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Top Canadian Dividend ETFs

    Exchange Traded Funds (ETFs) are investment products that allow you to invest in a basket of stocks, bonds, commodities, or other assets in a single trade. One of the most popular types of ETFs is the dividend ETF, which focuses on companies that pay out dividends to their shareholders. In this article, we’ll take a closer look at the top Canadian dividend ETFs to help you determine which ones may be right for your investment portfolio.

    What Makes a Great Exchange Traded Fund (ETF)?

    When evaluating ETFs, there are several key factors to consider:

    1. Cost: ETFs with low management fees and expense ratios are generally considered more attractive than those with high costs.
    2. Diversification: A good ETF will give you exposure to a broad range of stocks or other assets, reducing your overall risk.
    3. Liquidity: ETFs with high trading volume are generally easier to buy and sell, which can be important if you need to get in or out of a position quickly.
    4. Performance: As with any investment, it’s important to consider how well the ETF has performed over time, taking into account factors like inflation, market conditions, and changes in the underlying assets.

    Table: Top Canadian Dividend ETFs (as of 2023-02-04)

    ETF NameTicker SymbolManagement FeeDividend Yield1-Year Return
    iShares S&P/TSX Canadian Dividend Aristocrats Index ETFCDZ0.60%4.57%15.20%
    BMO Canadian Dividend ETFZDV0.45%4.26%14.73%
    Vanguard Canadian High Dividend Yield Index ETFVDY0.30%4.36%15.71%
    iShares Canadian Select Dividend ETFXDV0.47%4.21%14.93%
    BMO Low Volatility Canadian Equity ETFZLB0.35%4.05%14.15%

    Note: The above table is for informational purposes only and is not a recommendation to buy or sell any specific ETF.

    According to a report, these five ETFs have been ranked as the top Canadian dividend ETFs based on factors such as cost, diversification, liquidity, and performance.

    Let’s take a closer look at some real-world examples to help you understand how these ETFs work in practice. For example, if you want to invest in the Canadian energy sector, you could consider the iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (CDZ). This ETF holds a basket of Canadian stocks that have a long track record of paying dividends, including companies like Canadian Natural Resources and Enbridge.

    Another example is the BMO Canadian Dividend ETF (ZDV), which holds a diversified portfolio of Canadian dividend-paying stocks, including companies like Royal Bank of Canada and Brookfield Renewable.

    To help you understand the potential returns from these ETFs, let’s do some calculations. For example, if you invest $10,000 in the iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (CDZ), and it earns a return of 15.20% over the next year, your investment would be worth $11,520 after one year. It’s important to note that past performance is not a guarantee of future results, and investing in the stock market always carries some level of risk.

    Pros and Cons

    Like any investment, investing in Canadian dividend ETFs has its pros and cons. Some of the pros include:

    1. Diversification: As mentioned earlier, dividend ETFs allow you to invest in a basket of stocks, reducing your risk by spreading your money across multiple companies.
    2. Convenient and cost-effective: ETFs are easy to buy and sell and have low management fees, making them a cost-effective option for investors who don’t have the time or expertise to manage their own portfolios.
    3. Passive income: If you’re looking for a source of steady income, dividend ETFs can be a good choice. By investing in companies that pay dividends, you can receive a regular income stream without having to sell any of your shares.

    However, there are also some cons to consider, including:

    1. Market risk: Like any investment in the stock market, dividend ETFs are subject to market risk. If the stock market as a whole drops, your investment in a dividend ETF could drop as well.
    2. Concentration risk: While dividend ETFs offer diversification, they may also be heavily concentrated in a single sector or industry, which can increase your risk.
    3. Limited flexibility: Because ETFs are passively managed, you can’t select individual stocks to invest in. This can limit your flexibility and control over your investment portfolio.

    Canadian dividend ETFs can be a convenient and cost-effective way to invest in a basket of dividend-paying stocks. When evaluating ETFs, it’s important to consider factors like cost, diversification, liquidity, and performance, as well as your own investment goals and risk tolerance. As with any investment, it’s also important to understand the potential risks and limitations involved, so that you can make an informed decision. It’s always a good idea to speak with a financial advisor before making any investment decisions, and to make sure that any ETFs you invest in are consistent with your overall investment strategy.


    Christopher - BSc, MBA

    With over two decades of combined Big 5 Banking and Agency experience, Christopher launched Underbanked® to cut through the noise and complexity of financial information. Christopher has an MBA degree from McMaster University and BSc. from Western University in Canada.

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