10 Best Dividend ETFs in Canada for 2021

Photo of author

by Enoch Omololu

Published on

Advertiser Disclosure

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 is able to distribute regular income to its shareholders.

Dividend ETF fund managers screen for reliable (blue-chip) companies that have 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 on a periodic basis, either monthly, quarterly or annually.

You can choose to either take the cash or reinvest the dividends to increase your stake in the ETF.

Wealthsimple Trade offers commission-free trading for dividend stocks and ETFs. Get a $50 Bonus here.

Best Dividend ETFs in Canada

The top-10 dividend ETFs in Canada on my list 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
  • Investco Canadian Dividend Index ETF
  • Horizons Active Canadian Dividend ETF
  • iShares Core MSCI Canadian Quality Dividend Index ETF
  • iShares Canadian Select Dividend Index ETF
  • CI Active Canadian Dividend 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 39 stocks in various sectors including financials (58.6%), energy (22.3%), telecommunications (8.7%), utilities (6.2%), and four others.

Its top-10 holdings as of July 31, 2021, are:

VDY HoldingsSectorAllocation
RBCFinancials14.29%
TDFinancials11.98%
Enbridge Inc.Energy7.91%
Bank of Nova ScotiaFinancials7.50%
BMOFinancials6.35%
CIBCFinancials5.05%
TC Energy Corp.Energy4.73%
BCE IncTelecommunication services4.47%
Canadian Natural Resources Ltd.Energy3.80%
Manulife Financial CorpFinancials3.72%

Key facts for VDY are:

  • MER: 0.21%
  • Number of stocks: 39
  • Dividend yield: 3.84% (August 31, 2021)
  • Distribution frequency: Monthly
  • Assets Under Management (AUM): $1.2 billion
  • 1-year performance: 36.34%

Cost-conscious investors would note that VDY has a competitively low management expense ratio of 0.21%. This is equivalent to a $2.10 fee per year per $1,000 investment.

This fund has a “medium” risk rating, and its annualized yield is 3.84%.

2. iShares S&P/TSX 60 Index ETF

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 September 13, 2021, are:

XIU HoldingsSectorAllocation
ShopifyIT9.02%
RBCFinancials7.87%
TDFinancials6.40%
Canadian National RailwayIndustrials4.49%
Enbridge IncEnergy4.40%
Brookfield Asset ManagementFinancials4.39%
Bank of Nova ScotiaFinancials4.07%
BMOFinancials3.57%
CIBCFinancials2.82%
TC Energy CorpEnergy2.63%

Key facts to note for XIU are:

  • MER: 0.18%
  • Number of stocks: 59
  • Dividend yield: 2.62% (September 10, 2021)
  • Distribution frequency: Quarterly
  • AUM: $11.41 billion
  • 1-year performance: 28.02%

3. iShares S&P/TSX Canadian Dividend Aristocrats Index ETF

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 September 13, 2021, are:

CDZ HoldingsSectorAllocation
Keyera CorpEnergy3.17%
SmartCentres REITReal Estate2.98%
EnbridgeEnergy2.80%
Pembina Pipeline CorpEnergy2.76%
Power Corp. of CanadaFinancials2.54%
Canadian Natural Resources Ltd.Energy2.34%
BCE IncCommunication2.21%
Great West Lifeco IncFinancials2.20%
Fiera Capital Corp Class AFinancials2.18%
Exchange Income CorpIndustrials2.13%

CDZ holds equities from 11 different sectors, including a significant percentage in real estate via REITs (11.36%). The top-2 sectors are Financials (28.70%) and Energy (15.41%).

Key facts for this fund are:

  • MER: 0.66%
  • Number of stocks: 86
  • Dividend yield: 3.19% (September 10, 2021)
  • Distribution frequency: Monthly
  • AUM: $992 million
  • 1-year performance: 38.08%

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 HoldingsSectorAllocation
BCE IncCommunication5.25%
Enbridge IncEnergy5.25%
RBCFinancials5.08%
CIBCFinancials4.82%
Bank of Nova ScotiaFinancials4.77%
TDFinancials4.53%
Canadian National RailwayIndustrials4.37%
Telus CorpCommunications4.14%
BMOFinancials3.92%
TransCanada Corp.Energy3.92%

Key facts for ZDV are:

  • MER: 0.39%
  • Number of stocks: 51
  • Dividend yield: 4.05%
  • Distribution yrequency: Monthly
  • AUM: $725.33 million
  • 1-year performance: 35.36%

This “medium” risk fund has a decent yield and is easily one of the best Canadian dividend ETFs.

5. iShares S&P/TSX Composite High Dividend Index ETF

BlackRock’s iShares S&P/TSX Composite High Dividend Index ETF (XEI) holds 75 high-dividend paying stocks with exposure to 10 sectors.

70% of its holdings are concentrated in the financials (30.23%), energy (28.34%), communication (14.12%), and utilities (11.66%) sectors.

Real estate, consumer discretionary, industrials, healthcare, materials, and consumer staples are also represented, howbeit, in smaller proportions.

XEI’s top-10 holdings as of September 13, 2021, are:

XEI HoldingsSectorAllocation
BCE IncCommunication5.43%
Enbridge IncEnergy5.28%
RBCFinancials5.18%
Canadian Natural Resources Ltd.Energy4.90%
TC Energy CorpEnergy4.89%
TDFinancials4.71%
Nutrien Ltd.Materials4.68%
Bank of Nova ScotiaFinancials4.59%
Telus CorpCommunication4.11%
BMOFinancials4.03%

Key facts to note for XEI include:

  • MER: 0.22%
  • Number of stocks: 75
  • Dividend yield: 3.91% (September 10, 2021)
  • Distribution frequency: Monthly
  • AUM: $1.06 billion
  • 1-year performance: 37.52%

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.

Buy Dividend ETFs on Wealthsimple Trade and get a $50 Bonus.

best dividend etfs canada

6. Investco Canadian Dividend Index ETF

Invesco Canadian Dividend Index ETF (PDC) invests in Canadian companies known for consistently paying and increasing their dividends.

The fund seeks to replicate the performance of the NASDAQ Select Canadian Dividend Index.

Its top-10 holdings as of September 10, 2021, are:

PDC HoldingsSectorAllocation
Enbridge IncEnergy8.59%
RBCFinancials8.15%
BMOFinancials7.61%
Bank of Nova ScotiaFinancials7.51%
TDFinancials7.39%
BCE IncCommunications4.35%
Telus CorpCommunications4.17%
CIBCFinancials4.06%
Sun Life FinancialFinancials3.95%
Canadian Natural Resources Ltd.Energy3.93%

The bulk of PDC’s holdings are in financials (51.28%), followed by energy (20.49%), telecommunications (12.11%), and utilities (9.97%).

Key facts for PDC include:

  • MER: 0.56%
  • Number of stocks: 44
  • Dividend yield: 4.27% (September 13, 2021)
  • Distribution frequency: Monthly
  • AUM: $799.76 million
  • 1-year performance: 35.30%

7. Horizons Active Canadian Dividend ETF

Horizons Active Cdn Dividend ETF (HAL) seeks to provide investors with regular dividend income and modest long-term capital growth.

It invests in companies with above-average dividend yields (mostly Canadian) and also uses currency hedging and fixed income assets to maximize returns.

HAL’s top equity holdings as of July 31, 2021, are:

HAL HoldingsSectorAllocation
RBCFinancials5.47%
TDFinancials4.95%
Bank of Nova ScotiaFinancials3.39%
Summit Industrial Income REITReal Estate3.14%
Telus CorpCommunication2.96%
Granite REITReal Estate2.90%
Pembina PipelineEnergy2.83%
Imperial Oil Ltd.Energy2.82%
Allied Properties REITReal Estate2.73%
SmartCentres REITReal Estate2.71%

For sector allocation, the bulk of its holdings are in energy (24.98%), financials (22.64%), industrials (19.66%), real estate (11.46%), and utilities (6.90%) sectors.

Key facts for HAL include:

  • MER: 0.67%
  • Dividend yield: 3.18%
  • Distribution frequency: Quarterly
  • AUM: $93.29 million
  • 1-year performance: 23.02%

HAL has a low-to-medium risk rating.

Related: Best ETF Trading Apps.

8. iShares Core MSCI Canadian Quality Dividend Index ETF

iShares Core MSCI Canadian Quality Dividend Index ETF (XDIV) is one of the best dividends ETFs in Canada when you look at the combination 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 5 sectors: financials (58.48%), energy (14.60%), utilities (12.68%), materials (7.88%), and communication (6.04%).

XDIV’s top-10 stock holdings are:

XDIV HoldingsSectorAllocation
TC Energy CorpEnergy9.54%
CIBCFinancials8.92%
RBCFinancials8.83%
ScotiabankFinancials8.77%
TDFinancials8.55%
Manulife Financial CorpFinancials8.42%
Nutrien Ltd.Materials7.88%
Sun Life Financials IncFinancials6.75%
FortisUtilities4.79%
Power Corporation of CanadaFinancials4.28%

Key facts for XDIV include:

  • MER: 0.11%
  • Number of stocks: 23
  • Dividend yield: 3.86% (September 13, 2021)
  • Distribution frequency: Monthly
  • AUM: $493.74 million
  • 1-year performance: 31.41%

9. iShares Canadian Select Dividend Index ETF

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 September 13, 2021, are:

XDV HoldingsSectorAllocation
CIBCFinancials8.75%
Canadian Tire LtdConsumer Discretionary6.65%
BMOFinancials6.29%
RBCFinancials6.11%
Labrador Iron Ore Royalty CorpMaterials5.45%
BCE IncCommunication5.09%
TC Energy CorpEnergy4.78%
ScotiabankFinancials4.53%
National Bank of CanadaFinancials4.11%
TDFinancials4.06%

Key Facts of XDV include:

  • MER: 0.55%
  • Number of stocks: 29
  • Dividend yield: 3.97% (September 10, 2021)
  • Distribution frequency: Monthly
  • AUM:$1.76 billion
  • 1-year performance: 40.26%

10. CI Active Canadian Dividend ETF

This fund comprises dividend paying Canadian stocks as well as some foreign ones.

Offered by CI Global Assets Management, the CI Active Canadian Dividend ETF (FDV) holds 33 equities including:

FDV HoldingsSectorAllocation
Brookfield Asset ManagementFinancials5.91%
Alphabet IncCommunications4.55%
RBCFinancials4.17%
Canadian Tire CorpConsumer4.11%
Telus CorpCommunications4.02%
TDFinancials4.02%
Microsoft CorpTechnology3.88%
Brookfield InfrastructureUtilities3.70%
Thomson ReutersIndustrials3.62%
Bank of Nova ScotiaFinancials3.60%

Key facts to note for FDV include:

  • MER: 0.55%
  • Number of stocks: 33%
  • Dividend yield: 3.45%
  • Distribution frequency: Monthly, if any
  • AUM: $5.29 million
  • 1-year performance: 28.53%

FDV is rated as a low-to-medium risk investment fund.

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 $50 cash bonus.

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.

Are Dividend ETFs a Good Investment?

Investing your portfolio using dividend ETFs offers some benefits.

They are good for generating steady income on a periodic basis (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 a bit challenging to achieve a similar diversification if you are holding 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 every year, 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:

10 Best Dividend ETFs in Canada for 2021

Best Investment Offers This month

Canada's best online investment management platform.

Low management fee of 0.40% to 0.50% compared to mutual funds (up to 2%).

Enjoy automatic rebalancing, dividend reinvesting, and free financial advice.

Invest on autopilot and grow your net worth.

Offers self-directed and professionally managed portfolios.

No trading commissions on ETF purchases.

Low fees to buy stocks starting at $4.95 per transaction.

Free transfers from other banks and $0 inactivity fees.

1.25% savings interest rates.

Earn tax-free interest on every dollar and up to 125x more interest than other banks.

No monthly account fees.

Free withdrawals and CDIC insurance.

Retirement 101 eBook - 3D

Author

Photo of author
Enoch Omololu

Enoch Omololu is a personal finance expert and a veterinarian. He has a master’s degree in Finance and Investment Management from the University of Aberdeen Business School (Scotland) and has completed several courses and certificates in finance, including the Canadian Securities Course. He also has an MSc. in Agricultural Economics from the University of Manitoba and a Doctor of Veterinary Medicine degree from the University of Ibadan. Enoch has a passion for helping others win with their personal finances and has been writing about money matters for over a decade. His writing has been featured or quoted in The Globe and Mail, Winnipeg Free Press, Wealthsimple, Financial Post, Toronto Star, Credit Canada, MSN Money, National Post, CIBC, and many other personal finance publications.

His top investment tools include Wealthsimple and Questrade. He earns cash back on purchases using KOHO, monitors his credit score for free using Borrowell, and earns interest on savings through EQ Bank.

Leave a comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Share
Pin
Tweet
WhatsApp
Reddit