Dividend stocks can be risky. While they can be alluring due to their yields and the significant income they can generate, not all of them are safe. Picking individual dividend stocks can expose investors to risk, because a company may run into financial trouble and end up having to cut or suspend its dividend. Even though it may seem in fine shape today, a lot change, especially in the long run.
That's why for income investors, seeking out an exchange-traded fund (ETF) can be the best way to balance safety and dividend income. The iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (TSX:CDZ) stands out as an ideal option here. It invests in strong dividend stocks in Canada that have been paying and increasing their payouts for at least five consecutive years. Some of the top stocks within the fund include big names such as Enbridge, Canadian Natural Resources, and Sun Life Financial, and many others. At around 3%, the fund offers a decent yield, which isn't too high or too low.
This year, the fund has risen by 14% and been a good investment. And over the longer term, five years, it's gains are up around 36%, and that's before factoring in the dividend income you would have earned from this investment.
The Canadian Dividend Aristocrats Index ETF can be a great option for Canadian investors to put inside of a tax-free savings account, as it's a good investment to just buy and forget about. Simply let it accumulate gains and dividend income within your portfolio over the long haul.
