Building an income-producing portfolio sounds simple until you actually start doing it. One day you’re looking at bank stocks, the next you’re comparing pipelines, utilities, energy companies, and telecoms, wondering which dividend payers deserve your money. Before long, you’ve spent hours researching and still aren’t sure you’ve made the right call.
That’s a problem many Foolish investors run into. That’s why focusing on a group of proven dividend stocks could be a better strategy than relying on a single company or industry. It can provide more dependable income and give investors greater confidence over the long term. That’s exactly why top Canadian exchange-traded funds (ETFs) look so attractive. For example, the TSX-listed iShares S&P/TSX Composite High Dividend Index ETF (TSX:XEI) could be one of the smartest additions to a long-term income portfolio. Let me explain why.
Why this dividend-focused ETF looks attractive
The XEI ETF mainly tracks the S&P/TSX Composite High Dividend Index, giving investors exposure to a broad portfolio of Canadian dividend-paying stocks. Instead of leaning on one company or one industry, the fund spreads money across 75 holdings listed on the Toronto Stock Exchange. Its top positions include blue-chip stocks such as TD Bank, Royal Bank of Canada, Suncor Energy, TC Energy, and Enbridge.
Those holdings help explain why the fund has become a great option for income investors. As of May 31, 2026, XEI had around $4 billion in net assets, a distribution yield of 3.7%, and a 12-month trailing yield of 3.6%. It also carries a management expense ratio (MER) of just 0.22%, which leaves more of the income stream in investors’ pockets over time.
More importantly, this ETF is not just about yield, as XEI gained 20.7% over the last year, while its annualized five-year return came in at 15.8%.
Income, scale, and staying power
A lot of Canadian investors want dependable income, but they also want protection from putting too much money into one idea. XEI ETF offers a practical middle ground. Its top 10 holdings account for about 46.7% of the portfolio, while the rest of the fund still reaches across different market sectors. That diversification could soften the blow when one area slows down, and another picks up the pace.
The ETF’s long-term record adds even more weight to its appeal. Notably, a hypothetical $10,000 investment at the fund’s launch in April 2011 would have grown to $39,685 by the end of May 2026. That compounding matters because it shows the fund has been able to blend capital growth with a steady stream of monthly payouts over a long stretch of market cycles.
Foolish takeaway
Clearly, XEI ETF looks like a smart fit for investors who want broad Canadian exposure without turning portfolio building into a full-time job. The fund offers income, high-quality holdings, and a sensible cost structure in one place. With strong recent performance and a portfolio built around proven dividend payers, XEI could be a great ETF to own forever.
