others.
Its top-10 holdings as of January 2024 are:
| VDY Holdings | Sector | Allocation |
| RBC (RY.TO) | Financials | 14.25% |
| TD (TD.TO) | Financials | 11.8% |
| Enbridge Inc. (ENB.TO) | Energy | 7.64% |
| Bank of Montreal (BMO.TO) | Financials | 7.16% |
| Canadian Natural Resources Ltd. (CNQ.TO) | Energy | 7.03% |
| Bank of Nova Scotia (BNS.TO) | Financials | 5.89% |
| Canadian Imperial Bank of Commerce (CM.TO) | Financials | 4.37% |
| Suncor Energy Inc. (SU.TO) | Energy | 4.18% |
| TC Energy Corp. (TRP.TO) | Energy | 4.04% |
| Manulife Financial Corp (MFC.TO) | Financials | 4.03% |
Key facts for VDY are:
- MER: 0.22%
- Number of stocks: 52
- Dividend yield: 4.64%
- Distribution frequency: Monthly
- Assets Under Management (AUM): $2.35 billion
- 1-year performance: 8.40%
Cost-conscious investors would note that VDY has a competitively low management expense ratio of 0.22%. This is equivalent to a $2.20 fee per year per $1,000 investment.
This fund has a “medium” risk rating, and its annualized yield is 4.64%.
BlackRock’s iShares S&P/TSX 60 Index ETF (XIU) provides exposure to large Canadian companies that have a long history of paying dividends.
It seeks long-term capital growth and aims to replicate the performance of the S&P/TSX 60 Index, less fees and expenses.
If you are looking for an ETF with a storied history, XIU was the first ETF in the world, with an inception date of September 28, 1999. With assets nearing $12 billion, it is also one of the most liquid ETFs in Canada.
While Financials and Energy sector equities constitute almost half of the fund, several others are also represented, including IT, industrials, communication, consumer staples, health care, utilities, real estate, and materials.
XIU’s top-10 holdings as of January 2024 are:
| XIU Holdings | Sector | Allocation |
| Royal Bank of Canada (RY.TO) | Financials | 7.58% |
| Toronto Dominion Bank (TD.TO) | Financials | 6.01% |
| Shopify Class A (SHOP.TO) | Technology | 5.37% |
| Enbridge Inc (ENB.TO) | Energy | 4.29% |
| Canadian National Railway (CNR.TO) | Industrials | 4.04% |
| Canadian Pacific Kansas City Ltd (CP.TO) | Industrials | 3.95% |
| Canadian Natural Resources (CNQ.TO) | Energy | 3.87% |
| Bank of Montreal | Financials | 3.73% |
| Bank of Nova Scotia (BNS.TO) | Financials | 3.10% |
| Brookfield Corp Class A (BN.TO) | Financials | 3.07% |
Key facts to note for XIU are:
- MER: 0.18%
- Number of stocks: 61
- Dividend yield: 3.15%
- Distribution frequency: Quarterly
- AUM: $11.9 billion
- 1-year performance: 11.82%
iShares S&P/TSX Canadian Dividend Aristocrats Index ETF offers exposure to several high-dividend stocks and is one of the best monthly dividend ETFs in Canada.
The underlying stocks held by this fund are screened to only include Canadian companies that have increased dividends every year for at least 5 consecutive years.
The fund aims to replicate the performance of the S&P/TSX Canadian Dividend Aristocrats Index, less any fees and expenses.
CDZ’s top-10 holdings as of January 2024 are:
| CDZ Holdings | Sector | Allocation |
| Aecon Group (ARE.TO) | Industrials | 3.24% |
| Chartwell Retirement Residence REIT (CSH.UN) | REIT | 2.75% |
| Great Westlife Co Inc (GWO.TO) | Financials | 2.48% |
| Power Corporation of Canada (POW.TO) | Financials | 2.06% |
| Canadian Imperial Bank of Commerce (CM.TO) | Financials | 2.05% |
| Fiera Capital Corp Class A (FSZ.TO) | Financials | 2.03 |
| Parkland Corp (PKI.TO) | Energy | 1.97% |
| Manulife Financial Group (MFC.TO) | Financials | 1.92% |
| TC Energy Group (TRP.TO) | Energy | 1.90% |
| Enbridge Inc (ENB.TO) | Energy | 1.85% |
CDZ holds equities from 11 different sectors, including a significant percentage in real estate via REITs (9.09%). The top 2 sectors are Financials (30.54%) and Industrials (12.10%).
Key facts for this fund are:
- MER: 0.66%
- Number of stocks: 90
- Dividend yield: 4.06%
- Distribution frequency: Monthly
- AUM: $931 million
- 1-year performance: 9.26%
4. BMO Canadian Dividend ETF
BMO Canadian Dividend ETF (ZDV) is designed for investors looking to earn regular income while also giving their portfolio.
The fund invests in dividend-paying Canadian stocks that have been screened based on their liquidity and 3-year dividend growth rate, yield, and payout ratio.
ZDV’s top holdings are concentrated in the financials, energy, utilities, and communication sectors.
| ZDV Holdings | Sector | Allocation |
| Royal Bank of Canada (RY.TO) | Financials | 5.28% |
| Enbridge Inc (ENB.TO) | Energy | 5.14% |
| Bank of Nova Scotia (BNS.TO) | Financials | 4.96% |
| BCE Inc (BCE.TO) | Communication | 4.88% |
| Toronto Dominion Bank (TD.TO) | Financials | 4.61% |
| Canadian Imperial Bank of Commerce (CM.TO) | Financials | 4.54% |
| Canadian Natural Resources (CNQ.TO) | Energy | 4.53% |
| Bank of Montreal (BMO.TO) | Industrials | 4.03% |
| Manulife Financial Corp (MFC.TO) | Financials | 3.97% |
| Canadian National Railway (CNR.TO) | Industrials | 3.69% |
Key facts for ZDV are:
- MER: 0.39%
- Number of stocks: 51
- Dividend yield: 5.48%
- Distribution frequency: Monthly
- AUM: $1.00 billion
- 1-year performance: 8.19%
This “medium” risk fund has a decent yield and is easily one of the best Canadian dividend ETFs.
BlackRock’s iShares S&P/TSX Composite High Dividend Index ETF (XEI) holds 75 high-dividend paying stocks with exposure to 10 sectors.
More than 75% of its holdings are concentrated in the financials (30.14%), energy (30.02%), and utilities (17.36%) sectors.
This fund holds more than $1.58 billion in assets under management and is eligible in all registered and non-registered accounts.
XEI’s top-10 holdings as of January 2024 are:
| XEI Holdings | Sector | Allocation |
| Suncor Energy (SU.TO) | Energy | 5.17% |
| Royal Bank of Canada (RY.TO) | Financials | 5.15% |
| Canadian Natural Resources (CNQ.TO) | Energy | 5.08% |
| Enbridge Inc (ENB.TO) | Energy | 5.05% |
| TC Energy Group (TRP.TO) | Energy | 4.95% |
| Toronto Dominion Bank (TD.TO) | Financials | 4.83% |
| BCE Inc (BCE.TO) | Communication | 4.78% |
| Bank of Montreal (BMO.TO) | Financials | 4.72% |
| Telus Corp (T.TO) | Communication | 4.56% |
| Fortis Inc (FTS.TO) | Utilities | 4.56% |
Key facts to note for XEI include:
- MER: 0.22%
- Number of stocks: 75
- Dividend yield: 5.37%
- Distribution frequency: Monthly
- AUM: $1.57 billion
- 1-year performance: 6.74%
XEI’s low MER of 0.22%, diversification, and dividend yield make it a great choice if you are looking for a Canadian dividend ETF you can hold long-term.
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6. Fidelity Canadian High Dividend Index ETF Fund
This Fidelity Canadian dividend ETF (FCCD.TO) was established in September 2018 and has provided an annualized return of 5.19%.
It holds more than 50% of its weighted allocation in financial and energy stocks, which is not uncommon for Canadian ETFs.
Its top-10 holdings as of January 2024 are:
| FCCD Holdings | Sector | Allocation |
| Royal Bank of Canada (RY.TO) | Financials | 5.44% |
| Canadian Natural Resources (CNQ.TO) | Energy | 4.85% |
| Enbridge Inc (ENB.TO) | Energy | 4.46% |
| Toronto Dominion Bank (TD.TO) | Financial | 4.37% |
| Fortis Inc (FTS.TO) | Utilities | 4.18% |
| Emera Inc (EMA.TO) | Utilities | 3.57% |
| BCE Inc (BCE.TO) | Communication | 3.36% |
| Suncor Energy Inc (SU.TO) | Energy | 3.27% |
| Chartwell Retirement Residences (CSH-UN.TO) | Energy | 3.17% |
| Telus Corp (T.TO) | Communications | 3.03% |
Key facts for FCCD.TO include:
- MER: 0.39%
- Number of stocks: 65
- Dividend yield: 4.73%
- Distribution frequency: Monthly
- AUM: $175.9 million
- 1-year performance: -1.41%
Related: Best ETF Trading Apps.
iShares Core MSCI Canadian Quality Dividend Index ETF (XDIV) is one of the best dividends ETFs in Canada when you look at the combination of dividend yield and exceptionally low MER.
It seeks to replicate the performance of the MSCI Canada High Demand Yield 10% Security Capped Index, less all expenses and fees.
It is not as diversified across sectors as some of the others, with equity holdings in only 6 sectors: financials (43.60%), energy (21.12%), utilities (17.60%), communication (10.25%), consumer discretionary (3.72%), and materials (3.48%).
XDIV’s top-10 stock holdings as of January 2024 are:
| XDIV Holdings | Sector | Allocation |
| Royal Bank of Canada (RY.TO) | Financials | 9.70% |
| Manulife Financial Corp (MFC.TO) | Financials | 9.55% |
| Pembina Pipeline Corp (PPL.TO) | Energy | 9.14% |
| Sun Life Financial Inc (SLF.TO) | Financials | 8.66% |
| Fortis Inc (FTS.TO) | Utilities | 8.65% |
| Suncor Energy Inc (SU.TO) | Utilities | 8.46% |
| Toronto Dominion Bank (TD.TO) | Financials | 8.37% |
| Emera Inc (EMA.TO) | Utilities | 6.86% |
| Great-West Lifeco (GWO.TO) | Financials | 5.91% |
| Telus Corp (T.TO) | Communications | 5.73% |
Key facts for XDIV include:
- MER: 0.11%
- Number of stocks: 18
- Dividend yield: 4.80%
- Distribution frequency: Monthly
- AUM: $953 million
- 1-year performance: 12.00%
BlackRock’s iShares Canadian Select Dividend ETF (XDV) seeks to replicate the performance of the Dow Jones Canada Select Dividend Index by investing in 30 high dividend-yielding stocks.
Investors looking to generate monthly dividend income can consider this dividend ETF for their portfolio. XDV’s top-10 stock holdings as of January 2024 are:
| XDV Holdings | Sector | Allocation |
| Canadian Tire Ltd (CTC.A.TO) | Consumer Discretionary | 7.76% |
| Bank of Montreal (BMO.TO) | Financials | 7.59% |
| Royal Bank of Canada (RY.TO) | Financials | 6.81% |
| Bank of Nova Scotia (BNS.TO) | Financials | 5.05% |
| National Bank of Canada (NA.TO) | Financials | 5.00% |
| Toronto Dominion (TD.TO) | Financials | 4.74% |
| TC Energy Corp (TRP.TO) | Energy | 4.71% |
| BCE Inc (BCE.TO) | Communications | 4.68% |
| Canadian Imperial Bank of Commerce (CM.TO) | Financials | 4.57% |
| Sun Life Financial Inc (SLF.TO) | Financials | 3.95% |
Key Facts of XDV include:
- MER: 0.55%
- Number of stocks: 30
- Dividend yield: 4.99%
- Distribution frequency: Monthly
- AUM: $1.61 billion
- 1-year performance: 7.93%
9. Horizons Active Dividend ETF
This ETF invests in a mix of Canadian and American companies which seek long-term capital growth and dividend appreciation.
The Horizons Active Dividend ETF (HAL.TO) has a high MER and pays out its dividends quarterly.
As with many other Canadian dividend ETFs, HAL.TO has a high weighted allocation to the Financial (25.56%) and Energy (25.73%) sectors.
The top 10 holdings in HAL.TO as of January 2024 are:
| HAL Holdings | Sector | Allocation |
| Royal Bank of Canada (RY.TO) | Financials | 6.56% |
| Toronto-Dominion Bank (TD.TO) Enbridge Inc (ENB.TO) | Financials | 6.06% |
| Telus Corp (T.TO) | Communication | 3.99% |
| BCE Inc (BCE.TO) | Communication | 3.99% |
| WSP Global Inc (WSP.TO) | Financials | 3.51% |
| Exchange Income Corp (EIF.TO) | Financials | 3.36% |
| Canadian Natural Resources (CNQ.TO) | Energy | 3.33% |
| Tourmaline Oil Corp (TOU.TO) | Energy | 3.27% |
| Great-West LifeCo Inc (GWO.TO) | Financials | 3.23% |
| Power Corporation of Canada (POW.TO) | Financials | 3.21% |
Key facts to note for HAL.TO include:
- MER: 0.68%
- Number of stocks: N/A
- Dividend yield: 3.01%
- Distribution frequency: Quarterly
- AUM: $122 million
- 1-year performance: -0.78%
The last ETF on our list is a unique one: the Tesla (TSLA) Yield Shares Purpose ETF (YTSL.NE).
This is a covered call ETF that aims to provide a high distribution yield with exposure to Tesla’s stock. YTSL.NE, therefore only holds shares of Tesla’s stock and covered call options contracts. It is a risky investment but one that can provide generous income to shareholders.
Since its inception in December 2022, it has provided a monthly distribution and offers a current sky-high distribution yield of 22.13%.
Key facts for YTSL.NE include:
- MER: 0.58%
- Dividend yield: 22.13%
- Distribution frequency: Monthly
- AUM: $67.2 million
- 1-year performance: 89.84%
YTSL.NE Has a higher risk rating because the underlying price of the ETF is dependent on the price of Tesla’s stock. It is an interesting way for Canadian investors to gain exposure to Tesla and options trading without foreign exchange fees or the risk of options.
How To Buy Dividend ETFs in Canada
My top two choices for investing in the best dividend ETFs in Canada are:
A. Qtrade
This platform offers no-commission trades for several ETFs. It has competitive trading commissions for others and is a great platform overall.
Clients who open a new account are eligible for a $50+ cash bonus.
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B. Questrade
In addition to dividend stocks and ETFs, you can use Questrade for investing in bonds, GICs, mutual funds, and precious metals.
ETF purchases are commission-free on Questrade, and you pay low competitive fees when you sell (starts at $4.95 per trade).
When you open a Questrade account here, you get $50 in free trade credit after funding your account with at least $1,000.
Learn more about both platforms in my Wealthsimple Trade vs. Questrade comparison.
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Are Dividend ETFs a Good Investment?
Investing your portfolio using dividend ETFs offers some benefits.
They are good for generating steady income periodically (monthly or quarterly).
With proper budgeting and planning, you can live off this income stream and pay your bills when they are due.
Dividend ETFs generally hold multiple equities, helping you diversify your investments across different sectors. It could be challenging to achieve a similar diversification if you hold individual stocks.
In the same vein, it is cheaper to buy extra units of 1-2 dividend ETFs as opposed to purchasing 50 individual stocks every time you want to add more shares to your positions.
While commission-free brokerages like Wealthimple Trade lower your trading costs to the barest minimum, those that charge commissions (up to $9.99/trade) become expensive pretty quickly if you are buying individual stocks.
Compared to the interest income generated by savings accounts and other fixed-income assets, dividends are taxed more favourably.
Downsides of Dividend ETFs
All the best Canadian dividend ETFs on this list charge a fee yearly, ranging from 0.11% to 0.67%. You don’t pay this recurring fee (MER) if you buy the individual stocks.
Dividends are not guaranteed, and companies can choose to lower their distributions or cut them entirely.
A dividend ETF may not offer you the level of diversification required to meet your investment objectives and risk tolerance.
To counter this deficiency, you may need to hold more than one dividend ETF, plus individual stocks, bonds, and other securities.
Effectively, you may be better off just buying a ‘one-solution’ asset allocation fund to avoid all the hassle.
Overall, always do your due diligence before investing your money.
Related:
- Best Investment Accounts in Canada
- Questrade vs. TD Direct Investing
- Best Money Management Apps
- XAW WTF Review
- Best Brokerage Account Promotions
Editorial Disclaimer: The investing information provided here is for informational purposes only and is not intended as individual investment advice or recommendation to invest in any specific security or investment product. Investors should always conduct their own independent research before making investment decisions or executing investment strategies. Savvy New Canadians does not offer advisory or brokerage services. Note that past investment performance does not guarantee future returns.
