Our favourite dividend-focused funds

Whether you're looking for income or stability, these picks deliver.

Christopher Davis 23 July, 2015 | 5:00PM

Skimpy yields put income-seeking investors in a tough spot. Historically low yields in bonds have pushed many investors reliant on income into riskier alternatives such as dividend-paying stocks.

Fund investors face an additional hurdle because in a low-yield environment, a larger part of their potential income gets eaten up by fees; funds use the income generated from their holdings to cover their expenses, leaving what's left over to the fundholder. The higher the MER, therefore, the less you earn from dividend income.

There's one easy way to boost dividend income for fund investors: Lower your costs. ETFs are one plausible route to do so. Even ETFs that aren't exactly dirt-cheap, like iShares S&P/TSX Canadian Dividend Aristocrats with a 0.60% MER, have a significant advantage over most Canadian dividend-focused mutual funds.

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Christopher Davis

Christopher Davis  Christopher Davis is Director of Manager Research at Morningstar Canada.

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