BMO S&P/TSX 60 ETF's CAD 0.40 Dividend: A Steady Hand in Canadian Income Investing

The BMO S&P/TSX 60 Index ETF (ZIU:CA) has announced a dividend of CAD 0.40 per share, marking a slight increase from its prior payment of CAD 0.39. This move underscores the ETF's role as a cornerstone for income-focused investors in Canadian equities. By tracking the S&P/TSX 60 Index—a benchmark composed of the 60 largest and most liquid Canadian stocks—ZIU offers a blend of dividend yield, sector diversification, and low-cost exposure to Canada's economic backbone. Here's why this matters for investors today.

Dividend Yield: A Middle Ground in a Polarized Landscape

ZIU's trailing dividend yield of 2.53% (as of April 2025) positions it squarely between passive peers and actively managed income-focused ETFs. Let's compare:

• iShares S&P/TSX 60 Index ETF (XIU):CA
• Dividend Yield: 0.42% (TTM as of late 2024).
• Expense Ratio: 0.18% vs. ZIU's 0.15%.
• Evolve S&P/TSX 60 Enhanced Yield Fund (ETSX):CA
• Dividend Yield: ~9.56% (as of March 2025), driven by covered-call strategies.
• Expense Ratio: 0.45% (Class F shares) to 1.45% (Class A shares).

ZIU's yield is modest compared to ETSX but far superior to XIU's. This makes it an appealing middle ground for investors seeking predictable income without the complexity or risk of derivatives. While ETSX's 9.5% yield is tempting, its covered-call strategy can limit upside in rising markets—a trade-off worth weighing.

Sector Exposure: Anchored in Finance and Non-Energy Minerals

ZIU's holdings are dominated by Canada's largest companies, with 52% in Financials and 23% in Non-Energy Materials (e.g., mining, chemicals). This sector mix reflects Canada's economic strengths but also its vulnerabilities:

• Strengths:
• Financials benefit from steady interest rate environments, which are currently stable.
• Non-Energy Materials offer exposure to global industrial demand, less tied to oil/gas volatility.
• Risks:
• A prolonged economic slowdown could pressure financials.
• Commodity prices for materials stocks remain cyclical.

This concentration differs from broader Canadian equity ETFs, which often include energy-heavy companies. For income investors, ZIU's focus on stable, dividend-paying sectors like banking and utilities (within Financials) is a key advantage.

Why ZIU Shines in Current Markets

1. Low Cost, High Liquidity: With an expense ratio of just 0.15%, ZIU undercuts most peers while maintaining liquidity (CAD 1.7 billion in assets).
2. Dividend Growth Signal: The CAD 0.40 payout—up from CAD 0.39—suggests the underlying companies are confident in their cash flows, a positive sign for Canada's corporate health.
3. Diversification Without Complexity: Unlike ETSX's derivatives-heavy strategy, ZIU's straightforward indexing aligns with investors seeking simplicity and broad exposure to Canada's top firms.

The Value Proposition: Income at a Reasonable Price

For income-focused portfolios, ZIU offers three pillars of appeal:
- Predictability: The S&P/TSX 60's constituents are mature, dividend-paying firms with consistent payouts.
- Diversification: Exposure to 60 companies spreads risk beyond single sectors or stocks.
- Cost Efficiency: Its low fees make it ideal for long-term income accumulation.

While ETSX's yield is higher, its strategy introduces downside protection but caps upside gains—a trade-off better suited to conservative investors. XIU's paltry yield, meanwhile, makes it a poor choice for those prioritizing income.

Investment Takeaways

• Buy ZIU if: You want steady, low-cost exposure to Canada's largest companies with a modest dividend kicker.
• Avoid ZIU if: You're chasing high yields (opt for ETSX) or need energy-sector exposure.

The CAD 0.40 dividend is a small but meaningful signal of confidence in Canada's top firms. In a world of market volatility and complex strategies, ZIU's simplicity and diversification remain compelling for income investors seeking a reliable handhold in Canadian equities.

Final Word: For most Canadian equity income seekers, ZIU strikes the right balance between yield, cost, and risk. It's not the flashiest play, but in a noisy market, that's exactly what makes it valuable.