best canadian monthly dividend etf

Best Monthly Dividend ETF Canada – 2023

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

ETFDiv
Yld
MER
%
Canadian Diversified
XDV – iShares Can
Select Dividend Indx
4.300.55
XEI – Ishares S&P TSX
Comp High Div Indx
4.340.22
VDY – FTSE Canadian
High Div Yield Indx
4.150.21
CDZ –iShares S&P/TSX
Can Div Aristo Indx
3.700.66
Covered call
ZWC – BMO CDN High
Div Covered Call
6.640.72
Banking
FIE – Ishares CDN Fin
Mthly Income
6.940.89
RBNK – RBC CDN
Bank Yield Index
4.080.32
ZEB -BMO S&P TSX
Equal Weight Banks Indx
4.010.28
Source: Barchart as of December 19th 2022, AUM is asset under management in Millions, MER Management expense ratio

AUM and Rating comparison

ETFAUM
in M
Morningstar
rating
XDV1,9114 stars
XEI1,7533 stars
ZWC1,5282 stars
VDY1,2985 stars
CDZ1,0612 stars
ZWC1,5282 stars
FIE9635 stars
RBNK2845 stars
ZEB2,7004 stars
Source: Barchart and TD Market research, AUM asset under management

Best Canadian Monthly Dividend ETF: Performance

updated daily

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

These ETFs invest in the best Canadian companies in terms of dividend yield and growth potential. These funds invest your money in several sectors of the economy. However, due to the nature of the Canadian economy, it is not surprising to see these funds dominated by the banking and energy sectors.

In my opinion, XDV iShares Canadian Select Dividend Index and VDY FTSE Canadian High Dividend Yield Index remain the best Canadian diversified dividend ETFs. They combine: low volatility, attractive returns and good performance. VDY has a Morningstar rating of 5 Stars and a low MER of just 0.21%!

Covered Call ETFs (ZWC)

ZWC is a popular dividend ETF. ZWC, is what we call, a covered call ETF. In essence, the fund manager sells call options on the securities held in the portfolio for two main purposes: 1- to protect the portfolio in the event of a significant drop in the value of the securities held and 2- to collect premiums and thus improve distributions. These funds are very popular in Canada despite the poor long-term performance they generate.

Personally, I find the covered call strategy well suited to a basket of low volatility securities. It would be very risky if used with cyclical or volatile securities, for example: energy or mining companies.

In terms of dividend yields, ZWC is simply unbeatable. ZWC pays a dividend above 6%. This performance is due to the premiums collected, which enhance the dividend yield. However, in terms of long-term performance, the strategy of writing covered calls is unattractive.

Canadian Banking ETFs (FIE, RBNK et ZEB)

These ETFs invest in the largest Canadian banks. It is both a sector play and a dividend income strategy.

Canadian banks are known for their financial strength. The dividends of their securities are highly sought after and appreciated for their attractive and stable yields. ZEB – BMO S&P TSX Equal Weight Banks Index and RBNK RBC CDN Bank Yield Index are both excellent choices. If you want exposure to the Canadian banking sector with a focus on earning dividends, you’ll be served. Both pay a fairly stable monthly dividend.

RBNK and ZEB have a lower MER than FIE.

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)

NameWeight
Canadian Imperial Bank of Commerce8.5%
Canadian Tire Corp Ltd Class A6.8%
Bank of Montreal6.3%
Labrador Iron Ore Royalty Corp6.2%
Royal Bank of Canada6.0%
BCE Inc4.7%
TC Energy Corp4.7%
Bank of Nova Scotia4.7%
The Toronto-Dominion Bank4.3%
National Bank of Canada3.9%

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

NameWeight
Enbridge Inc5.2%
Royal Bank of Canada5.1%
Canadian Natural Resources Ltd5.1%
The Toronto-Dominion Bank5.0%
BCE Inc5.0%
Suncor Energy Inc4.9%
TC Energy Corp4.8%
Bank of Nova Scotia4.8%
Nutrien Ltd4.5%
Bank of Montreal4.0%

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

Weight (%)Name
4.96%TORONTO-DOMINION BANK
4.91%BCE INC
4.91%ROYAL BANK OF CANADA
4.71%CANADIAN IMPERIAL
BANK OF COMMERCE
4.61%BANK OF NOVA SCOTIA
4.24%MANULIFE FINANCIAL CORP
4.20%TRANSCANADA CORP
4.10%ENBRIDGE INC
3.81%BANK OF MONTREAL
3.77%GREAT-WEST LIFECO INC

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

NameWeight
Royal Bank of Canada14.1%
The Toronto-Dominion Bank12.5%
Enbridge Inc7.9%
Bank of Nova Scotia7.7%
Bank of Montreal6.5%
Canadian Imperial Bank of Commerce4.9%
TC Energy Corp4.7%
BCE Inc4.4%
Canadian Natural Resources Ltd4.1%
Manulife Financial Corp3.7%

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

NameWeight
Keyera Corp3.4%
SmartCentres3.0%
Pembina Pipeline Corp2.8%
Enbridge Inc2.8%
Canadian Natural Resources Ltd2.5%
Power Corporation of Canada2.4%
Fiera Capital Corp2.3%
Great-West Lifeco Inc2.1%
BCE Inc2.1%
Canadian Imperial Bank of Commerce2.1%

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

NameWeight
iShares S&P/TSX Cdn
Prefr Shr ETF Comm
20.7%
iShares Core Canadian
Corporate Bd ETF
10.0%
Canadian Imperial Bank of Commerce9.1%
Royal Bank of Canada8.5%
The Toronto-Dominion Bank7.0%
Sun Life Financial Inc6.5%
Manulife Financial Corp6.5%
National Bank of Canada6.5%
Power Corporation of Canada6.0%

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

NameWeight
Canadian Imperial Bank of Commerce25.7%
Bank of Nova Scotia24.0%
Royal Bank of Canada16.6%
The Toronto-Dominion Bank15.9%
Bank of Montreal8.5%
National Bank of Canada8.0%

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.

Weight (%)Name
17,18%BANK OF MONTREAL
16,90%TORONTO-DOMINION BANK/THE
16,78%CANADIAN IMPERIAL BANK OF COMMERCE
16,59%NATIONAL BANK OF CANADA
16,50%ROYAL BANK OF CANADA
15,86%BANK OF NOVA SCOTIA/THE
0,19%CASH

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

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