Many investors--especially retirees--value monthly dividends. They makes it much easier to budget expenses, which tend to come monthly.
There are a number of ways to do this. Investors can stagger quarterly dividends so they ensure a relatively consistent monthly income. They can build a portfolio filled with the dozens of Canadian stocks that pay a monthly dividend. Or they can choose a simple route and just buy a monthly income ETF.
Two of Canada’s largest monthly-paying ETFs are the iShares Diversified Monthly Income ETF (TSX:XTR) and the iShares Canadian Financial Monthly Income ETF (TSX:FIE).
Let’s start with the diversified option. It owns a number of underlying ETFs, including ones that hold corporate bonds, U.S.-based dividend growers, and high yield bonds. In total, it has 11 different holdings and pays a distribution of 5.4%.
It comes with a management expense ratio of 0.56%, which is a little high, but is certainly cheaper than comparable mutual funds. And with assets of more than $610 million, it offers plenty of liquidity for retail investors.
The financial monthly income ETF has 27 different holdings, which are a mixture of other ETFs and individual stocks. The largest holding is a preferred share ETF, followed by a corporate bond ETF. Canada’s largest banks are also major holdings.
The yield is quite good, coming in at 6.8%, but the management expense ratio of 0.85% is quite expensive versus comparable funds. It isn’t quite as big as its peer either, with assets just under $380 million.
