The iShares Core MSCI Canadian Quality Dividend Index ETF (TSX:XDIV) may potentially offer dividend investors the best of both words: high-yielding stocks, and dividend growth stocks as well. While high-yielding stocks are great, investors also often want to see their dividend income rise over time, to ensure that inflation isn't chipping away at it, and thus, diminishing the purchasing power.
This exchange-traded fund (ETF) aims to focus on stocks that pay above-average dividends and whose payouts are either steady or increasing. As a result, there's a good mix of top dividend stocks here. Among the fund's top holdings are the big banks and insurance companies, including Manulife Financial, Toronto-Dominion Bank, and Royal Bank of Canada. Those top three financial stocks account for close to 30% of its overall holdings, giving it a strong base.
The financial sector accounts for nearly half of its portfolio, with energy stocks making up another 29%. For income investors, that can be an attractive mix as those are the sector where many of Canada's top dividend stocks come from.
The ETF isn't overly diverse as there are just 21 holdings, but it can nonetheless be a good no-nonsense option for income investors who want high, growing dividend income. The problem with diversification is in having too many holdings, inevitably leading to some stocks that investors may not want, or that in the case of dividends, may not offer good payouts.
This ETF also has a low expense ratio of just 0.11%. Meanwhile, it has an attractive yield of around 3.1%. All in all, this can be a great ETF to buy and hold for years.
