If you’re a Canadian investor looking for predictable, consistent income from your portfolio, monthly dividend ETFs can be a powerful tool. Instead of waiting every quarter for distributions, these ETFs pay you every month — which makes budgeting and reinvesting easier.

In this guide, we’ll break down what monthly dividend ETFs are, why they appeal to Canadian investors, and which ones are worth considering in 2025. We’ll compare yields, strategies, and risks so you can make an informed choice.

What Are Monthly Dividend ETFs?

A monthly dividend ETF is an exchange-traded fund that collects dividend payments from its underlying investments — typically stocks or bonds — and distributes them to shareholders every month.

Instead of holding a handful of companies yourself, you get instant diversification, professional management, and a predictable payout schedule.

Example:

ZWC (BMO Canadian High Dividend Covered Call ETF) collects dividends from high-yield Canadian stocks and enhances income by writing covered call options.
VDY (Vanguard FTSE Canadian High Dividend Yield Index ETF) focuses on dividend-paying blue-chip stocks, paying distributions monthly.

Why Canadian Investors Love Monthly Payouts

1. Easier Cash Flow Management
If you rely on investment income for living expenses, monthly payouts match your bills.

2. Compounding Power
Reinvesting monthly instead of quarterly accelerates compounding through DRIPs (Dividend Reinvestment Plans).

3. Flexibility
You can choose to reinvest in more ETF units or take the cash to cover expenses.

4. Psychological Boost
Seeing income hit your account every month helps keep long-term investors motivated.

Top Monthly Dividend ETFs in Canada for 2025

Below are some of the top contenders based on yield, MER, and strategy. (Data as of January 2025.)

Risks to Watch Before You Buy

While monthly dividend ETFs can be attractive, they aren’t risk-free:

Yield Traps: A high yield can be unsustainable if it’s funded by return of capital or comes at the expense of capital growth.
MER Impact: Higher fees can erode returns over time.
Strategy Trade-offs: Covered call ETFs can limit upside in strong markets.
Sector Concentration: Many Canadian dividend ETFs are overweight financials and energy.

How to Add Monthly Dividend ETFs to Your Portfolio

Define Your Goal — Are you looking for maximum income or balanced growth + income?
Choose the Right Account — Use a TFSA for tax-free income, RRSP for tax-deferred growth, and be mindful of withholding taxes in taxable accounts.
Diversify — Combine Canadian, U.S., and global dividend ETFs for balance.
Automate — Use DRIPs to reinvest automatically.
Monitor Performance — Review at least quarterly to ensure yield and strategy still align with your goals.

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1 - Best Monthly Dividend ETFs in Canada for 2025