12 Best Dividend ETFs in Canada For 2022

If you’re looking to invest in high-yield dividend stocks, bonds, commodities, and other securities in one platform, a dividend ETF is what you need.

Diversifying your portfolio across different sectors and industries is a great strategy for minimizing risk and maximizing gains.

Dividend ETFs help you achieve just that by investing your funds in different securities, sectors, and industries.

With a dividend ETF,  you don’t have to worry about the poor performance of one security since your portfolio is diversified.

However, different dividend ETFs have different performances. As a result, you want to invest only in the best dividend ETF.

This article covers the best dividend ETFs in Canada and factors to consider when narrowing your selection.

What is a Dividend ETF?

A dividend exchange-traded fund (ETF) is a portfolio that holds a portion of high-paying assets. The dividend ETFs’ returns are usually distributed monthly, quarterly, annually to investors.

Depending on your investment objective, you can reinvest your dividend yield or take the cash after distribution.

As one of the safe investments with high returns in Canada, ETFs help you reduce risk by investing your funds across different assets, sectors, and industries.

So if you’re looking for a regular cash flow and high-paying ETF portfolio, a dividend ETF is your ideal option.

Unlike mutual funds, dividend ETFs offer high returns with low risk. You can stay on top of your investment with regular dividend distribution, knowing that you have a predictable income stream.

However, you shouldn’t rush into investing in a dividend ETF without understanding its pros and cons. This leads us to the next section.

Pros and Cons of Dividend ETFs

Pros

• Steady income: Most dividend ETFs distribute returns monthly and quarterly. Only a few distributes annually. Thus, a dividend ETF is ideal if you’re looking for steady income from your investment.
• Diversification: If you’re looking to hold different securities without investing in each, a dividend ETF is what you need. Diversification helps you avoid risk and maximize gains in the stock market.
• Low-cost: Investing in a dividend ETF is low-cost compared to investing in an individual stock. Dividend ETFs allow you to buy only a portion of different securities, saving you cost.
• Low fees: Dividend ETFs have low fees, unlike mutual funds. When you invest in a robo-advisor such as Wealthsimple, you can buy and sell your ETFs without any commission.

Cons

• Recurring fees: Unlike individual stocks, dividend ETFs have recurring fees, consisting of management expense ratio (MER) and management fee.
• Returns are not guaranteed: Even though dividend ETFs are high-paying, the returns are not guaranteed.

12 Best Dividend ETFs in Canada

As mentioned previously, dividend ETFs are popular investment vehicles because of their high yield and low risk.

But not all dividend ETFs are the same. In order to make the most of your investment, consider the following best dividend ETFs in Canada.

1. Vanguard FTSE Canadian High Dividend Yield Index ETF

• MER: 0.21%
• Management fee: 0.20%
• 12-month yield: 3.83%
• Distribution frequency: Monthly

Vanguard FTSE Canadian High Dividend Yield Index ETF is one of the best dividend ETFs in Canada to consider.

This dividend ETF aims to track the wide range of Canadian equity index performance.  As of the time of writing this review, this dividend ETF is tracking the FTSE Canada High Dividend Yield Index.

That said, the Vanguard FTSE Canadian High Dividend Yield Index ETF primarily invests in companies that pay dividends in Canada.

2. BMO Canadian Dividend ETF

• MER: 0.39%
• Management fee: 0.35%
• 12-month yield: 3.96%
• Distribution frequency: Monthly

The BMO Canadian Dividend ETF (ZDV) is a popular dividend ETF in Canada that seeks to track high-paying dividend stocks in Canada.

That said, the fund aims to invest in Canadian equities with a three-year dividend growth rate, payout ratio, and yield.

3. BMO Canada High Dividend Covered Call ETF

• MER: 0.72%
• Management fee: 65%
• 12-month yield: 6.40%
• Distribution frequency: Monthly

The BMO Canadian High Dividend Covered Call ETF (ZWC) seeks to track yield-weighted dividend ETFs across different sectors in order to earn option premiums (call).

Furthermore, this dividend ETF writes call options out of your funds which are selected based on options analysis.

However, there’s downside protection on the option premium.

4. iShares S&P/TSX Canadian Dividend Aristocrats Index ETF

• MER: 0.66%
• Management fee: 0.60%
• 12-month yield: 3.29%
• Distribution frequency: Monthly

The iShares S&P/TSX Canadian Dividend Aristocrats Index ETF is managed by Black Rock which tracks the S&P/TSX Canadian Dividend Aristocrats Index.

Like the above dividend ETFs, this ETF also offers a diversified exposure across high-paying Canadian dividend companies.

With a 3.29% 12-month yield and monthly dividend distribution frequency, the iShares S&P/TSX Canadian Dividend Aristocrats Index ETF is worth checking out.

5. iShares S&P/TSX 60 Index ETF

• MER: 0.18%
• Management fee: 0.15%
• 12-month yield: 2.46%
• Distribution frequency: Quarterly

iShares S&P/TSX 60 Index ETF is also managed by Black Rock and has been in existence since 1990. As a result, this ETF is considered the world’s ETF.

That said, the iShares S&P/TSX 60 Index ETF tracks the performance of the S&P/TSX 60 Index to achieve long-term capital growth.

Accordingly, this dividend ETF offers large exposure across high-paying Canadian dividend companies.

6. CI Active Canadian Dividend ETF

• MER: 0.92%
• Management fee: 0.550%
• 12-month yield: 28.53%
• Distribution frequency: Monthly

The CI Active Canadian Dividend ETF tracks Canadian actively managed high-paying dividends and other assets to achieve long-term capital growth.

Moreover, the CI Active Canadian Dividend ETF also invests in foreign securities in order to achieve its investment objective.

7. Horizons Active Canadian Dividend ETF

• MER: 0.67%
• Management fee: 0.55%
• 12-month yield: 22.50%
• Distribution frequency: Quarterly

Horizons Active Canadian Dividend ETF is one of the best dividend ETFs in Canada to consider.

The ETF tracks high-yield North America equity securities in order to achieve long-term capital growth and long-term total returns.

With a 22.50% 12-month yield and 0.67% MER, Horizons Active Canadian Dividend ETF could be your cost-effective vehicle for holding high-paying securities in one portfolio.

8. iShares S&P/TSX Composite High Dividend Index ETF

• MER: 0.22%
• Management fee: 0.20%
• 12-month yield: 4.05%
• Distribution frequency: Monthly

iShares S&P/TSX Composite High Dividend Index ETF is another dividend ETF managed by Black Rock seeking to track the performance of net of expenses of the S&P/TSX Composite High Dividend Index.

Like the above best dividend ETFs in Canada, this dividend ETF seeks to achieve long-term capital growth and long-term total returns.

9. Invesco Canadian Dividend Index ETF

• MER: 0.56%
• Management fee: 0.50%
• 12-month yield: 4.27%
• Distribution frequency: Monthly

Invesco Canadian Dividend Index ETF tracks the performance of the expenses and fees of the NASDAQ Select Canadian Dividend Index.

That said, the fund holds highly liquid Canadian equity securities with growing dividend returns.

Categorically, Invesco Canadian Dividend Index ETF invests 95% in Canadian equities and income trusts and invests 5% in other countries.

10. iShares Core MSCI Canadian Quality Dividend Index ETF

• MER: 0.11%
• Management fee: 0.10%
• 12-month yield: 4.17%
• Distribution frequency: Monthly

iShares Core MSCI Canadian Quality Dividend Index ETF is another Black Rock-managed fund that tracks the performance of the next of expenses of the MSCI Canada High Dividend Yield 10% Security Capped Index.

With constant and growing dividends, iShares Core MSCI Canadian Quality Dividend Index ETF offers exposure to high-paying dividend ETFs.

11. First Asset Morningstar Canada Dividend Target 30 Index ETF

• MER: 0.65%
• Management fee: 0.60%
• 12-month yield: 4.66%
• Distribution frequency: Quarterly

The First Asset Morningstar Canada Dividend Target 30 Index ETF tracks the next of fees and expenses of the Morningstar Canada Target Dividend Index.

Based on Morningstar proprietary research, the fund invests in Canadian big equity securities with high liquidity.

If you have a medium risk tolerance and are looking for quarterly returns, the First Asset Morningstar Canada Dividend Target 30 Index ETF could be ideal for you.

With this fund, you have high exposure to high-paying Canadian dividend companies.

12. iShares Canadian Select Dividend Index ETF

• MER: 0.55%
• Management fee: 0.50%
• 12-month yield: 3.99%
• Distribution frequency: Monthly

There’s no complete mention of the best dividend ETFs in Canada without iShares Canadian Select Dividend Index ETF.

This fund tracks the net of expenses of the Dow Jones Canada Select Dividend Index to provide long-term capital growth.

Categorically, this fund offers exposure to 30 high-paying Canadian dividend companies through the Dow Jones Canada Total Market Index.

READ MORE: Best Canadian ETFs

How to Choose the Best Dividend ETFs in Canada

It can be challenging to narrow your selection from the above list of the best Dividend ETFs in Canada.

Frankly speaking, the above dividend ETFs have competitive returns and similar investment objectives, leading to their honorable mention.

Since it’s not possible to invest in all the above ETFs at once, it’s essential you narrow your selection to the one that suits your investment objective.

Here are four major factors to consider when narrowing your selection on the best dividend ETFs in Canada.

1. Fees

The management expense ratio (MER) and management fees constitute the overall fees of your investment. While the fees may be low initially, they may add up over time and consume your capital.

As a result, it’s essential to choose a dividend ETF with a low management fee and MER. However, the portfolio fees may not be a problem if you don’t intend to invest for a long duration.

2. Yield

The yield of the portfolio determines your investment returns. Thus, considering the monthly or annual yield of the fund is key to making a cost-effective decision.

From the above review, you can see that each portfolio has a different 12-month yield. This indicates your varying earnings from each of them.

As a result, you want to choose a dividend ETF with a high yield.

3. Number of Assets

The number of a portfolio’s assets determines its liquidity. The more liquid an ETF is the less risk.

While the above dividend ETFs invest in varying securities, it’s essential to consider the total number of assets of your desired ETF.

4. Diversification

Diversification is the last but not the least factor you need to consider when choosing the best dividend ETF in Canada.

Different portfolios have different diversification strategies. This makes it essential to consider the number of holdings and sectors of your portfolio.

Furthermore, consider the market capitalization of the portfolio to know the level of risk involved.

READ MORE: Best Silver ETFs in Canada

How to Buy Dividend ETFs in Canada

There are different ways of buying dividend ETFs in Canada. The best option is a robo-advisor.

Besides their low fees, robo-advisors also automate your investment, saving you the stress of actively managing your portfolio.

However, not all robo-advisors are the same. Hence, it’s essential to choose one of the best robo-advisors in Canada.

Wealthsimple and Questrade are the leading best robo-advisors in Canada. But when narrowing your selection, you want to make the best decision.

1. Wealthsimple

Wealthsimple offers cost-effective investment solutions through its trading platform Wealthsimple Trade.

That said, Wealthsimple is a household name when it comes to low-cost investment in Canada. Through Wealthsimple Trade, you can buy and sell dividend ETFs without any commission. This also applies to trading stocks.

If you’re okay with an above-average risk level and are looking for global exposure, Wealthsimple should be your ideal option.

2. Questrade

Whenever there’s a mention of Wealthsimple, Questrade comes next. This is because Questrade has proved to be a competitive robo-advisor with low-cost investment solutions through its Questwealth Portfolio.

Frankly speaking, Questrade shares a few just differences with Wealthsimple, the major of which is commission.

As mentioned previously, Wealthsimple charges no commission on buying and selling ETFs and stocks. However, Questrade offers only commission-free ETFs purchase and charges a commission on selling them.

But if you’re looking to invest most of your funds in the Canadian stock market, Questrade is ideal for you.

If you’re still in doubt on which to choose, read this comprehensive comparison on Questrade vs. Wealthsimple to make an informed decision.

Verdict on the Best Dividend ETFs in Canada

Buying a dividend ETF should be your priority if you’re looking for low-cost investment solutions. While dividend ETFs are low-cost and high-paying, you shouldn’t invest in them blindly.

From the above review of the best dividend ETFs in Canada, it’s easy to get confused on which to choose.

As mentioned previously, you should consider the ETF’s fees, yield, number of assets, and diversification when narrowing your selection.

Hopefully, you can now take the practical step of investing in your desired dividend ETF whether through Wealthsimple Trade or Questwealth Portfolio.

But if you need more clarification, don’t hesitate to contact me in the comment section.