Best Canadian Dividend ETFs 2023 (And Why I Don't Like Them) (2024)

Because I’ve been writing about dividend investing for nearly two decades now, I get a lot of inquiries every month about the best Canadian dividend ETFs vs the best dividend stocks in Canada.

Obviously Canadians love their tax-efficient dividend income.The consistency of having those dividend payouts hit their accounts allows investors to better control their behaviors and stay focused on the long-term.

What the dividend ETFs vs individual stocks decision ultimately boils down to for most people is the trade off between convenience vs MER costs.Personally, if you’ve read my articles on the Smith Manoeuvre and the Dogs of the TSX (BTTSX), then you’ll know that I prefer to invest in individual stocks with the help of the Dividend Stocks Rock platform.

If you are looking for the easiest possible way to invest your money in a diversified portfolio of dividend payers, then my picks for the 2023 Best Canadian Dividend ETF is likely the right fit for you.

Top Canadian Dividend ETFs in 2023 – Quick Comparison

What Is a Dividend ETF?

An ETF is short for “Exchange Traded Fund”.

The basic idea behind ETFs is that they give you instant easy access to a pool of assets.Those assets could be Canadian stocks, American bonds, or even cryptocurrencies.

In the case of the dividend ETFs that we’ve listed above, each of the ETFs is made up of Canadian stocks that have pay substantial dividends.They differ from each other slightly in the weighting of each stock, and whether certain stocks are included at all, but they are more similar than they are different.

Much like dividend stocks, dividend ETFs pay you a dividend quarterly or annually.That money will go into your brokerage account – where you can take it out to fund your day-to-day life, or reinvest it.

Are Dividend ETFs a Good Investment?

Historically, Canadian dividend ETFs have been a pretty good investment for all the same reasons that Canadian dividend stocks have done well. Namely:

• Canada loves to ignore oligopolies. This lack of competition isn’t great for consumer prices, but it’s excellent for building super-stable dividend-producing companies.
• Canada’s market is heavy in financial and energy stocks – which tend to be big dividend players.
• Canadian dividends are taxed in a very friendly manner (essentially no tax up to $40K for both you and your significant other), making them very popular for income-oriented investors.
• Because Canadian blue-chip dividend companies are mature companies with long track records, they don’t have nearly as many ups and downs as tech stocks or other types of growth stocks.This tends to lead to better investor behaviour over the long term.

When looking specifically at dividend ETFs (instead of individual stocks), it’s important to note that purchasing a dividend ETF gives you instant diversification.

While the sector exposure might still be somewhat limited due to Canada’s heavy weighting of financials and energy companies, it will be much more diversified than choosing one or two individual stocks.

Best Canadian Dividend Stocks for 2023

Best Canadian Dividend ETFs in 2023

Here’s a closer look under the hood at each of our picks for the Best Canadian Dividend ETFs of 2023.

Investment Style:This is a new addition to the list with an inception date of June 2017.This ETF is a low-cost portfolio of Canadian stocks with above-average dividend yield and steady or increasing dividends and strong overall financials.

The XDIV ETF has a fairly concentrated portfolio with only 21 positions, but with an MER of ~0.12%, it is seriously cheap for a dividend ETF.I’m thinking that this new iShares ETF will start cannibalizing XDV due to its lower cost and similar exposure.

Top 10 Holdings:

1. Bank of Nova Scotia (BNS)
2. Manulife Financial Corp. (MFC)
3. Royal Bank of Canada (RY)
4. CIBC (CM)
5. TC Energy Corp (TRP)
6. Sun Life Financial (SLF)
7. Nutrien Ltd (NTR)
8. Fortis (FTS)
9. Pembina Pipeline (PPL)
10. Power Corporation of Canada (POW)

Key Facts:

• MER:0.11%
• Number of stocks:21
• Dividend yield: 4.11% (January 2023)
• Distribution frequency: Monthly
• AUM: $688 million

2. S&P/TSX Canadian Dividend Aristocrats Index Fund (CDZ)

Investment Style: This ETF follows thedividend achievers indexwhich holds dividend stocks that have a history of increasing their dividend (at least 5 consecutive years). I use this strategy for myleveraged dividend portfoliobut with a very different selection of stocks.

The downside of this ETF is that it is expensive with MER of 0.66%, and some questionable stock picks in my opinion (90 positions in total).The bright side of this fund is that it’s not dominated by financials like the other ETFs listed below (as of the date of this post).

Top 10 Holdings:

1. Smartcentres Real Estate Investment Trust (SRU.UN)
2. Keyera Corp (KEY)
3. Pembina Pipeline (PPL)
4. Enbridge (ENB)
5. Canadian Natural Resources (CNQ)
6. Fiera Capital Corp (FSZ)
7. Exchange Income Corp (EIF)
8. Power Corporation of Canada (POW)
9. TC Energy (TRP)
10. BCE Inc. (BCE)

Key Facts:

• MER: 0.66%
• Number of stocks: 90
• Dividend yield: 3.85% (January 2023)
• Distribution frequency: Monthly
• AUM: $957.43 million

Investment Style:This ETF uses a methodology that combines dividend growth, yield, and average payout ratio, then chooses 29 positions with the highest yield. Although cheaper than CDZ, the MER is still pretty high for an ETF at 0.55%. This ETF has a large exposure to financials at almost 54%.

Top 10 Holdings:

1. Canadian Imperial Bank of Commerce/Canada (CM)
2. Canadian Tire Class A (CTC.A)
3. Bank of Montreal (BMO)
4. Royal Bank of Canada (RY)
5. Labrador Iron Royalty Corp (LIF)
6. Bank of Nova Scotia (BNS)
7. TC Energy Corp. (TRP)
8. BCI Inc. (BCE)
9. Toronto-Dominion Bank (TD)
10. National Bank of Canada (NA)

Key Facts:

• MER:0.55%
• Number of stocks: 30
• Dividend yield: 4.41% (January 2023)
• Distribution frequency: Monthly
• AUM: $1.584 billion

4. FTSE Canadian High Dividend Yield Index ETF (VDY)

Investment Style: Vanguard is relatively new to the Canadian ETF scene but they have a good selection with lower MERs which helps put pressure on the other providers. This ETF follows the FTSE Canadian High Dividend Yieldindex (47 positions) but does not include much detail about their strategy except that they are a market-weighted index that purchases common stocks with a history of above-average dividend yield.As with any ETF that is market weighted in Canada, it’s heavy in financials with almost 58% weighting.

Top 10 Holdings:

1. Royal Bank of Canada (RY)
2. Toronto-Dominion Bank (TD)
3. Enbridge Inc. (ENB)
4. Bank of Nova Scotia (BNS)
5. TC Energy Corp. (TRP)
6. Bank of Montreal (BMO)
7. Suncor (SU)
8. Canadian Imperial Bank of Commerce/Canada (CM)
9. Manulife Financial Corp. (MFC)
10. Nutrien Ltd (NTR)

Key Facts:

• MER: 0.22%
• Number of stocks: 47
• Dividend yield: 4.15% (January 2023)
• Distribution frequency: Monthly
• AUM: $1.92 billion

5. BMO Canadian Dividend ETF (ZDV)

Investment Style: This ETF uses a methodology that looks for dividend growth, yield, and payout ratio.With 51 positions it has a MER in the middle of the pack.In terms of sector diversification, this ETF does a decent job with 41% financials exposure.

Top 10 Holdings:

1. Bank of Nova Scotia (BNS)
2. Enbridge Inc. (ENB)
3. Royal Bank of Canada (RY)
4. Toronto-Dominion Bank (TD)
5. Canadian Imperial Bank of Commerce/Canada (CM)
6. BCE Inc (BCE)
7. Canadian National Railway (CNR)
8. Bank of Montreal (BMO)
9. Telus (T)
10. Nutrien Ltd (NTR)

Key Facts:

• MER: 0.39%
• Number of stocks: 51
• Dividend yield: 4.33% (January 2023)
• Distribution frequency: Monthly
• AUM: $972.38 million

6. Invesco Canadian Dividend ETF(PDC)

Investment Style: Formerly calledPowerShares Canadian Dividend Index ETF. This ETF mirrors the NASDAQ Select Canadian Dividend Index.This ETF owns high-yielding Canadian stocks with a track record of growing dividends (40 positions).While this ETF is not exactly cheap with a MER of 0.55%, it has a little less exposure to financials @ 38%. Still, this isn’t the best choice on this list in my opinion.

Top 10 Holdings:

1. Bank of Nova Scotia
2. Bank of Montreal
3. The Toronto-Dominion Bank
4. Enbridge Inc
5. TC Energy Corp
6. Canadian Imperial Bank of Commerce
7. Power Corporation of Canada
8. TELUS Corp
9. Brookfield Infrastructure Partners LP
10. Pembina Pipeline Corp

Key Facts:

• MER: 0.55%
• Number of stocks: 40
• Dividend yield: 4.24% (January 2023)
• Distribution frequency: Monthly
• AUM: $845.38 million

How to Buy Dividend ETFs in Canada

The best way to invest in Canadian ETFs is by signing up to an online discount brokerage. There are dozens of options to choose from – and we review and compare all Canadian brokers so that you can make the best choice for your exact needs.

However, there are two specific brokers which stand out from the rest – Qtrade and Questrade. Not only are they the top overall brokers in Canada, but they give the best offers when it comes to ETF trading. You can click on the links above to read detailed reviews for each, or read a direct comparison between Qtrade and Questrade here.

TL;DR – Questrade is slightly cheaper when it comes to buying and selling single stocks, but Qtrade is the best broker in Canada AND offers free buying and selling of ETFs. (with Questrade only buying ETFs is commission-free.)

Canadian Dividend ETFs FAQ

Why I Don’t Invest In Canadian Dividend ETFs

I don’t want to be one of those bloggers that is the “Do as I say, not as I do” type of writers.

I personally don’t own any of the ETFs on our list simply because my portfolio has reached the size where I can own enough positions to get greater diversity than most dividend ETFs – without paying any MER.

The management expense ratio on the S&P/TSX Canadian Dividend Aristocrats Index Fund (CDZ) for example is .66%.On a $500,000 portfolio, that’s a hefty annual price tag of $3,300.

If I had less than $50,000 though, I’d definitely consider going with an all-in-one ETF or the iShares Core MSCI Canadian Quality Dividend Index ETF (XDIV) simply because it is the cheapest one on the list and the lack of diversification is no worse than its competitors.

As I said at the top, I prefer choosing from my list of best Canadian dividend stocks as opposed to going with one of the Canadian dividend ETFs from our list.That said, if you’re looking to generate stable (not to mention tax friendly) income from Canadian blue chip companies – while spending 3 minutes per month on your portfolio – you could do worse than just picking a Canadian dividend ETF and rebuying it repeatedly.