A great way for investors to earn recurring income in the stock market safely is by investing in a well-diversified exchange-traded fund (ETF). An ETF can provide plenty of diversification and produce a lot of dividend income. Inside of a tax-free savings account (TFSA), it can be an ideal investment to just buy and hold for years.
A solid option for TFSA investors to consider today is the iShares Canadian Select Dividend Index ETF (TSX:XDV). Its management expense ratio is 0.55% and it gives investors exposure to 30 of the best Canadian dividend stocks. The fund picks stocks based on not only their yields but also their track records for dividend growth and their payout ratios.
Top stocks in the fund include Royal Bank of Canada (TSX:RY)(NYSE:RY), TC Energy (TSX:TRP)(NYSE:TRP), and Canadian Tire (TSX:CTC.A). Financials make up the bulk of the fund’s holdings, accounting for 57% of its overall weight, followed by utilities at 12%. Energy and consumer discretionary stocks also each represent more than 8% of the ETF’s weight.
What’s appealing about the fund is that it makes distributions to shareholders on a monthly basis, providing you with a consistent stream of cash flow on a more regular basis than if you just invested in the average dividend stock. And with it yielding 4.3%, it’s a fairly high yield for investors overall.
In the past 12 months, the ETF has risen by around 18%. This can be an ideal investment for risk-averse investors to put into their TFSAs. With some good diversification and great dividend stocks, you can keep your risk relatively low while also taking advantage of having exposure to companies which offer high payouts.
