2 ETFs to Buy to Get Big Dividends

When choosing ETFs for dividends, it’s a good idea to look at the distribution history and fluctuations. Ensure the dividend dips are not extreme.

ETF chart stocks

Image source: Getty Images

Dividend ETFs can be a great option for investors that want to create a dividend portfolio for growth but don’t want to deal with the hassle of managing the portfolio. The inherent diversification of the ETF and passive rebalancing offers you peace of mind, and it’s not necessarily at the cost of a good yield.

If you are looking for sizeable dividends, there are two ETFs that you should look into.

A utility ETF

Utilities are a highly stable and reliable asset class. Most established utility companies have rock-solid financials and financial futures, which endorses their dividend stability. And if you wish to create a healthy, utility-focused dividend portfolio, Harvest Equal Weight Global Utilities Income ETF (TSX:HUTL) is a good place to start.

The fund is made up of about 33 companies, almost equally weighted (3.5% or lower), and includes companies from multiple countries with different utility businesses. Electric utilities dominate the fund’s makeup and include Canadian giants like Fortis. But telecom companies also have a healthy representation, mostly from Canada and the U.S., but there are European companies as well.

It’s currently offering a mouthwatering 7.1% yield, but the average yield is quite decent as well (4.8%). The fund offers monthly distributions and has sustained its payouts since inception. The ETF might also offer decent capital appreciation potential.

A health care ETF

In Canada, a health care-oriented ETF might not make sense, especially from a dividend perspective since the sector here is dominated by marijuana companies, almost none of which pay dividends. But a U.S.-oriented ETF like CI Health Care Giants Covered Call ETF (TSX:FHI) can be a smart high dividend investment, but not a very stable one.

The ETF pays quarterly dividends when it pays, which is not always. However, thanks to the generous distributions in 2021, the trailing 12-month yield of the company are quite high (7.8%). And that’s when the ETF is trading at an all-time high.

Since its inception in 2018, the fund has grown about 18% in value, which is not very heartening but not bad either. It indicates that the portfolio is at least growing. The management fee is also relatively higher at 0.65%. Still, it represents healthy health care giants from the U.S., which is a basket of securities worth getting exposure to.

Foolish takeaway

When you are investing for dividends in Canada, dividend aristocrats are usually the first pick, but dividend ETFs are just as an attractive asset class. The inherent diversification and the fact that many sector-specific dividend ETFs also offer slow but long-term capital appreciation potential make them worth holding in your portfolio.

But keep in mind that many ETFs that require more “management” than others usually come with relatively higher expense ratios and plan accordingly.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends FORTIS INC.

More on Dividend Stocks

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Where to Invest Your $7,000 TFSA Contribution

The TFSA is attractive for investors who want to generate tax-free passive income.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA Investors: 3 Dividend Stocks Worth Holding Forever

These TSX stocks have the potential to grow their dividends over the next decade, making them top investments for TFSA…

Read more »

Tractor spraying a field of wheat
Dividend Stocks

Is Nutrien Stock a Buy for its Dividend Yield?

Nutrien is down more than 50% form the 2022 highs. Is NTR stock now oversold?

Read more »

golden sunset in crude oil refinery with pipeline system
Dividend Stocks

Best Stock to Buy Right Now: Enbridge vs TC Energy?

Enbridge and TC Energy rebounded nicely over the past year. Are more gains on the way?

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

2 Utility Stocks That Are Smart Buys for Canadians in November

Are you looking for some of the smart buys to consider in November? These utility stocks offer growth and a…

Read more »

View of high rise corporate buildings in the financial district of Toronto, Canada
Dividend Stocks

Is Power Corporation of Canada Stock a Buy for its 5% Dividend Yield?

Is Power Corporation of Canada (TSX:POW) stock's 5% dividend yield worth it? Discover why this resilient stock could be a…

Read more »

hand stacks coins
Dividend Stocks

Here Are My Top 3 Dividend Stocks to Buy Now

These three dividend stocks are ideal for strengthening your portfolio and earning a stable passive income.

Read more »

man touches brain to show a good idea
Dividend Stocks

3 No-Brainer REIT Stocks to Buy Right Now for Less Than $200

REITs have long been touted as some of the best dividend stocks out there if you want recurring, strong income.…

Read more »