Updated: Nov 14, 2022
Looking for Canadian ETFs with MONTHLY dividend payouts? Today, I go over TOP 4 dividend ETFs to start building that passive income stream.
If you want to learn about which investment accounts to set up first before you start investing, check out my blog here. Now, let's jump right in!
1. iShares Core MSCI Canadian Quality Dividend Index ETF (XDIV. TO)
Benchmark Index: MSCI Canada High Dividend Yield 10% Security Capped Index
The 3 year average return is 8.44%. This may be a little deceiving since if you look at the returns of the calendar year, it was actually had negative returns in 2018 and 2020. That being said, this is a fairly young ETF as it was incepted only in June of 2017.
The trailing12 months yield is 4.03% (ie. dividends) and is distributed MONTHLY. However, it appears their latest distribution was lower than the past 12 months as it dropped to 3.87%.
Extremely low management fees of 0.10% is definitely ideal as it will not eat into your returns.
Majority of the top holdings are in the financial sector, mainly major Canadian Banks. In fact, this ETF is made up of almost 60% of investments in the financial section, followed by 13.5% in energy, 12.7% in utililes, 7.8% in materials, and 6% in communication.
2. iShares Canadian Select Dividend Index ETF (XDV.TO)
Benchmark Index: Dow Jones Canada Select Dividend Index
Somewhat similar to XDIV.TO, this is ETF has been around since December 2005, so we are better able to look at its performance over the long-run. The 3 year average return is 11.62% and seem to have outperformed XDIV.TO.
The trailing12 months yield is 3.62% (ie. dividends) and is distributed MONTHLY. Their latest distribution must have been higher than the past 12 months as the distribution yield shows 3.94%.
The fees are a little higher than XDIV.TO (ie. .1% vs. .5%) but the returns appear to be doing better to compensate for the higher fees.
You can also see the top 10 holdings are also very similar to XDIV.TO in that they are mostly made up of investments in the financial sectors, mainly Canadian major banks. This ETF is made up of almost 54.8% of investments in the financial section, followed by 11.8% in communication, 11.5% in utilities, 6.6% in consumer discretionary, 5.7% in energy, 5.6% in materials, and 3.8% in industrials.
3. iShares S&P/TSX Capped REIT Index ETF (XRE.TO)
Benchmark Index: S&P/TSX Capped REIT Index
If you want to invest in real estate but don't have lots of capital to invest, another great alternative is to invest in REITs or Real Estate Investment Trust, which earn most of its income from rental income. Investing in real estate also provides some diversification compared to the other two ETFS mentioned above. This ETF in particular had a 3 year average return of 9.65%. They didn't do too well in 2020, but that is expected as that is when the pandemic had hit.
The trailing12 months yield is 2.74% (ie. dividends) and is distributed MONTHLY. Their latest distribution must have been higher than the past 12 months as the distribution yield shows 3.03%.
Their fees are also on the higher side of 0.55%. Though keep in mind these fees are still a lot lower than standard mutual funds offered through banks, that have around 2% in management fees.
Their holdings mainly consist of 31.4% in retail, 24.4% in residential, 20.6% in industrial, 11.2% in diversified, 9.2% in office, and 3.2% in health care REITS.
4. BMO Covered Call Canadian Banks ETF (ZWB.TO)
Fund of a Fund (majority holding of ~27% in ZEB, BMO EQUAL WEIGHT BANKS INDEX ETF). This ETF in particular had a 3 year average return of 8.03%. For this ETF in particular, it actually managed to make positive returns of 1.81% in 2020, compared to the other ETFS above, which have all done poorly and resulted in negative returns.
The yield is the highest of all the mentioned ETFs above, at 5.68%. Banks give some of the highest dividends and the extra risk taken from premiums earned via covered call is shown to prove higher returns available for distribution.
The management fee is at 0.65%, which is the highest out of the bunch. This is because this ETF earns premiums from call options, which requires more analysis and involvement than other ETFs.
As mentioned, this ETF is a fund of a fund, which primary holdings in its own BMO Equal Weight Banks Index ETF, with remaining holdings made up of national banks in Canada.
Disclaimer: This Blog is for entertainment/informational purposes only, and you should not construe any such information as investment or financial advice, as I am not a financial advisor. I recommend doing your own research and/or consulting with your own financial advisor.
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