Many top Canadian dividend stocks have been struggling amid rising interest rates. That means that their yields are also higher than they might normally be, giving dividend investors an incentive to load up on these types of stocks right now. When interest rates come down, these stocks could be hot buys again.
A good way to gain exposure to these types of stocks is through an exchange-traded fund (ETF). The Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX:VDY) currently has a yield of 4.6%. Over the past 12 months, the fund has risen by just 1% and when including its dividend, the ETF’s total returns are around 5%.
While it hasn’t been a good buy of late, that can change under more favorable economic conditions. The fund contains 56 stocks with a median market cap of $85.6 billion. And the average price-to-earnings ratio is less than 14, suggesting that there’s some good value here for investors.
The top three stocks in the fund are Royal Bank of Canada (TSX:RY)(NYSE:RY), Toronto-Dominion Bank (TSX:TD)(NYSE:TD), and Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ). The majority of the ETF’s holdings are in financial stocks (56%), followed by energy (29%), with utilities and telecom each accounting for less than 6%.
The fund has some attractive fundamentals which make it a suitable long-term investment if you’re looking for a place to invest your money in right now. While the fund has been an underperformer of late, that’s precisely why it may be a good time to invest in it, to be able to get even more value from the ETF by buying it at a fairly modest price today.
