© Reuters. 2 Dividend-Paying ETFs You Can Buy in 2022
Stock markets around the world fell sharply after the most recent announcement of interest rate hikes by the US Federal Reserve. Energy prices fell sharply, causing considerable weakness in the market as a whole. The S&P/TSX Composite Index is down nearly 10% from its June 7, 2022 level at the time of writing.
The monumental interest rate hike by the U.S. Fed has seen interest rates rise to their highest levels since 1994. There are growing concerns that the Bank of Canada (BoC) is following suit and proceeding to an interest rate hike of 75 basis points.
The Canadian stock market performed better than stock markets in the United States. However, it remains volatile and unpredictable. The Canadian market may not yet be in bearish territory, but it could reach that point if volatility and aggressive interest rate hikes continue.
Investing in exchange-traded funds (ETFs) that pay dividends could offer you a small hedge against the risk associated with stock market uncertainty. Good ETFs could help you diversify your asset allocation while generating passive income through reliable monthly distributions.
Let’s look at two dividend-paying ETFs you can consider adding to your portfolio for this purpose.
Vanguard Canadian High Dividend Yield ETF Vanguard Canadian High Dividend Yield ETF (:VDY) is one of the most popular ETFs in Canada for dividend seekers. The fund has assets under management (AUM) of $1.79 billion as of June 10, 2022. It tracks the performance of the Canadian high dividend yield index, investing its assets to reflect the holdings of the underlying index.
The fund invests primarily in common stocks of Canadian companies that pay dividends, particularly those characterized by high dividend yields. It is a low-cost fund with a management expense ratio (MER) of 0.22% and pays its investors their shareholder dividends monthly. The fund’s 12-month dividend yield at writing is 3.46%, making it an attractive income-generating asset to consider in current market conditions.
iShares Canadian Financial Monthly Income ETF iShares Canadian Financial Monthly Income ETF (TSX:FIE) is another popular dividend ETF in Canada. The objective of the fund is to maximize the total return of its investors while distributing reliable and stable monthly dividends to shareholders. The fund does not replicate an underlying index. Its objective is to create and manage a diversified portfolio that provides investors with targeted exposure to the Canadian financial services sector.
The fund’s narrow focus on the financial services sector means you can use it to express a sectoral view. Boasting $861.84 million in assets under management, the fund has a 12-month dividend yield of 6.87% as of June 21, 2022. It is a more expensive fund to own due to its active management status. The FIE ETF comes with an MER of 0.81%. However, its high dividend yield might justify the extra cost.
Foolish Takeaway Investing in income-generating assets that spread your capital across a broad basket of securities gives you the benefit of diversification. In addition, ETFs relieve you of the burden of managing a portfolio of assets yourself by allowing you to benefit from an investment product professionally managed by financial experts.
Vanguard VDY ETF and iShares FIE ETF could offer you exposure to two diversified baskets of Canadian equity securities that can generate monthly income through regular and reliable high-yield distributions.
The post 2 Dividend-Paying ETFs You Can Buy in 2022 appeared first on The Motley Fool Canada.
Fool contributor Adam Othman has no position on any of the stocks mentioned. The Motley Fool has no position in the stocks mentioned.
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