The safest way to generate dividend income is by investing in an exchange-traded fund (ETF). It spreads out your risk over many different stocks, making you less dependent on any single one. For Canadian investors, a great option to consider is the BMO Canadian Dividend ETF (TSX:ZDV).
This fund has 61 holdings in its portfolio, and it includes some of the best stocks you'll find on the TSX, including top financial stocks Royal Bank of Canada and Toronto-Dominion Bank, and leading oil and gas companies such as Enbridge and Suncor Energy. In addition to financials and energy, materials, utilities, and industrials are also among the largest sectors within the fund. Overall, there's some excellent diversification with this ETF, and with it yielding 2.6%, it offers a healthy payout.
It charges a modest management expense ratio of 0.39%, which is reasonable for this type of ETF. And that means on a $10,000 investment, it'll cost you $39 in fees per year.
This year, the fund has risen by around 22% in value, as Canadian stocks as a whole have been doing well, plus many investors have been loading up on safe dividend stocks, as they can provide some good stability and recurring cash flow.
A big bonus with the fund is that it makes payments on a monthly basis, unlike typical dividend stocks. This means a more regular stream of cash flow for investors. The BMO Canadian Dividend ETF can be an ideal type of investment to buy and hold for the long term, given its low risk, diversification, and dividend income.
