If you're looking to boost your portfolio's cash flow without sacrificing diversification, the iShares S&P/TSX Composite High Dividend Index ETF (TSX:XEI) is an investment worth considering. Focused on high-dividend Canadian stocks and low costs, the fund offers an attractive yield of roughly 3.4%. Normally, the more diversified a fund becomes, the lower its payout tends to drop, making XEI’s generous yield especially appealing.
What makes that yield even more impressive is the fund's strong capital appreciation. Shares of XEI have surged by around 25% this year, yet the payout remains remarkably high, roughly triple the S&P 500's average yield. With a low management expense ratio of just 0.22%, investors get to keep more of those returns in their pockets.
Holding 74 stocks, XEI strikes a solid balance when it comes to diversification. While it maintains heavy exposure to financials and energy, accounting for roughly 30% of the portfolio each, it also allocates about 15% to utilities. This gives it broader sector balance than more concentrated Canadian dividend funds, without spreading itself too thin.
Its top five holdings feature iconic Canadian energy and banking leaders, including Toronto-Dominion Bank, Suncor Energy, and Royal Bank of Canada. However, with the largest single holding capped at just over 5% of the fund, you don't have to worry about one company's poor performance dragging down your entire portfolio.
Best of all, XEI distributes its dividends on a monthly basis. For Tax-Free Savings Account (TFSA) investors seeking a reliable, recurring stream of income, it's a tough fund to beat.
