Best Monthly Dividend ETF Canada – 2024

Exchange-traded funds (ETFs) that pay monthly dividends are popular with investors. Indeed, it is a way for many to have a relatively stable monthly income. There are a number of ETFs with monthly dividends. However, each ETF has a different objective and a unique investment strategy. For the purposes of this post, we have selected 10 Best Canadian monthly dividend ETFs.

Dividend Yield and AUM comparison

AUM and Rating comparison

Best Canadian Monthly Dividend ETF: Performance

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Diversified Canadian Dividend ETFs (example : XDV, XEI, VDY, CDZ)

These ETFs focus on investing in top-performing Canadian companies that offer strong dividend yields and growth potential. They allocate your investments across various sectors of the Canadian economy. However, it’s worth noting that these funds often have a significant presence in the banking and energy sectors, which is reflective of the Canadian economic landscape.

In my assessment, two standout Canadian diversified dividend ETFs are XDV iShares Canadian Select Dividend Index and VDY FTSE Canadian High Dividend Yield Index. These ETFs offer a compelling combination of attributes, including low volatility, attractive returns, and strong overall performance. Notably, VDY boasts an impressive Morningstar rating of 5 Stars and an enticingly low Management Expense Ratio (MER) of just 0.21%.

• CIBC Investor’s Edge Review
• Full list of ‘Dividend Kings’ stocks by sector –
• Canadian Dividend Stocks under 10$

Covered Call ETFs (ZWC and HDIV)

ZWC and HDIV are well-known dividend-focused exchange-traded funds (ETFs) in the investment landscape. What distinguishes them is their classification as covered call ETFs. In essence, the fund managers overseeing these ETFs engage in a specific strategy where they sell call options on the securities held within the fund’s portfolio. This approach serves two primary purposes:

Portfolio Protection: One key objective is to safeguard the portfolio in the event of a significant decline in the value of the securities it holds. By selling call options, the fund generates income that can help offset potential losses in the underlying holdings.

Income Enhancement: The second goal is to bolster income distributions. These ETFs collect premiums from selling call options, thereby increasing the overall income generated by the fund. This boost in income is particularly attractive to income-focused investors.

Despite their popularity in the Canadian investment landscape, it’s essential to note that covered call ETFs like ZWC and HDIV have faced criticism for their relatively poor long-term performance.

When it comes to dividend yields, covered call ETFs often provide attractive returns due to the additional income generated from the premiums collected through options trading. However, from a long-term performance perspective, the strategy of writing covered calls can be less appealing, as it may limit the potential for capital appreciation.

For a more in-depth exploration of covered call ETFs and their performance in Canada, you can refer to our comprehensive guide on the best covered call ETFs in the country. This resource can provide you with a deeper understanding of these investment vehicles and their suitability for your financial goals.

Canadian Banking ETFs (FIE, RBNK et ZEB)

These ETFs are dedicated to investments in Canada’s most prominent banking institutions, making them a dual-purpose investment that combines sector-specific positioning with a focus on generating dividend income.

The Canadian banking sector is renowned for its financial robustness, and the dividends from these bank securities are highly coveted due to their appealing and dependable yields. Among the top choices for investors seeking exposure to the Canadian banking sector with an emphasis on dividend income, ZEB (BMO S&P TSX Equal Weight Banks Index) and RBNK (RBC CDN Bank Yield Index) stand out as excellent options. Both of these ETFs consistently deliver stable monthly dividend payments.

It’s also worth noting that both RBNK and ZEB come with a lower Management Expense Ratio (MER) compared to FIE, making them potentially more cost-effective choices for investors.

XDV – iShares Canadian Select Dividend Index ETF

XDV seeks long-term capital growth by replicating the performance of the Dow Jones Canada Select Dividend Index, net of expenses.

Holdings (XDV)

Consult issuers’ website for up-to-date data

XEI – iShares Core S&P/TSX Composite High Dividend Index ETF

This ETF objective is to replicate the performance of the S&P/TSX Composite High Dividend Index ETF. The fund’s objective is long term capital growth by investing in Canadian companies operating across diversified sectors. XEI pays a monthly dividend income which can be appealing for investor who are looking for a frequent payout.

XEI portfolio

Consult issuers’ website for up-to-date data

ZWC – BMO CDN High Div Covered Call

The BMO Canadian High Dividend Covered Call ETF (ZWC)  has been designed to provide exposure to a dividend focused portfolio, while earning call option premiums. The underlying portfolio is yield-weighted and broadly diversified across sectors.

The fund selection methodology uses 4 factors: – Liquidity; – Dividend growth rate; – Yield and payout ratio.

What’s unique about this ETF is that it uses covered calls to protect against downside risk. This being said, the covered call strategy provides limited downside protection. Also, when you write a covered call, you give up some of the stock’s potential gains. These ETFs will tend to have a higher yield and a lower performance.

The financial sector and Energy represents 56% of the total overall sector allocation.

ZWC High dividend ETF Holdings

Consult issuer’s website for up-to-date data

VDY – Vanguard FTSE Canadian High Dividend Yield Index ETF

FTSE Canadian High Dividend Yield Index ETF tracks the performance of the FTSE Canada High Dividend Yield Index, which consists of Canadian stocks having a high dividend yield. Due to the nature of the Canadian market, this fund has large portion of its investment portfolio in Energy and Financials.

VDY holdings

Consult issuers’ website for up-to-date data

Consult issuer’s website for up-to-date data

CDZ – S&P/TSX Canadian Dividend Aristocrats Index Fund

The S&P/TSX Canadian Dividend Aristocrats includes only large companies that are part of the TSX and who have increased their dividend consistently for at least 5 years period. This fund has been around for a while now.

CDZ holdings

Consult issuers’ website for up-to-date data

FIE – Ishares CDN Fin Mthly Income

Ishares CDN Fin Monthly Income seeks to maximize total return and to provide a stable stream of monthly cash distributions. FIE has a high exposure to the financial sector.

FIE holdings

Consult issuers’ website for up-to-date data

RBNK – RBC CDN Bank Yield Index

RBC Canadian Bank Yield Index ETF seeks to replicate the Solactive Canada Bank Yield Index. The latter is focused only on the Canadian banking industry.

RBNK holdings

Consult issuers’ website for up-to-date data

ZEB -BMO S&P TSX Equal Weight Banks Indx

The BMO Equal Weight Banks ETF has been designed to replicate, to the extent possible, the performance of the Solactive Equal Weight Canada Banks Index, net of expenses. The index includes the major Canadian banks with a balanced allocation as you can see in the composition of the portfolio below.

Please consult issuers’ website for up-to-date data

HDIV -Hamilton Enhanced Multi-Sector Covered Call

HDIV is a passive covered call ETF. It’s ideal for investors who seek high dividend income and low volatility. HDIV invests in a basket of 7 covered call & sector focus ETFs. The fund manager uses also cash leverage of 25% to enhance yield and growth potential. The index tracked is The Solactive Multi-Sector Covered Call ETFs Index TR x 1.25.