These 3 Dividend ETFs Are a Retiree’s Best Friend

The iShares S&P/TSX Composite High Dividend Index ETF (TSX:XEI) is a great ETF for retirees.

| More on:

Dividend ETFs are among the best assets for retirees to invest in. Offering high yield and ample diversification in one package, they can add a lot of income potential to retirement portfolios. With a combination of dividend ETFs, money market funds and guaranteed investment certificates (GICs), you can establish a stream of cash flows that lasts through your golden years. With that in mind, here are three dividend ETFs that are worth holding in retirement.

FTSE dividend stocks

The Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX:VDY) is a Canadian dividend ETF that specializes in high yield stocks. This ETF tracks the FTSE Canada High Dividend Yield Index. The index consists of 47 Canadian dividend stocks hand-picked for their high yields. Among these names you’ll find plenty of banks, utilities, and pipelines. Bank stocks, which are among the best performing equities on the TSX over the last 10 years, make up about 55% of the fund.

Having explored VDY’s portfolio, we can now look at its features. VDY boasts a relatively low 0.2% management fee, $41.46 in net asset value (NAV), and a 4.71% trailing distribution yield. Overall, it is a high yield fund that you can count on to add some much needed income to your portfolio.

Even higher yields

The iShares S&P/TSX Composite High Dividends Index ETF (TSX:XEI) is a high yield fund that has an even higher yield than VDY does. XEI is based on the Canadian Dividend Aristocrats Index – that is, Canadian stocks that have raised their dividends 25 years in a row. Not very many stocks have that distinction. Many dividend aristocrats have high yields. As a result, XEI’s portfolio has a somewhat higher yield than VDY’s does. XEI yields 5.12%, which means that if you invest $100,000 in it, you get $5,120 in cash back annually. You may get a lot more than that over the long run, as many of the largest XEI portfolio stocks are raising their dividend payouts.

Some key characteristics of XEI include:

  • 75 stocks
  • A 5.12% distribution yield
  • A 5.16% trailing yield
  • A 0.2% management fee
  • A 0.22% MER

The TSX 60

Last but least, we have the iShares S&P/TSX 60 Index ETF (TSX:XIU). This fund is not marketed as a dividend ETF, but the TSX 60 Index has a high enough yield that we could consider it one.

XIU is the one fund on this list that I personally own. I’ve owned it since 2018 and have no plans of selling.

The fund tracks the TSX 60 Index, which consists of the 60 largest publicly traded Canadian companies by market cap. This group consists of a lot of financials and utilities – two sectors that are pretty cheap and high yielding at the moment.

XIU has a 3% distribution yield, 60 stocks, and very high trading volume (meaning you don’t lose much money to the bid-ask spread). It is managed by Blackrock, a very reputable asset management company. Overall, it’s one of the best Canadian equity funds to hold.

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 Andrew Button has positions in the iShares S&P/TSX 60 Index ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

dividends can compound over time
Dividend Stocks

Want a 7% Yield? The 3 TSX Stocks to Buy Today

These TSX stocks are offering high yields of over 7%, making them attractive for investors seeking steady passive income.

Read more »

how to save money
Dividend Stocks

The Smartest Dividend Stocks to Buy With $200 Right Now

These smartest dividend stocks can consistently pay and increase their dividends in the coming years, irrespective of the macro uncertainty.

Read more »

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

3 Utility Stocks That Are Smart Buys for Canadians in November

These utility stocks benefit from regulated businesses and generate predictable cash flows that support higher dividend payouts.

Read more »

Start line on the highway
Dividend Stocks

Invest $10,000 in This Dividend Stock for $600 in Passive Income

Do you want to generate passive income? Forget the rental unit! This option will save you the mortgage yet still…

Read more »

Senior uses a laptop computer
Dividend Stocks

1 Reliable Dividend Stock for the Ultimate Retirement Income Stream

TD Bank (TSX:TD) shares are way too cheap with way too swollen a yield for retirees to pass up right…

Read more »

A worker drinks out of a mug in an office.
Dividend Stocks

Is Brookfield Infrastructure Partners a Buy for its 4.75% Yield?

Brookfield Infrastructure Partners (BIP) has a 4.75% dividend yield. Is it worth it?

Read more »

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 »