For investors looking for safety and steady income, bonds can be a practical option. They may not offer the excitement or upside of stocks, but high-quality corporate bonds can provide dependable payouts with relatively modest risk. One exchange-traded fund (ETF) that fits this profile is the iShares Core Canadian Corporate Bond Index ETF (TSX:XCB).
XCB is a diversified ETF that gives investors exposure to investment-grade Canadian corporate bonds with maturities of at least one year. Its yield is currently about 4.1%, which is well above average. The fund’s returns have been flat through the first half of the year, but that is not necessarily a drawback. This ETF is designed more for stability and income than for strong capital appreciation. Its management expense ratio is also low at 0.17%.
The fund is mainly concentrated in financials, energy, and infrastructure, which together account for about three-quarters of its holdings. It owns more than 1,300 corporate bonds, giving investors broad diversification across established parts of the Canadian economy. Major issuers include Royal Bank, Bank of Nova Scotia, and Toronto-Dominion Bank, but no single holding dominates the portfolio.
The trade-off is that investors should not expect major growth from this fund. XCB is better viewed as a conservative income vehicle: a diversified bond ETF that can help produce regular payouts while keeping risk relatively contained. For someone seeking a higher-yielding alternative to cash, without taking on the volatility of equities, it can be a good option to consider, particularly inside of a tax-free savings account where the dividend income won't be taxable.
