June 24th 2021: In this post, we will be going over the Best Canadian Dividend Exchange Traded Funds (ETF) in Canada. We started by selecting 11 of the most popular ETFs that invest exclusively in Canadian stocks. Then, we compared these ETFs based on the dividend yield, performance over a 3 years period and volatility. For each ETF, we will provide the funds’ objective, holdings and sector allocation. Dividend ETFs can be a great long term investment and a stable source of income.

Benefits of holding a dividend ETF

  • Diversification

Canadian Dividend ETF offer an instant exposure to a large number of businesses. This being said, most of Canadian Dividend ETFs are dominated by the Financial and Energy sector. As you will see below, some are more exposed than others. Keep this mind when planning your overall sector allocation.

  • Predictable income stream

Most of the ETFs selected below pay an income on a monthly basis which is great in case you are looking for a solid steady income.

  • Tax efficiency

An ETF that invest in US or International stocks incurs a minimum of 15% withholding tax. This makes ETFs that invest in Canadian stocks much more tax efficient for investors.

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MER and Volatility (Best dividend ETF Canada list)

NameAUM*MER*Beta*
XDV – iShares Canadian Select Div Indx1,7000.550.87
XEI – Ishares S&P TSX Comp High Div Index1,1100.221.10
VDY – FTSE Canadian High Div Yield Index1,0600.210.92
CDZ – iShares S&P/TSX Can Div Aristocrats Idx9410.661.08
FIE – Ishares CDN Fin Mthly Income8960.891.34
PDC – Invesco Can Div Index7590.560.90
ZDV – BMO Canadian Div6570.391.00
XDIV – iShares Core MSCI Can
Quality Div Indx
4530.110.90
DGRC – CI Wisdomtree CDN Qlty Div Gwth Idx3770.240.93
RBNK – RBC CDN Bank Yield Indx1520.321.01
RCD – RBC Quant CDN Div Leaders1080.42%0.93
Source Yahoo Finance Data as of June 24th 2021. AUM is asset under management in Millions. MER is the management expense ratio. Beta (5 years) is a measure of risk, the higher the Beta the higher is the volatility

XDV – iShares Canadian Select Dividend Index has the lowest volatility and is the largest Canadian Dividend ETF in terms of assets. The highest volatility goes to FIE – Ishares CDN Fin Mthly Income. This is not surprise knowing the fund invests primarily in the financial sector, so it’s less diversified that the rest of the Canadian dividend ETFs in the list.

XDIV (iShares Core MSCI Canadian Quality Dividend Index ETF) has the lowest MER in the list (0.11% only).

Yield and performance (Best dividend ETF Canada list)

SymbolDiv
Yield
1 yr3 yrs
 XDV3.6651.5811.78
 XEI4.0343.949.80
 VDY3.8243.6811.13
 CDZ3.1644.6011.03
 FIE6.0652.239.93
 PDC4.2437.089.72
 ZDV4.1839.609.00
XDIV4.1438.099.31
 DGRC2.6335.1710.21
 RBNK3.4363.0912.46
 RCD3.4137.498.94

Source Yahoo Finance Data as of June 24th 2021

RBNK – RBC CDN Bank Yield Index has the best performance in all the ETFs selected. RBNK and FIE are not diversified; they both invest mainly in Canadian Banks.

FIE (Ishares CDN Fin Mthly Income) offers the highest dividend yield at 6.06%. It’s a great ETF if you are bullish on the banking sector.

XDV, VDY and CDZ remain the best dividend ETF in Canada if you are looking for a diversified dividend income. They combine: low volatility + interesting yields and great performance.

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Similar posts

XDV – iShares Canadian Select Dividend Index ETF

iShares Canadian Select Dividend Index ETF: provides long-term capital growth by investing in 30 high yielding Canadian companies in the Dow Jones Canada Total Market Index.

XDV – Holdings and sector allocation

NameWeight %
CANADIAN IMPERIAL BANK OF COMMERCE8,73
CANADIAN TIRE LTD CLASS A6,72
LABRADOR IRON ORE ROYALTY CORP6,47
BANK OF MONTREAL6,26
ROYAL BANK OF CANADA5,96
TC ENERGY CORP4,80
BCE INC4,65
BANK OF NOVA SCOTIA4,63
TORONTO DOMINION4,31
NATIONAL BANK OF CANADA3,90
As of June 23rd 2021
SectorWeight %
Financials55.93
Utilities11.69
Communication11.50
Consumer Discretionary6.50
Energy6.01
Materials5.05
Industrials3.15
Cash and/or Derivatives0.17
As of March 25th

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. 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 Holdings and sector allocation

NameIndustryWeight %
TC ENERGY CORPEnergy5.08
ENBRIDGE INCEnergy5.08
TORONTO DOMINIONFinancials5.05
ROYAL BANK OF CANADAFinancials5.00
BCE INCCommunication4.99
BANK OF NOVA SCOTIAFinancials4.88
CANADIAN NATURAL RESOURCES LTDEnergy4.77
SUNCOR ENERGY INCEnergy4.60
PEMBINA PIPELINE CORPEnergy4.48
NUTRIEN LTDMaterials4.43
As of March 25th
TypeFund
Financials30.11
Energy28.79
Communication13.04
Utilities11.36
Materials6.03
Real Estate5.75
Consumer Discretionary2.88
Industrials1.04
Cash and/or Derivatives0.41
Health Care0.39
As of March 25th

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 and sector allocation

Holding name% of market value
Royal Bank of Canada(RY)14.23%
Toronto-Dominion Bank(TD)12.86%
Bank of Nova Scotia(BNS)8.29%
Enbridge Inc.(ENB)8.01%
Bank of Montreal(BMO)6.13%
Canadian Imperial Bank of Commerce(CM)4.81%
TC Energy Corp.(TRP)4.61%
Manulife Financial Corp.(MFC)4.53%
BCE Inc.(BCE)4.00%
Canadian Natural Resources Ltd.(CNQ)3.69%
As of March 25th
SectorFund
Financials60.0%
Energy24.2%
Telecommunications8.0%
Basic Materials4.1%
Utilities2.5%
Industrials0.8%
Real Estate0.2%
Consumer Discretionary0.2%
As of March 25th

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

The S&P/TSX Canadian Dividend Aristocrats ETF 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 and sector allocation

NameSector
SMARTCENTRES RL ESTATE INVESTMENT2,87
ENBRIDGE INC2,77
KEYERA CORP2,76
PEMBINA PIPELINE CORP2,69
FIERA CAPITAL CORP CLASS A2,26
CANADIAN NATURAL RESOURCES LTD2,22
EXCHANGE INCOME CORP2,11
TC ENERGY CORP2,11
POWER CORPORATION OF CANADA2,10
BCE INC2,07
As of March 25th
SectorWeight (%)
Financials29.77
Energy14.86
Industrials11.77
Real Estate10.58
Utilities10.41
Consumer Staples6.80
Communication6.49
Materials3.32
Consumer Discretionary3.09
Health Care1.83
As of March 25th

FIE – Ishares CDN Fin Mthly 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 and sector allocation

NameWeight (%)
ISHARES S&P/TSX CANADIAN PREFFERED20.42
iShs Canadian Corp Bnd Idx ETF9.09
CANADIAN IMPERIAL BANK OF COMMERCE8.87
ROYAL BANK OF CANADA7.99
MANULIFE FINANCIAL CORP7.87
TORONTO DOMINION7.19
SUN LIFE FINANCIAL INC7.07
NATIONAL BANK OF CANADA6.80
POWER CORPORATION OF CANADA5.54
IA FINANCIAL INC5.05
As of March 25th
SectorWeight (%)
Banks45.39
Insurance31.75
Diversified Financials7.07
Energy4.53
Utilities4.09
Real Estate4.01
Telecommunications1.03
Transportation0.64
Food & Staples Retailing0.55
Autos & Components0.30
As of March 25th

PDC – Invesco Canadian Dividend Index ETF

Invesco Canadian Dividend Index ETF seeks to replicate the performance of the NASDAQ Select Canadian Dividend Index. Don’t be confused with NASDAQ, the companies are 95% Canadian. The fund applies strict criteria to select only companies that have increased their dividend overtime and that offer a high yield.

PDC Holdings and sector allocation

NameWeight (%)
Enbridge Inc8.00%
Royal Bank of Canada7.97%
Toronto-Dominion Bank/The7.91%
Bank of Nova Scotia/The7.85%
Bank of Montreal7.16%
TC Energy Corp4.15%
Canadian Natural Resources Ltd4.12%
Canadian Imperial Bank of Commerce4.01%
Manulife Financial Corp3.95%
BCE Inc3.93%
Total top holdings59.05%
as of March 25, 2021
Financials50.89%
Energy20.20%
Telecommunication services11.84%
Utilities10.09%
Real estate3.86%
as of March 25, 2021

ZDV – BMO Canadian Dividend ETF

BMO Canadian Dividend ETF seeks exposure to companies that exhibit growth in paying dividends. The fund has a large number of holding and allocates a maximum of 5% per position.

ZDV Holdings and sector allocation

Weight (%)Name
5.28%BANK OF NOVA SCOTIA/THE
5.10%CANADIAN IMPERIAL BANK OF COMMERCE
5.10%ROYAL BANK OF CANADA
5.10%ENBRIDGE INC
5.07%TORONTO-DOMINION BANK/THE
4.84%BCE INC
3.87%CANADIAN NATIONAL RAILWAY CO
3.81%BANK OF MONTREAL
3.62%TELUS CORP
3.54%TRANSCANADA CORP
As of March 25th
SectorWeight (%)
Financials41.29
Energy12.46
Communication10.80
Utilities11.62
Materials6.58
Real Estate2.83
Consumer Discretionary2.44
Industrials7.91
Consumer Staples3.69
Health Care0.39
As of March 25th

XDIV – iShares Core MSCI Canadian Quality Dividend Index ETF

XDIV invests in Canadian stocks with strong financials. The companies selected pay above-average dividend yields and have either paid steady or increasing dividends.

XDIV portfolio holdings and sector allocation

NameWeight %
CANADIAN IMPERIAL BANK OF COMMERCE9.75
ROYAL BANK OF CANADA9.13
TC ENERGY CORP9.10
BANK OF NOVA SCOTIA8.87
TORONTO DOMINION8.75
MANULIFE FINANCIAL CORP8.24
NUTRIEN LTD7.74
SUN LIFE FINANCIAL INC6.61
FORTIS INC4.70
POWER CORPORATION OF CANADA4.04

as of June 23rd 2021

SectorWeight %
Financials59.22
Energy14.44
Utilities12.51
Materials7.74
Communication5.86
Cash and/or Derivatives0.24

DGRC – CI WisdomTree Canada Quality Dividend Growth Index ETF

CI Wisdomtree CDN Qlty Div Gwth Idx holdings provide exposure to dividend-paying Canadian companies with growth characteristics.

DGRC Holdings and sector allocation

NameWeight (%)
MAGNA INTL INC NPV6.49
SUN LIFE FINANCIAL INC.5.34
KEYERA CORP5.25
GREAT WEST LIFECO INC NPV5.14
Canadian Pacific Railway Ltd5.13
THOMSON REUTERS CORP NPV5.01
Canadian National Railway Co4.92
ROGERS COMMUNICATIONS4.77
INTACT FINL CORP4.77
TC ENERGY CORP NPV4.75

As of March 25th

Sector allocation

SectorWeight (%)
Consumer Discretionary12.94
Consumer Staples10.48
Energy11.85
Utilities Financials18.02
Materials10.15
Communication8.33
Real Estate2.83
Information Technology1.69
Industrials26.18

As of March 25th

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 and sector allocation

HoldingsAssets
CANADIAN IMPERIAL BANK OF COMMERCE25.1%
BANK OF NOVA SCOTIA24.9%
BANK OF MONTREAL17.0%
TORONTO-DOMINION BANK16.3%
NATIONAL BANK OF CANADA8.7%
ROYAL BANK OF CANADA8.1%
CANADIAN DOLLAR0.0%
Total % of top 10 holdings100.0%

As of March 25th

RCD – RBC Quant CDN Dividend Leaders

RBC Quant Canadian Dividend Leaders ETF seeks to provide unitholders with exposure to the performance of a diversified portfolio of high-quality Canadian dividend-paying equity securities that will provide regular income and that have the potential for long-term capital growth.

RCD Holdings and sector allocation

HoldingsAssets
CONSTELLATION SOFTWARE INC/CANADA9.0%
ROYAL BANK OF CANADA6.4%
ENBRIDGE INC5.3%
TORONTO-DOMINION BANK4.5%
BCE INC4.3%
CANADIAN NATIONAL RAILWAY CO4.1%
CANADIAN IMPERIAL BANK OF COMMERCE3.8%
MANULIFE FINANCIAL CORP3.7%
BANK OF NOVA SCOTIA3.4%
OPEN TEXT CORP2.3%

As of March 25th

Sector allocation

SectorWeight (%)
Financials29.9
Energy12.6
Communication6.0
Utilities4.2
Materials11.1
Real Estate3.5
Consumer Discretionary4.2
Industrials12.3
Consumer Staples2.9
Health Care1

As of March 25th

Buy a Dividend ETF or Pick my own dividend stocks

This is a recurring question, should I pick and buy my own dividend stocks or just invest in a Dividend ETF? Let’s try to answer this question in a rational way:

  • MER vs Trading costs:

Buying and selling stocks has a cost built into it. The most talked about is the trading fees which could range from 5 to 15$ commission per trade. Let’s assume you trade at 5$ per transaction and you can buy ETFs for free (this option is now offered by several brokerage firms including Questrade). I prepared a table assuming you are holding 30 stocks versus buying an ETF and paying the MER (Management Expense Ratio).

The comparison table below show that for small amounts you are better off buying an ETF. Otherwise, trading costs will eat up your returns. However, once the amount in hand is higher (100K plus), owning an ETF will cost much more for investors. Thus, you are better off selecting quality dividend stocks on your own.

Amount invested30 Dividend
stocks
ETF
Comparable
10,000 $150$ / 1.5%Buy ETF if MER is
lower than 1.5%
50,000 $150$ / 0.3%Buy ETF if MER is
lower than 0.3%
100,000 $150$ / 0.15%Buy ETF if MER is
lower than 0.15%

The table above looks only at the commission fees paid by traders. There is other factors in play here:

– Time value money: selecting your own stocks requires a prep work (researching the market, analyzing your picks, testing your portfolio and readjusting if necessary…etc);

– Diversification: an ETF is a well diversified investment generally speaking. So, in order to compete with an ETF, you need to own at least 30 stocks as per academic research. One need also to point out that empirical research emphasizes ‘you need to own randomly selected stocks! this insures mathematically speaking low correlation between the stocks you own’ You can’t buy big names here and there and hope to achieve diversification. It’s a bit more complex. The correlation between your various investments needs to be analyzed. Buying 10 stocks that are highly correlated with each other is shooting yourself in the foot. Your stocks need to be a mix:

  • various industries;
  • Include both cyclical and non cyclical businesses;
  • Include defensive stocks;
  • Include various sizes of business (Large and mid).

Disclaimer

The data on this website is for your information only. It does not constitute investment advice, or advice on tax or legal matters. Any information provided on this website does not constitute investment advice or investment recommendation nor does it constitute an offer to buy or sell or a solicitation of an offer to buy or sell shares or units in any of the investment funds or other financial instruments described on this website. Should you have any doubts about the meaning of the information provided herein, please contact your financial advisor or any other independent professional advisor.

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