Posted by Mark on May 25, 2014

Last year, I shared my favourite Canadian Exchange Traded Funds (ETFs) on this site along with some top U.S. and international considerations for your portfolio .   The ETF landscape has changed a bit over the last year so today’s post will update some of that content, starting with my top Canadian dividend ETFs for your portfolio, sharing some reasons why I like these products and what to be mindful of.

Are you a tad nervous about owning dividend paying stocks directly?  For sure it’s not for everyone and there are risks involved.  Don’t sweat it, these Canadian dividend ETFs have you covered.  What are the benefits of investing in dividend ETFs?

1. You get a number of dividend paying stocks in your portfolio for a modest fee.
2. You get diversification (for a modest fee).
3. You get paid cold hard cash monthly or quarterly depending upon the ETF distribution schedule.

Check out these picks below.

I think for all around performance, yield, cost and diversification, this Canadian dividend ETF is top-notch.

As of May 23, 2014 ZDV fast facts:

• Management Expense Ratio (MER) = 0.40%.
• Yield over 4%.

• Monthly payout.
• 37% energy, 29% financials and 10% utilities for holdings.
• A good product for income-oriented investors seeking to keep their fees low.

Vanguard Canada rocks thanks to their low fees and diversified products.   The only downside I see to this product, the top-10 holdings dominate it; these holdings make up over 60% of the product.  I would prefer to own these companies directly (and I do).

As of May 23, 2014 VDY fast facts:

• MER = 0.34%.
• Yield about 2.7%.
• Monthly payout.
• The top holdings are the big-5 Canadian banks, Enbridge and TransCanada.

A relative newcomer, established in February 2012, this ETF seeks to replicate the Morningstar Canada Dividend Target 30 Index – it goes after many of the largest and most liquid Canadian dividend paying companies.  This product is a bit pricy for my liking but is worthy of consideration even with a quarterly payout schedule.

As of May 23, 2014 DXM fast facts:

• Management fee = 0.60%
• Yield about 3%.

This product underwent a name change earlier this year but the product remains essentially the same.  This ETF holds 30 of the highest yielding, dividend-paying companies in the Dow Jones Canada Total Market Index, using a methodology associated with dividend growth, yield and average payout ratio.   There are some wildcards in this product (meaning, some companies I wouldn’t own directly since the yield is too high for my liking) but on the whole if youre looking for income for a modest fee youve come to a decent place.

As of May 23, 2014 XDV fast facts:

• MER = 0.55%.
• Yield almost 4%.
• Monthly payout.

This product tracks the S&P/TSX Canadian Dividend Aristocrats Index, less fees and expenses.  Meaning, stocks in this ETF have increased ordinary cash dividends for at least 5 consecutive years, a decent criteria but this ETF also contains risky stocks like AGF and EIF, companies on the verge of a dividend cut.  A consideration for your portfolio but there are better choices (above) in my opinion.

As of May 23, 2014 CDZ fast facts:

• MER = 0.66%.
• Yield just over 3%.
• Monthly payout.

There are other Canadian Dividend ETFs to consider, including many other dividend funds not mentioned here but todays focus was on the top ETFs in my opinion.  Stay tuned for more of my favourite ETFs in the coming weeks.

Disclosure:  I used to own XDV a few years ago in my personal portfolio but sold it in favour of holding many individual stocks directly.