This Dividend ETF Delivers Monthly Income
Written by Sneha Nahata at The Motley Fool Canada
Canadian stocks offering monthly payouts are an attractive option for Tax-Free Savings Account (TFSA) investors to generate consistent income. Notably, the TSX has several high-quality companies that reward shareholders with monthly payouts. Each month, those dividends can supplement your lifestyle or be reinvested to compound returns even further, all without worrying about taxes eroding your gains. Over time, this combination of steady income and tax efficiency can turn your TFSA into a dependable income generator.
Although individual dividend stocks are an option, they are not the only way to achieve a monthly income. Exchange-Traded Funds (ETFs) offer an alternative that combines income potential with built-in diversification. Unlike owning shares of a single company, which can expose investors to company-specific risks, ETFs pool a basket of securities, including stocks, bonds, or other assets, that trade just like individual stocks on an exchange. This structure spreads risk across multiple holdings and helps soften the impact if one company underperforms.
For investors who want consistent monthly income without the added stress of monitoring individual companies, dividend-focused ETFs can be an attractive solution. They provide the benefit of diversification, typically carry lower volatility, and still offer steady payouts. Against this backdrop, here is a dividend ETF that delivers reliable monthly income to add to your TFSA.
When it comes to dividend-focused ETFs in Canada, the BMO Canadian Dividend ETF (TSX:ZDV) stands out for its ability to deliver reliable monthly income, a low-cost structure, and potential for long-term growth.
ZDV invests in a diversified basket of dividend-paying Canadian companies that have shown resilience and consistent growth. Its strategy is built on a rules-based approach that screens Canadian companies for dividend strength. The ETF looks at key metrics such as three-year dividend growth rates, current yields, and payout ratios to ensure it captures firms with both resilience and the ability to sustain shareholder returns.
Unsurprisingly, the methodology tilts the fund toward financials and energy, the two sectors that have historically rewarded investors with solid dividends. Moreover, by diversifying across communication services, basic materials, and industrials, it spreads risk more effectively and positions itself for growth across different market cycles.
Currently, it offers a yield of over 3.3% and has over $1.2 billion in assets under management (as of September 13).
