If so, exchange-traded dividend funds (ETFs) are the way to go.
While there are some individual stocks that pay their dividends monthly, these are few and far between. You don’t want to limit your options regarding quality and value just to get a monthly dividend payment. That would be irrational.
For dividend-oriented ETFs, monthly payouts are often the rule. Such funds typically consist of portfolios of quarterly dividend payouts, each of which has different payout dates. To ensure smooth distribution, these funds usually pay out a fixed dividend every month.
In this article, I will explore one dividend ETF that you could use to earn significant monthly passive income in your TFSA. With less than $100,000 invested in this ETF, you can get $250 per month in income – and the costs of the fund aren’t even that high.
BMO Canadian Dividend ETF
BMO Canadian Dividend ETF (TSX:ZDV) is a Canadian dividend fund offered by Bank of Montreal. The fund is built on TSX dividend sectors such as banking, utilities and energy. The overall makeup of the fund isn’t that different from the TSX broad market funds, which are primarily focused on Canada’s largest companies. However, it excludes non-dividend TSX stocks such as Shopify. This fact has slowed ZDV’s total returns over the past two years, but also boosted dividend income. If you want a lot of dividend income in a low-risk package, this fund may be for you.
Dividend details
BMO Canadian Dividend ETF has a distribution of $0.07 per month. That amounts to €0.84 per year. At the current price of $27.09, the aforementioned dividend yields a dividend yield of 3.1%. If you invest $96,774 in this fund, you will get back about $250 in monthly dividends. See math below.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| BMO Canadian Dividend Fund | $27.09 | 3,572 | $0.07 per month ($0.84 per year) | $250 per month ($3,000 per year) | Monthly |
As you can see, you don’t even need to invest $100,000 in ZDV to get back $300 per month in passive income. And ZDV is a diversified fund, a portfolio unto itself, which limits much of the risk inherent in picking individual high-yield names.
Facts about funds
Now that we’ve explored the dividend facts of the BMO Canadian Dividend Fund, it’s time to explore the basic mechanics of the fund.
BMO Canadian Dividend Fund owns 59 stocks, all dividend-paying Canadian large caps. This is a significant degree of diversification: ZDV has almost as many stocks as the respected TSX 60 index. The fund also has a relatively low management fee of 0.39% and a bid-ask spread of 0.06%. The bid-ask spread may be a bit on the high side, but it does not indicate serious illiquidity. Overall, ZDV investors should do well in the long term.
The bottom line
If you want to get rich from dividends, you have a long road ahead of you. But if you aim for a more modest amount, like $250 per month, you can get what you’re looking for. If you invest less than $100,000 in the BMO Canadian Dividend ETF, you can get there.
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