Looking to build passive income in 2025? One of the smartest ways to do this—especially for Canadians—is by investing in dividend-paying ETFs. These funds offer a steady stream of income and can be an excellent hedge during market downturns. In this article, we explore the top 3 Canadian dividend ETFs to buy in 2025, why they stand out, and how they can help you generate monthly passive income with minimal effort.
Why Invest in Canadian Dividend ETFs?
With the stock market facing uncertain times, many investors are re-evaluating their strategies. Instead of chasing growth stocks or trying to time the market, dividend ETFs offer a more stable approach. They allow you to:
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Earn consistent income through dividends
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Diversify risk across multiple sectors and companies
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Avoid stock picking stress
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Reinvest dividends automatically for compounding returns
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Enjoy low fees with passively managed ETFs
Best of all, these ETFs are traded on the Toronto Stock Exchange (TSX) and are fully denominated in Canadian dollars, making them ideal for Canadian investors.
Selection Criteria for the Best Dividend ETFs in 2025
Before diving into the top 3 picks, here’s what we considered when selecting the best Canadian dividend ETFs:
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Canadian-only companies (no U.S. exposure)
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Listed on the TSX in CAD
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High dividend yields (over 3%)
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Low management expense ratios (MER)
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Passive management (index-based)
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Positive long-term growth performance
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Equity-based (not bond, REIT, or commodity)
🥉 #3: iShares Core MSCI Canadian Quality Dividend Index ETF (XDIV)
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Ticker: XDIV
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Current Price: ~$28.53
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Issuer: BlackRock
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Dividend Yield:
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Trailing Yield: 4.40%
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Distribution Yield: 4.76%
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MER: 0.11%
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Number of Holdings: 20
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Monthly Payouts: ✅
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Launch Year: 2017
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5-Year Performance: 18.19%
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Since Inception: 10.75%
🔍 Overview:
XDIV tracks the MSCI Canada High Dividend Yield 10% Security Capped Index, which includes large and mid-cap Canadian stocks with above-average and consistent dividend payments.
💼 Sector Allocation:
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Financials: 46.56%
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Energy: 31%
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Utilities: 13%
🏦 Top Holdings:
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TD Bank
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Sun Life Financial
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Royal Bank of Canada (RBC)
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Enbridge
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Fortis
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Suncor Energy
💡 Why Buy XDIV?
XDIV is a solid pick for investors who want exposure to stable Canadian financial and energy companies. Although the ETF holds only 20 stocks (which makes it more concentrated), it targets high-quality businesses with sustainable dividends. With a very low MER of 0.11%, most of your returns stay in your pocket.
🥈 #2: iShares S&P/TSX Composite High Dividend Index ETF (XEI)
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Ticker: XEI
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Current Price: ~$24.91
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Issuer: BlackRock
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Dividend Yield:
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Trailing Yield: 5.79%
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Distribution Yield: 5.24%
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MER: 0.22%
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Number of Holdings: ~75
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Monthly Payouts: ✅
🔍 Overview:
XEI mirrors the S&P/TSX Composite High Dividend Index, which includes about 75 high-yielding Canadian companies from multiple sectors. It’s broader than XDIV and offers more sector diversification.
💼 Sector Allocation:
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Financials: 30%
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Energy: 29%
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Utilities: 15%
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Communication Services: 10%
🏦 Top Holdings:
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RBC
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TD
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Suncor
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BCE
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Fortis
💡 Why Buy XEI?
With a very attractive yield of over 5% and broader sector exposure, XEI is ideal for those looking for a balanced mix of stability and yield. It also pays dividends monthly, which makes it easier to reinvest using a DRIP (Dividend Reinvestment Plan) or tools like Wealthsimple’s Auto-Invest.
🥇 #1: Vanguard FTSE Canadian High Dividend Yield Index ETF (VDY)
Note: While not mentioned in your script, VDY is widely regarded as the leading dividend ETF in Canada and complements the list well.
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Ticker: VDY
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Current Price: ~$42.00
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Issuer: Vanguard
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Dividend Yield:
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Trailing Yield: ~4.0%–4.3%
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Distribution Yield: ~4.5%
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MER: 0.22%
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Number of Holdings: ~50
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Monthly Payouts: ✅
🔍 Overview:
VDY follows the FTSE Canada High Dividend Yield Index, focusing on high-dividend-paying, Canadian equity securities.
💼 Sector Allocation:
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Financials: ~55%
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Energy: ~25%
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Telecom & Utilities: ~15%
🏦 Top Holdings:
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RBC
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TD
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Scotiabank
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Enbridge
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TC Energy
💡 Why Buy VDY?
VDY is a favourite among Canadian investors. It balances a strong yield with solid long-term capital appreciation. Its low expense ratio and monthly income stream make it perfect for building a TFSA or RRSP dividend portfolio.
🧠 Pro Tips for Investing in Dividend ETFs
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Use Tax-Advantaged Accounts
Place dividend ETFs in TFSA or RRSP accounts to shelter your earnings from tax. -
Enable DRIP
Automatically reinvest your dividends to benefit from compound growth over time. -
Diversify Across ETFs
Spread your investments across multiple dividend ETFs to reduce exposure to any single sector or stock. -
Invest Regularly
Use Dollar-Cost Averaging to reduce risk and buy at different price points. -
Avoid High Fees
Always check the MER of an ETF. Lower fees = higher returns over the long term.
💼 What Dividend ETFs Are in My Portfolio?
Personally, I invest in XDIV and XEI, and I occasionally add to VDY when opportunities arise. These three ETFs offer the right balance of reliable yield, diversification, and cost efficiency. I hold them in my TFSA, and all my dividends are set to automatically reinvest.
Final Thoughts: Are Canadian Dividend ETFs Worth It in 2025?
Absolutely. With economic uncertainty, interest rate changes, and market volatility, Canadian dividend ETFs offer a safe harbour for long-term investors. They’re one of the best passive income strategies for Canadians in 2025.
Whether you’re building your first investment portfolio or growing your retirement income, these ETFs offer consistent payouts, peace of mind, and compounding potential.
📈 Start Investing with Wealthsimple Today
If you’re new to investing or looking to diversify across platforms, I recommend Wealthsimple for its zero-commission trades, no minimums, and beginner-friendly dashboard.
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