The Best Canadian Dividend ETFs (2021 Update)

This post was originally written in 2015 but I have updated it in April of 2021 due to recent questions about the top Canadian dividend ETFs available.  Check out the new entrants below.

Dividend investing has been a part of my portfolio strategy since I started MDJ and has become a major part of my monthly income over the years.

To rewind a little, I keep my Canadian dividend stocks in a leveraged non-registered account where I use my HELOC for capital and claim the interest as a tax deduction using the Smith Manoeuvre.  I own individual stocks, rather than Canadian dividend ETFs for various reasons, but there are a number of circumstances where ETFs could work better.

ETFs are easier to manage, and they follow a particular index which helps reduce the risk of owning individual stocks.  There are also downsides, particularly the annual management expense ratio (MER) and the lack of control in which positions that the ETF owns.

The selection of the best Canadian Dividend ETFs have grown over the years and the list has only gotten better with Blackrock iShare’s newest addition.  Note that the list below does not include Canadian real estate investment trusts (REITS). If you’re interested in more global diversification, check out my article on building a portfolio with low cost dividend ETFs.

Best Canadian Dividend ETFs for 2021:

S&P/TSX Canadian Dividend Aristocrats Index Fund (CDZ)

Investment Style: This ETF follows the dividend achievers index which holds dividend stocks that have a history of increasing their dividend (at least 5 consecutive years).  I use this strategy for my leveraged dividend portfolio but with a very different selection of stocks.  

The downside of this ETF is that it is expensive with MER of 0.66%, and some questionable stock picks in my opinion (86 positions in total).  The bright side of this fund is that it’s not dominated by financials like the other ETFs listed below (as of the date of this post).

Top 10 Holdings:

  1. Smartcentres Real Estate Investment Trust (SRU.UN)
  2. Keyera Corp (KEY)
  3. Pembina Pipeline (PPL)
  4. Enbridge (ENB)
  5. Canadian Natural Resources (CNQ)
  6. Fiera Capital Corp (FSZ)
  7. Exchange Income Corp (EIF)
  8. Power Corporation of Canada (POW)
  9. TC Energy (TRP)
  10. BCE Inc. (BCE)

MER: 0.66%


iShares Canadian Select Dividend Index ETF (XDV)

Investment Style:  This ETF uses a methodology that combines dividend growth, yield, and average payout ratio, then chooses 29 positions with the highest yield.  Although cheaper than CDZ, the MER is still pretty high for an ETF at 0.55%.  This ETF has a large exposure to financials at almost 54%.

Top 10 Holdings:

  1. Canadian Imperial Bank of Commerce/Canada (CM)
  2. Canadian Tire Class A (CTC.A)
  3. Bank of Montreal (BMO)
  4. Royal Bank of Canada (RY)
  5. Labrador Iron Royalty Corp (LIF)
  6. Bank of Nova Scotia (BNS)
  7. TC Energy Corp. (TRP)
  8. BCI Inc. (BCE)
  9. Toronto-Dominion Bank (TD)
  10. National Bank of Canada (NA)

MER: 0.55%


FTSE Canadian High Dividend Yield Index ETF (VDY)

Investment Style:   Vanguard is relatively new to the Canadian ETF scene but they have a good selection with lower MERs which helps put pressure on the other providers.  This ETF follows the FTSE Canadian High Dividend Yield index (60 positions) but does not include much detail about their strategy except that they are a  market-weighted index that purchases common stocks with a history of above-average dividend yield.  As with any ETF that is market weighted in Canada, it’s heavy in financials with almost 58% weighting.

Top 10 Holdings:

  1. Royal Bank of Canada (RY)
  2. Toronto-Dominion Bank (TD)
  3. Enbridge Inc. (ENB)
  4. Bank of Nova Scotia (BNS)
  5. TC Energy Corp. (TRP)
  6. Bank of Montreal (BMO)
  7. Suncor (SU)
  8. Canadian Imperial Bank of Commerce/Canada (CM)
  9. Manulife Financial Corp. (MFC)
  10. Nutrien Ltd (NTR)

MER: 0.22%

BMO Canadian Dividend ETF (ZDV)

Investment Style:  This ETF uses a methodology that looks for dividend growth, yield, and payout ratio. With 51 positions it has a MER in the middle of the pack.  In terms of sector diversification, this ETF does a decent job with 41% financials exposure.

Top 10 Holdings:

  1. Bank of Nova Scotia (BNS)
  2. Enbridge Inc. (ENB)
  3. Royal Bank of Canada (RY)
  4. Toronto-Dominion Bank (TD)
  5. Canadian Imperial Bank of Commerce/Canada (CM)
  6. BCE Inc (BCE)
  7. Canadian National Railway (CNR)
  8. Bank of Montreal (BMO)
  9. Telus (T)
  10.  Nutrien Ltd (NTR)

MER: 0.38%


iShares Core MSCI Canadian Quality Dividend Index ETF (XDIV)

Investment Style:  This is a new addition to the list with an inception date of June 2017.  This ETF is a low-cost portfolio of Canadian stocks with above-average dividend yield and steady or increasing dividends and strong overall financials.  This ETF has a fairly concentrated portfolio with only 21 positions, but with an MER of ~0.12%, it is seriously cheap for a dividend ETF.  I thinking that this new iShares ETF will start cannibalizing XDV due to its lower cost and similar exposure.

Top 10 Holdings:

  1. Bank of Nova Scotia (BNS
  2. Manulife Financial Corp. (MFC)
  3. Royal Bank of Canada (RY)
  4. CIBC (CM)
  5. TC Energy Corp (TRP)
  6. Sun Life Financial (SLF)
  7. Nutrien Ltd (NTR)
  8. Fortis (FTS)
  9. Pembina Pipeline (PPL)
  10. Power Corporation of Canada (POW)

MER: 0.11%


Invesco Canadian Dividend ETF (PDC)

Investment Style:  Formerly called PowerShares Canadian Dividend Index ETF. This ETF mirrors the NASDAQ Select Canadian Dividend Index.  This ETF owns high-yielding Canadian stocks with a track record of growing dividends (40 positions).  While this ETF is not exactly cheap with a MER of 0.55%, it has a little less exposure to financials @ 38%. Still, this isn’t the best choice on this list in my opinion.

Top 10 Holdings:

  1. Bank of Nova Scotia
  2. Bank of Montreal
  3. The Toronto-Dominion Bank
  4. Enbridge Inc
  5. TC Energy Corp
  6. Canadian Imperial Bank of Commerce
  7. Power Corporation of Canada
  8. TELUS Corp
  9. Brookfield Infrastructure Partners LP
  10. Pembina Pipeline Corp

MER: 0.55%


The Best Place To Buy Free ETFs In Canada

The best way to invest in Canadian ETFs is by signing up to an online discount brokerage. There are dozens of options to choose from – and we review and compare all brokers so that you can make the best choice for your exact needs.

However, there are 2 specific brokers which stand out from the rest – Qtrade and Questrade. Not only they are the 2 overall best brokers in Canada, but they give the best offers when it comes to ETF trading. You can click on the links above to read detailed reviews for each, or read a direct comparison between Qtrade and Questrade here.

TL;DR – Questrade is slightly cheaper overall, but Qtrade is the best broker in Canada AND offers free buying and selling of ETFs, while with Questrade only buying is commission-free.

Canadian Dividend ETF vs Dividend Stock Picking

Should I focus on investing in the best Canadian ETFs, or should I consider investing into individual dividend stocks on the TSX? 

I believe both options are viable and recommended, and I personally mix both in my portfolio.

Depending on your appetite for risk, how much knowledge and experience you have on the market, and how much time you can spend on managing a stock portfolio, you may benefit from buying individual dividend stocks too. You can view our list of the best dividend growth stocks in Canada and decide which route is better for you as an investor.

If you want to opt for an easy resource that will help you manage your dividend portfolio for a reasonable cost, consider Dividend Stocks Rocks. DSR is not just a weekly newsletter with stock picks. It’s a program that will help you manage portfolio and improve your results. You can first read our detailed DSR review, or sign up now by clicking the button below:

How do I invest in the Best Dividend ETFs in Canada?

Million Dollar Journey advocates for two types of low-fee methods of investing. One would be discount brokerages, and specifically ones that offer Canadian ETF buying for free, and the second one is a more hands-off approach of robo-investing which is becoming increasingly popular in Canada and for a good reason. View our quick and easy comparison below to see which one fits you best in order to buy Canadian dividend ETFs:

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Latest News In Canadian Dividends

Investors who maintained their Canadian exposure during the US-based tech boom of last year are beginning to be rewarded.  The speculation that “smart money” is now gradually “cycling” over to value stocks, banks, and industrials should be great for indexes that have lots of financials and industrials.  

As the wrestling announcers of my youth might say, “Is that the TSX 60’s music?!”

As you can see from the lists above, Canadian dividend ETFs (and really any Canadian ETF at all) is packed full of financials and other types of stocks that only marginally benefitted from the rising economic tides last year.  As some of the massive American technology companies come back to Earthly valuations, dividend investors have enjoyed watching funds flow in tried-and-true blue chip dividend stocks. 

As the dividend ETFs above show, it’s hard to beat the security of banks, insurance, and utilities if you’re looking for save income generation and capital preservation over the long term.

Final Thoughts

Out of the six Canadian dividend ETFs, there is no clear-cut “winner” of the Best Canadian Dividend ETF title as each has their good and bad attributes.  If you are dead set on a dividends-only portfolio, and want to use exclusively ETFs, then you will probably need to select a combination of two ETFs to get proper sector diversification.

I like the strategy that CDZ uses (focus on dividend growth), but their MER is high, and some of their positions are questionable.  For example, some of the holdings have not increased their dividend for 5 years in a row, which goes against their core strategy.  As well, CDZ has very little financial sector coverage which can be a good or bad thing depending on your existing exposure to the sector.  (It also makes it the perfect pairing with some of the financials-heavy ETFs, or you could simply add your own financials to your brokerage account as individual stock picks.)

XDV is a popular ETF,  but expensive with significant exposure to the financial sector.  With the new kid on the block XDIV out there (very similar exposure and positions), I imagine that there will be an outflow of assets from XDV to XDIV because of the lower MER (0.11%)

Vanguard’s VDY is a reasonable deal with 0.11% MER, and has very similar holdings as XDV/XDIV.  However, VDY has 60 positions which provide a little more diversification over XDVs 30 positions and XDIVs 22 positions.  I like to consider the trio of VDY/XDV/XDIV as financial dividend ETFs as their financial weighting is quite high.

ZDV has a reasonable MER, but with top holdings that appear to be very volatile with high payout ratios.  Personally, I’m not a fan of this ETF due to its holdings.

Finally, the other new entrant to this list is Invesco PDC (formerly Powershares before the company was bought out).  I personally like the holdings in this ETF, but not a fan of the fee.  In terms of a combination of ETFs to get balanced exposure, I would probably use a combination of XDIV/PDC or VDY/PDC.

If you’re looking for distributions, there are other options as well such as REIT ETFs like iShares XRE, BMO ZRE or Vanguards VRE.  For the adventurous, there are also covered call ETFs available by BMO.

If you decide to invest in low-fee ETFs, make sure to consider the discount brokerages that allow commission-free ETF trading.

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FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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Bernie
8 days ago

FT surely you don’t consider CDZ to be the “best” Canadian dividend ETF? In my books CDZ would be more credible if its holdings were equal weighted rather than yield weighted. High yielding stocks generally underperform low yielders.

Someone should start up an ETF which equal weights the Canadian Dividend All-Star List. That list truly contains ALL Canadian dividend companies who have grown their dividends by at least 5 consecutive years!

Jake
6 months ago

Hey There!

I know I’m a little late, my apologies! The dividend ETF route vs. individual stocks seems more my route at the moment. Is there a list of international dividend ETFs you have made or can recommend?

If you have an article on what to consider before choosing an international ETF vs a U.S. or Canadian focused one, that would be super helpful. All I know is international is more diversified, but would that mean it performs worse? I currently hold XEQT for my index investments, so I would have to see if there is overlap with my choice of dividend ETF, but I have yet to know if investment overlap is bad or not.

I see you’ve mentioned in a couple articles you prefer to globally diversify through your index investing, is this just due to tax regulation?

I’ve really enjoyed and benefited from your content, keep up the great work, and thank you!

Jake :)

jagdeep
11 months ago

i just want to say thank you everyone for your contribution i am a newbie investor you all are angels

Tim Boner
1 year ago

What do you think about the TD Q Canadian Dividend ETF (TQCD)?

Abid Ali
1 year ago

Hi FT, what are your thoughts in holding XDIV and VCN (50-50)?

For background, I am researching which investments to select for a non-reg account as part of my Smith Manouvre strategy. Ideally, this account will house all my Canadian equities as part of my larger diversified portfolio which includes RRSPs, TFSAs.

The reason I thought 50-50 is to better diversified in the Canadian equities side but also get some good dividend yields to pay down the non-deductible mortgage faster while being tax efficient.

Let me know.

Thanks in advanced!

Editor
Kyle Prevost
1 year ago
Reply to  Abid Ali

Hey Abid, I’ll let FT comment here if he wants to as well, but are you aware of the complications of using ETFs to do a SM? Something to think about!

Passivecanadianincome
3 years ago

Great list. Thanks for putting it together. Like you mentioned they are very finance energy heavy. Same as my portfolio but i will look for individual stocks in those etfs in other sectors.
Cheers

GYM
3 years ago

Thanks for the updated list :) I have ZDV but a small position in it. I like that these dividend ETFs are pretty generous, considering ETFs don’t traditionally have much in the way of dividends.

Ty
3 years ago

I agree with Frugal Trader. XEI has a higher distribution and caps each holding ~5% to limit exposure on single holdings. The top names are all the familiar suspects and the MER is much lower than some others at 0.20%.
Disclosure: ~ I hold a large position in XEI in my taxable account.

Shel
3 years ago
Reply to  Ty

+1 on XEI and my reasons for holding it are as Ty has mentioned. Also each sector is capped at 30% (particularly for the Cdn market, financials and energy) which I like as a constraint. Yield of ~4.5%

Bernie
3 years ago
Reply to  Ty

The biggest drawback with XEI is with the irregularity of the dividends. There were three monthly dividend cuts in 2016. This could be a problem with income investors seeking a safe, reliable, increasing dividend stream.

I don’t own an ETF but, from what I see, they have the best combination of growth, dividend growth, yield and diversity of the holdings.

Bernie
3 years ago
Reply to  Bernie

Correction: I don’t own an ETF but, from what I see, PDC has the best combination of growth, dividend growth, yield and diversity of the holdings.

Leo Ly @ isaved5K.com
3 years ago

Depending on the size of your portfolio, if your portfolio is over $100K, you can select the ETF for that you like, take the top 30 positions and just buy the stocks yourself. Assuming the that you pay $10 per transaction, this costs you $300 initially and going forward if you are a buy and hold investor, you will most likely pay less than 0.1% in transaction cost and nothing in MER.

Now you have your very own low cost ETF.

Ms99to1percent
3 years ago

Thanks for keeping this list updated. We are currently not too focused on dividends, but we might be once we are 5 years or so away from FIRING.