I’d Invest $12,000 in These 3 High-Yield Dividend ETFs for Passive Income

Market turbulence? Sleep easy with these three high-yield dividend ETFs that provide steady monthly income while you wait for recovery.

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It’s easier to hold an investment portfolio for the long term if that portfolio provides regular passive-income streams, even through tough economic times. Dividends empower you to buy the dips, and I absolutely love passive dividend income.

The market has been extremely volatile so far in 2025. Tariffs and counter-tariffs have rocked investor portfolios. However, the Canadian market has performed much better, with the TSX down only 2.7% year to date during a time when larger market indices like the S&P 500 and NASDAQ-100 have lost 10.1% and 15.7% in value. During choppy times like these, investors can still sleep well at night when they continue to earn steady dividend cash flows while patiently waiting for markets to recover.

With $12,000 in new capital to invest in 2025, I wouldn’t try to time the market to find the lowest entry points. Earlier attempts at market timing have failed consistently. Instead, I would invest the capital in these high-yield dividend exchange-traded funds (ETFs) that offer ready-made portfolios, wide diversification, low management fees, and professional management, all in one go.

iShares S&P/TSX Capped REIT Index

Created with Highcharts 11.4.3iShares S&p/tsx Capped REIT Index ETF PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Real estate investment trusts (REITs) are a formidable asset class to consider for regular passive income, and iShares S&P/TSX Capped REIT Index ETF (TSX:XRE) gives investors exposure to a diversified portfolio of 16 professionally managed Canadian real estate investment trusts in one bundle. It’s the easiest way for retail investors to gain widely diversified exposure to high-quality Canadian real estate properties without the headaches of direct property ownership.

The portfolio is heavily weighted toward retail REITs (44.4%) and multi-family residential REITs (28.2%) — both defensive real estate categories during bouts of economic volatility.

With $1.4 billion in assets under management and a reasonable management expense ratio (MER) of 0.61%, investors may pay about $6.10 annually in investment expenses on every $1,000 invested. The high-dividend yield ETF is a cost-effective way to invest in retail, residential, premium office, and industrial properties through a single investment.

XRE pays monthly distributions with a yield of 5.5% annually and offers a distribution-reinvestment plan (DRIP) to compound your capital. While markets tumbled, this ETF has held steady with just a 2.4% year-to-date total return loss. I’d allocate $4,000 here.

iShares S&P/TSX Composite High Dividend Index ETF

Created with Highcharts 11.4.3iShares S&p/tsx Composite High Dividend Index ETF PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

iShares S&P/TSX Composite High Dividend Index ETF (TSX:XEI) lets you invest in the best dividend stocks within the S&P/TSX Composite Index through a low-cost setup. With an MER of just 0.22%, investors pay only $2.20 in annual expenses per $1,000 invested.

XEI holds 75 positions, offering wide diversification among Canada’s most established large companies. The portfolio is well-balanced across financials (30.4%), energy (29.4%), utilities (14.5%), and telecommunications (10%), providing excellent sector diversification.

The high-yield dividend ETF pays monthly dividends with a yield of 5.1%, making it perfect for those looking to replace monthly salary paychecks during retirement. The ETF also offers a DRIP option for smooth dividend reinvestment. My allocation is $4,000.

BMO Laddered Preferred Share Index ETF

Created with Highcharts 11.4.3Bmo Laddered Preferred Share Index ETF PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Investment professionals at BMO Global Asset Management offer investors access to a medium-risk portfolio of 138 Canadian preferred share issues through BMO Laddered Preferred Share Index ETF (TSX:ZPR). With nearly $1.3 billion in net assets and an MER of 0.5%, the high-yield dividend ETF provides affordable exposure to a sub-asset class where liquidity can otherwise be challenging.

What makes this ETF special is the preferential treatment preferred shares receive among dividend-paying stocks. Companies must pay preferred shareholders first before considering dividends to common shareholders. This adds a layer of income security to your investment portfolio — if dividend cuts become necessary, common shares take the hit first.

The portfolio primarily consists of Canadian financial institutions’ offerings (49%) and energy companies (27%), with communications and utilities making up most of the remainder.

The ETF pays monthly dividends with a yield of 5.1%. I’d allocate my final $4,000 here.

Investor takeaway

In these uncertain times, focusing on reliable passive income through diversified, high-quality Canadian ETFs would give me both peace of mind and the financial cushion to weather market turbulence. With these three high-yield dividend ETFs, my $12,000 investment would generate approximately $630 in annual dividend income while positioning me for recovery when markets eventually turn around.

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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.

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