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.
What is a Dividend ETF?
A dividend ETF holds dividend-paying stocks and can distribute 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
- RBC Quant Canadian Dividend Leaders 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 53 different stocks across various sectors, including financials (54%), energy (27.19%), telecommunications (7.97%), utilities (6.48%), and several others.
Its top-10 holdings as of July 2023, are:
| VDY Holdings | Sector | Allocation |
| RBC (RY.TO) | Financials | 13.71% |
| TD (TD.TO) | Financials | 11.67% |
| Enbridge Inc. (ENB.TO) | Energy | 7.79% |
| Bank of Montreal (BMO.TO) | Financials | 6.64% |
| Canadian Natural Resources Ltd. (CNQ.TO) | Energy | 6.32% |
| Bank of Nova Scotia (BNS.TO) | Financials | 6.17% |
| BCE Inc. (BCE.TO) | Telecommunications | 4.30% |
| TC Energy Corp. (TRP.TO) | Energy | 4.22% |
| Suncor Energy Inc. (SU.TO) | Energy | 4.02% |
| Canadian Imperial Bank of Commerce (CM.TO) | Financials | 3.9% |
Key facts for VDY are:
- MER: 0.22%
- Number of stocks: 53
- Dividend yield: 4.79%
- Distribution frequency: Monthly
- Assets Under Management (AUM): $2.16 billion
- 1-year performance: 2.55%
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 6.24%.
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 exceeding $11 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 July 2023 are:
| XIU Holdings | Sector | Allocation |
| Royal Bank of Canada (RY.TO) | Financials | 7.66% |
| Toronto Dominion Bank (TD.TO) | Financials | 6.65% |
| Canadian Pacific Kansas City Ltd (CP.TO) | Industrials | 4.33% |
| Shopify Class A (SHOP.TO) | Technology | 4.30% |
| Enbridge Inc (ENB.TO) | Energy | 4.17% |
| Canadian National Railway (CNR.TO) | Industrials | 3.95% |
| Bank of Montreal | Financials | 3.67% |
| Canadian Natural Resources (CNQ.TO) | Energy | 3.63% |
| Bank of Nova Scotia (BNS.TO) | Financials | 3.34% |
| Brookfield Corp Class A (BN.TO) | Financials | 2.78% |
Key facts to note for XIU are:
- MER: 0.18%
- Number of stocks: 60
- Dividend yield: 3.31%
- Distribution frequency: Quarterly
- AUM: $11.3 billion
- 1-year performance: 9.45%
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 July 2023 are:
| CDZ Holdings | Sector | Allocation |
| Aecon Group (ARE.TO) | Industrials | 2.54% |
| Chartwell Retirement Residence REIT (CSH.UN) | REIT | 2.41% |
| Great Westlife Co Inc (GWO.TO) | Financials | 2.40% |
| Fiera Capital Corp Class A (FSZ.TO) | Financials | 2.13% |
| Power Corporation of Canada (POW.TO) | Financials | 2.12% |
| Canadian Imperial Bank of Commerce (CM.TO) | Financials | 1.98% |
| Bank of Nova Scotia (BNS.TO) | Financials | 1.91% |
| Enbridge Inc (ENB.TO) | Energy | 1.89% |
| BCE Inc (BCE.TO) | Telecommunications | 1.86% |
| Canadian Tire Ltd Class A (CTC.A.TO) | Consumer Discretionary | 1.85% |
CDZ holds equities from 11 different sectors, including a significant percentage in real estate via REITs (9.40%). The top 2 sectors are Financials (30.39%) and Industrials (11.47%).
Key facts for this fund are:
- MER: 0.66%
- Number of stocks: 90
- Dividend yield: 3.91%
- Distribution frequency: Monthly
- AUM: $913 million
- 1-year performance: 5.25%
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 |
| Toronto Dominion Bank (TD.TO) | Financials | 5.29% |
| Royal Bank of Canada (RY.TO) | Financials | 5.12% |
| Bank of Nova Scotia (BNS.TO) | Financials | 4.92% |
| Enbridge Inc (ENB.TO) | Energy | 4.87% |
| BCE Inc (BCE.TO) | Communication | 4.52% |
| Canadian Imperial Bank of Commerce (CM.TO) | Financials | 4.35% |
| Canadian Natural Resources (CNQ.TO) | Energy | 4.17% |
| Canadian National Railway (CNR.TO) | Industrials | 3.91% |
| Manulife Financial Corp (MFC.TO) | Financials | 3.91% |
| Bank of Montreal (BMO.TO) | Financials | 3.78% |
Key facts for ZDV are:
- MER: 0.39%
- Number of stocks: 52
- Dividend yield: 4.33%
- Distribution frequency: Monthly
- AUM: $1.01 billion
- 1-year performance: 4.28%
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 (31.40%), energy (29.38%), and utilities (16.46%) sectors.
This fund holds more than $1.4 billion in assets under management and is eligible in all registered and non-registered accounts.
XEI’s top-10 holdings as of July 2023 are:
| XEI Holdings | Sector | Allocation |
| Toronto Dominion Bank (TD.TO) | Financials | 5.46% |
| Royal Bank of Canada (RY.TO) | Financials | 5.30% |
| Canadian Natural Resources (CNQ.TO) | Energy | 5.25% |
| Suncor Energy (SU.TO) | Energy | 4.94% |
| Enbridge Inc (ENB.TO) | Energy | 4.79% |
| Telus Corp (T.TO) | Communication | 4.73% |
| BCE Inc (BCE.TO) | Communication | 4.67% |
| Bank of Montreal (BMO.TO) | Financials | 4.66% |
| Fortis Inc (FTS.TO) | Utilities | 4.38% |
| TC Energy Group (TRP.TO) | Energy | 4.27% |
Key facts to note for XEI include:
- MER: 0.22%
- Number of stocks: 75
- Dividend yield: 5.11%
- Distribution frequency: Monthly
- AUM: $1.4 billion
- 1-year performance: 2.27%
XEI’s low MER of 0.22%, diversification, and dividend yield makes it a great choice if you are looking for a Canadian dividend ETF you can hold long-term.
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 5.63%.
It holds 50% of its weighted allocation in financial and energy stocks, which is not uncommon for Canadian ETFs.
Its top-10 holdings as of July 2023 are:
| FCCD Holdings | Sector | Allocation |
| Royal Bank of Canada (RY.TO) | Financials | 5.24% |
| Toronto Dominion Bank (TD.TO) | Financials | 4.52% |
| Enbridge Inc (ENB.TO) | Energy | 4.46% |
| Canadian Natural Resources (CNQ.TO) | Energy | 4.29% |
| Fortis Inc (FTS.TO) | Utilities | 4.14% |
| Emera Inc (EMA.TO) | Utilities | 3.69% |
| Algonquin Power + Utilities (AQN.TO) | Energy | 3.67% |
| BCE Inc (BCE.TO) | Communication | 3.38% |
| Suncor Energy Inc (SU.TO) | Energy | 2.97% |
| Telus Corp (T.TO) | Communications | 2.85% |
Key facts for FCCD.TO include:
- MER: 0.39%
- Number of stocks: 66
- Dividend yield: 4.66%
- Distribution frequency: Monthly
- AUM: $178.2 million
- 1-year performance: -2.05%
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 (50.98%), energy (19.86%), utilities (15.51%), communication (7.24%), consumer discretionary (3.53%), and materials (2.70%).
XDIV’s top-10 stock holdings as of July 2023 are:
| XDIV Holdings | Sector | Allocation |
| Toronto Dominion Bank (TD.TO) | Financials | 9.37% |
| Sun Life Financial Inc (SLF.TO) | Financials | 9.28% |
| Suncor Energy Inc (SU.TO) | Energy | 9.20% |
| Royal Bank of Canada (RY.TO) | Financials | 9.19% |
| Manulife Financial Corp (MFC.TO) | Financials | 9.03% |
| Bank of Nova Scotia (BNS.TO) | Financials | 8.88% |
| Fortis Inc (FTS.TO) | Utilities | 8.67% |
| Pembina Pipeline Corp (PPL.TO) | Energy | 8.02% |
| Emera Inc (EMA.TO) | Energy | 5.27% |
| Great-West Lifeco (GWO.TO) | Financials | 4.01% |
Key facts for XDIV include:
- MER: 0.11%
- Number of stocks: 18
- Dividend yield: 4.76%
- Distribution frequency: Monthly
- AUM: $837 million
- 1-year performance: 9.76%
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 July 2023 are:
| XDV Holdings | Sector | Allocation |
| Canadian Tire Ltd (CTC.A.TO) | Consumer Discretionary | 9.82% |
| Bank of Montreal (BMO.TO) | Financials | 7.16% |
| Royal Bank of Canada (RY.TO) | Financials | 6.58% |
| Bank of Nova Scotia (BNS.TO) | Financials | 5.18% |
| National Bank of Canada (NA.TO) | Financials | 5.04% |
| Toronto Dominion (TD.TO) | Financials | 4.96% |
| BCE Inc (BCE.TO) | Communications | 4.78% |
| Canadian Imperial Bank of Commerce (CM.TO) | Financials | 4.18% |
| TC Energy Corp (TRP.TO) | Energy | 4.13% |
| Sun Life Financial Inc (SLF.TO) | Financials | 3.95% |
Key Facts of XDV include:
- MER: 0.55%
- Number of stocks: 30
- Dividend yield: 4.70%
- Distribution frequency: Monthly
- AUM: $1.62 billion
- 1-year performance: 5.99%
9. RBC Quant Canadian Dividend Leaders ETF
This ETF invests in a diversified portfolio of Canadian high-dividend paying stocks. It has a Medium risk rating and holds 74 different securities.
As with many other Canadian dividend ETFs, RCD has a high weighted allocation to the Financial (31.3%) and Energy (19.6%) sectors.
The top 10 holdings in RCD.TO as of July 2023 are:
| RCD Holdings | Sector | Allocation |
| Constellation Software (CSU.TO) | Technology | 6.8% |
| Enbridge Inc (ENB.TO) | Energy | 6.2% |
| Bank of Nova Scotia (BNS.TO) | Financials | 4.6% |
| Royal Bank of Canada (RY.TO) | Financials | 4.5% |
| BCE Inc (BCE.TO) | Communication | 4.5% |
| Manulife Financial Corp (MFC.TO) | Financials | 4.4% |
| Toronto-Dominion Bank (TD.TO) | Financials | 4.3% |
| Canadian Imperial Bank of Commerce (CM.TO) | Financials | 3.8% |
| Canadian National Railway (CNR.TO) | Industrials | 3.7% |
| Gibson Energy (GEI.TO) | Energy | 3.0% |
Key facts to note for RCD include:
- MER: 0.42%
- Number of stocks: 62
- Dividend yield: 4.18%
- Distribution frequency: Monthly
- AUM: $115.58 million
- 1-year performance: 7.0%
RCD is rated as a low-to-medium-risk investment fund.
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 of $0.3067 per share. This equals a current dividend yield of 12.60%.
Key facts for YTSL.NE include:
- MER: 0.58%
- Dividend yield: 12.60%
- Distribution frequency: Monthly
- AUM: $49.7 million
- 1-year performance: N/A
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-2 buy choices for investing in the best dividend ETFs in Canada are:
A. Wealthsimple Trade
This platform offers the cheapest way to buy and hold dividend ETFs. It has no trading commissions (pay $0 trading fees), and this applies when you purchase dividend stocks as well.
Wealthsimple Trade is available on all devices.
Clients who open a new account here are eligible for a $25 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.
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