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Dividend investment is a gift that keeps on giving, provided you invest in the right income-generating assets. Choose the right one high quality dividend stocks and maintaining an income-generating portfolio is not something everyone can do. This carries a considerable degree of risk, even with the most seemingly reliable investments.
Exchange-traded funds (ETFs) are investment vehicles that could alleviate this pressure. These funds are baskets of securities managed by professionals on your behalf. These funds seek to provide you with investment returns either by passively tracking the performance of a particular market index or through an actively managed portfolio that aligns with a specific mandate of the fund manager.
If you want to create a dividend income portfolio and prefer a more passive approach, the TSX offers several dividend ETFs you might consider investing in to achieve your goals. While these funds may come with higher management fees than passively managed funds, they also offer hefty dividend yields that could more than cover the costs.
Today I’m going to discuss two high yield dividend ETFs you might consider buying today.
BMO Utilities Covered Call ETF (TSX:ZWU) is a high-yield ETF that seeks to provide you with investment returns based on the performance of high-yielding utilities, telecommunications companies, pipelines and other equity-based sectors at high dividend yield. The fund manager uses a covered call strategy to increase its yield, giving you potentially higher passive income than many reliable dividend-paying stocks.
The covered call strategy results in a substantial dividend yield of 7.44%. Provided you invest enough funds over the years in ZWU stock ETFs, you could earn yourself considerable passive income from its dividend payouts alone.
BMO Equal Weight S&P/TSX Banks ETF (TSX:ZEB) is the ideal fund to consider if you want exposure to the Canadian banking sector. ZEB ETF does not use a covered call strategy to enhance its dividend yield, which means a lower dividend yield than ZWU ETF. At the time of writing, the BMO ZEB ETF is offering dividends to shareholders at a decent yield of 3%.
The absence of a covered call strategy could mean lower shareholder dividends. However, his approach means that his potential capital gains are higher than what you might get if the fund manager used a covered call strategy. Covered call options can increase dividend income, but limit growth. ZEB ETF could be a better addition to your portfolio if you want dividend income as well as capital gains.
Invest in a portfolio of dividend stocks is a great way to create a passive income stream that can grow your wealth and provide you with reliable long-term returns. However, you should monitor the assets you hold and rebalance your portfolio to adapt to changing stock market circumstances to stay aligned with your goals.
Investing in dividend ETFs frees you from the responsibility of managing a portfolio of securities yourself. It also gives you exposure to the performance of a broader range of securities than you might hold in a self-directed portfolio.
If you’re looking for a hands-off method to generate decent dividend income, ZWU ETF and ZEB ETF could be viable additions to your portfolio.