If you have a tax-free savings account (TFSA) and want to add some stability and dividend income to it this year, then an excellent exchange-traded fund (ETF) to consider is the iShares S&P/TSX Capped Utilities Index ETF (TSX:XUT).
Holding an ETF can be particularly useful inside of a TFSA where you can just buy and hold forever, and this could be an ideal one to consider. This fund yields 3.5%, which is a very solid payout that can provide you with some excellent recurring dividend income. This year, it's also up around 9%, which is better than the TSX's flat returns thus far. And that's also not factoring in the dividend, either.
This can be a particularly valuable investment to hold if you're worried about a recession. While economic downturns typically trigger market volatility, the utilities sector can be a relatively safe place to invest. Companies in this space generate strong earnings, have highly regulated revenue streams, and they also pay dependable dividends.
This ETF provides investors with exposure to many top utility stocks in Canada, ensuring consistent production regardless of the economic climate. Its holdings feature iconic Canadian infrastructure giants, including Fortis, Hydro One, and Northland Power. These are top stocks that help make the ETF a fairly dependable and stable one to hang on to.
While the fund isn't terribly diverse, as there are just 14 holdings in it, but by focusing on larger companies in the space, that can make it a good and relatively safe investment to hang on to, for both long-term growth and dividend income.
