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10 Best Dividend ETFs in Canada for December 2022

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
  • TD Q Canadian Dividend ETF 
  • Horizons Active Canadian Dividend ETF
  • iShares Core MSCI Canadian Quality Dividend Index ETF
  • iShares Canadian Select Dividend Index ETF
  • RBC Quant Canadian Dividend Leaders 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 47 stocks in various sectors, including financials (55.4%), energy (26.3%), telecommunications (9.0%), utilities (6.2%), and four others.

Its top-10 holdings as of November 9th, 2022, are:

VDY HoldingsSectorAllocation
RBCFinancials14.24%
TDFinancials12.58%
Enbridge Inc.Energy8.47%
Bank of MontrealFinancials6.67%
Bank of Nova ScotiaFinancials6.47%
Canadian Natural Resources Ltd.Energy5.76%
TC Energy Corp.Energy4.59%
Canadian Imperial Bank of CommerceFinancials4.36%
Suncor Energy Inc.Energy4.34%
BCE IncTelecommunications4.31%

Key facts for VDY are:

  • MER: 0.22%
  • Number of stocks: 47
  • Dividend yield: 6.24% (November 2022)
  • Distribution frequency: Monthly
  • Assets Under Management (AUM): $1.84 billion
  • 1-year performance: 3.68%

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%.

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 $10 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 November 9th, 2022 are:

XIU HoldingsSectorAllocation
Royal Bank of CanadaFinancials7.78%
Toronto Dominion BankFinancials6.92%
Enbridge IncEnergy4.73%
Canadian National RailwayIndustrials4.36%
Canadian Pacific RailwayIndustrials4.18%
Canadian Natural ResourcesEnergy3.97%
Bank of MontrealFinancials3.76%
Bank of Nova ScotiaFinancials3.44%
Brookfield Asset ManagementFinancials3.43%
Suncor Energy IncEnergy2.89%

Key facts to note for XIU are:

  • MER: 0.18%
  • Number of stocks: 60
  • Dividend yield: 3.05% (November 2022)
  • Distribution frequency: Quarterly
  • AUM: $10.6 billion
  • 1-year performance: -4.18%

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 November 9th, 2022 are:

CDZ HoldingsSectorAllocation
Slate Grocery REITReal Estate3.10%
Pembina Pipeline CorpEnergy3.01%
Enbridge IncEnergy2.86%
Keyera CorpEnergy2.80%
Fiera Capital Corp Class AFinancials2.77%
Capital Power CorpUtilities2.77%
Exchange Income CorpIndustrials2.29%
TC Energy CorpEnergy2.20%
Canadian Natural ResourcesEnergy2.19%
Smartcentres RL Estate InvestmentReal Estate2.01%

CDZ holds equities from 11 different sectors, including a significant percentage in real estate via REITs (12.01%). The top 2 sectors are Financials (24.15%) and Energy (15.51%).

Key facts for this fund are:

  • MER: 0.66%
  • Number of stocks: 93
  • Dividend yield: 4.30% (November 2022)
  • Distribution frequency: Monthly
  • AUM: $992 million
  • 1-year performance: -5.97%

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
Royal Bank of CanadaFinancials5.29%
Toronto Dominion BankFinancials5.02%
Enbridge IncEnergy4.97%
Canadian Natural ResourcesEnergy4.88%
BCE IncCommunication4.79%
Canadian National RailwayIndustrials4.51%
Bank of Nova ScotiaFinancials4.30%
TC Energy CorpEnergy4.22%
Canadian Imperial Bank of CommerceFinancials3.97%
Manulife Financial CorpFinancials3.88%

Key facts for ZDV are:

  • MER: 0.39%
  • Number of stocks: 51
  • Dividend yield: 4.36% (November 2022)
  • Distribution frequency: Monthly
  • AUM: $918 million
  • 1-year performance: 1.85%

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 (29.98%), energy (31.84%), communication (11.65%), and utilities (11.50%) 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 November 9th, 2022, are:

XEI HoldingsSectorAllocation
Suncor Energy IncEnergy5.98
Canadian Natural ResourcesEnergy5.85%
Toronto Dominion BankFinancials5.11%
Royal Bank of CanadaFinancials5.11%
Enbridge IncEnergy4.99%
BCE IncCommunication4.87%
TC Energy GroupEnergy4.81%
Bank of MontrealFinancials4.55%
Pembina Pipeline CorpEnergy4.53%
Telus CorpCommunications4.48%

Key facts to note for XEI include:

  • MER: 0.22%
  • Number of stocks: 75
  • Dividend yield: 4.92% (November 2022)
  • Distribution frequency: Monthly
  • AUM: $1.3 billion
  • 1-year performance: 3.70%

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.

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6. TD Q Canadian Dividend ETF

The TD Q Canadian Dividend ETF invests in Canadian companies known for consistently paying and increasing their dividends.

This fund has 99.5% of its holding in Canadian stocks. The top two sectors to which TQCD has exposure are Financial Services (31.10%) and Energy (23.30%).

Its top-10 holdings as of November 9th, 2022, are:

TQCD HoldingsSectorAllocation
Imperial Oil LtdEnergy3.99%
Crescent Point Energy CorpEnergy3.97%
Toronto Dominion BankFinancials3.88%
TransForce IncLogistics3.81%
Canadian Natural ResourcesEnergy3.72%
Loblaw Cos LtdRetail3.72%
Canadian Imperial Bank of CanadaFinancials3.69%
Great-West Lifeco IncInsurance3.61%
Shaw Communications IncCommunications3.39%
Quebecor IncCommunications3.38%

Key facts for TQCD include:

  • MER: 0.39%
  • Number of stocks: 62
  • Dividend yield: 4.03% (November 2022)
  • Distribution frequency: Monthly
  • AUM: $75 million
  • 1-year performance: 1.70%

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 November 9th, 2022, are:

HAL HoldingsSectorAllocation
Royal Bank of CanadaFinancials5.85%
Toronto Dominion BankFinancials4.89%
Ovintiv IncEnergy4.00%
Telus CorpCommunication3.75%
Freehold Royalties IncEnergy3.63%
ARC Resources LtdEnergy3.50%
Exchange Income CorpAsset Management3.18%
WSP Global IncConsulting2.97%
Canadian Natural Resources LtdEnergy2.92%
Pembina Pipeline CorpEnergy2.83%

For sector allocation, the bulk of its holdings are in energy (35.69%), financials (17.49%), industrials (10.32%), real estate (11.34%), and utilities (6.76%) sectors.

Key facts for HAL include:

  • MER: 0.68%
  • Dividend yield: 5.71%
  • Distribution frequency: Quarterly
  • AUM: $121 million
  • 1-year performance: 4.33%

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 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 5 sectors: financials (51.49%), utilities (20.07%), communication (18.63%), consumer discretionary (7.55%), and energy  (2.03%).

XDIV’s top-10 stock holdings as of November 9th, 2022 are:

XDIV HoldingsSectorAllocation
Toronto Dominion BankFinancials9.68%
Royal Bank of CanadaFinancials9.55%
Sun Life Financial IncFinancials9.31%
Manulife Financial CorpFinancials8.93%
Fortis IncUtilities7.88%
Bank of Nova ScotiaFinancials7.83%
Restaurants Brand InternationalConsumer Discretionary7.55%
Rogers CommunicationCommunication6.33%
Shaw CommunicationsCommunication5.37%
Telus CorpCommunication4.17%

Key facts for XDIV include:

  • MER: 0.11%
  • Number of stocks: 20
  • Dividend yield: 4.51% (November 2022)
  • Distribution frequency: Monthly
  • AUM: $688 million
  • 1-year performance: 0.38%

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 November 9th, 2022, are:

XDV HoldingsSectorAllocation
Canadian Imperial Bank of CanadaFinancials7.49%
Bank of MontrealFinancials6.90%
Royal Bank of CanadaFinancials6.65%
Canadian Tire LtdConsumer Discretionary6.54%
National Bank of CanadaFinancials4.99%
BCE IncCommunication4.85%
Toronto Dominion BankFinancials4.75%
TC Energy GroupEnergy4.50%
Labrador Iron Ore Royalty CorpMaterials4.26%
Bank of Nova ScotiaFinancials4.26%

Key Facts of XDV include:

  • MER: 0.55%
  • Number of stocks: 30
  • Dividend yield: 4.66% (November 2022)
  • Distribution frequency: Monthly
  • AUM: $1.59 billion
  • 1-year performance: -7.24%

10. 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 (32.7%) and Energy (23.2%) sectors.

The top 10 holdings in RCD as of November 9th, 2022, are:

RCD HoldingsSectorAllocation
Enbridge IncEnergy6.5%
Toronto Dominion BankFinancials5.8%
Bank of Nova ScotiaFinancials5.4%
Royal Bank of CanadaFinancials5.0%
Canadian Natural Resources LtdEnergy4.4%
Canadian National Railway CoIndustrials4.4%
BCE IncCommunications4.1%
Constellation SoftwareTechnology3.7%
Suncor Energy IncEnergy3.5%
Bank of MontrealFinancials3.4%
Bank of Nova ScotiaFinancials3.60%

Key facts to note for RCD include:

  • MER: 0.43%
  • Number of stocks: 74
  • Dividend yield: 4.36%
  • Distribution frequency: Monthly
  • AUM: $113 million
  • 1-year performance: -0.8%

RCD 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 $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.

Related:

10 Best Dividend ETFs in Canada for December 2022

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Author

Gravatar for Enoch Omololu, MSc (Econ)
Enoch Omololu, MSc (Econ)

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 is passionate about helping others win with their finances and has been writing about money matters for over a decade. He has been featured or quoted in The Globe and Mail, Winnipeg Free Press, Wealthsimple, CBC News, Financial Post, Toronto Star, CTV News, Canadian Securities Exchange, Credit Canada, National Post, and many other personal finance publications. You can learn more about him on the About Page.

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.

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