The Canadian stock market is already known for its above-average dividends. For example, the benchmark S&P/TSX 60 Index currently has a 3% trailing 12-month yield as of March 11.
But if you want more income, the easiest way is to buy a dividend exchange-traded fund (ETF) that focuses on high-yield stocks. Here’s a look at two longstanding ETFs that both pay monthly and yield more than the S&P/TSX 60.
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S&P/TSX Composite High Dividend Index
The first option is the S&P/TSX Composite High Dividend Index, which serves as a higher-yielding counterpart to the broader S&P/TSX Composite.
This index specifically screens for 75 higher-yielding companies, which naturally tilts it more heavily toward financials and energy stocks—two of Canada’s most dominant dividend-paying sectors.
You can get exposure to this index by investing in iShares S&P/TSX Composite High Dividend Index ETF (TSX:XEI).
XEI is relatively affordable, with a 0.22% expense ratio, and currently offers a 5.49% trailing 12-month yield, paid out monthly.
S&P/TSX Canadian Dividend Aristocrats Index
If you’re comfortable with a slightly lower yield in exchange for higher share price appreciation, an alternative is S&P/TSX Canadian Dividend Aristocrats Index.
This index selects Canadian stocks that have increased their dividends for at least five consecutive years, ensuring a focus on consistent dividend growers rather than just high yield.
You can track this index through iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (TSX:CDZ).
CDZ comes with a higher 0.66% expense ratio and a lower 3.77% trailing 12-month yield, but historically, it has outperformed XEI in total return, making it a solid option for investors who want both dividend growth and capital appreciation.
The Foolish takeaway
There’s a smart way to own both XEI and CDZ so you can benefit from both high-yield and dividend-growth strategies
For instance, you could prioritize XEI in your Tax-Free Savings Account, where you can withdraw those high monthly dividends tax-free whenever you need them.
Meanwhile, CDZ fits well in a Registered Retirement Savings Plan, where you can reinvest its steadily growing dividends and let them compound into a sizable nest egg for retirement.
By using both ETFs strategically, you can maximize income now while also building long-term wealth for the future.
