Some public data sources make BCE (TSX:BCE) stock fundamentals look far worse than they really are.
For instance, Yahoo Finance currently reports a dividend payout ratio of 745.65%. If that number were accurate, it would imply BCE is paying out more than seven times its earnings—clearly unsustainable.
But that figure is misleading because Yahoo calculates payout ratios using net income, which doesn’t properly reflect cash flow in capital-intensive industries like utilities, telecoms, and pipelines.
For these sectors, investors should use a non-GAAP (generally accepted accounting principles) measure called distributable cash flow (DCF) instead. Based on that measure—and factoring in BCE’s recent dividend cut—its payout ratio sits closer to 75%, which is better, though not ideal.
The company’s current ratio of 0.61 and debt-to-equity ratio of 204% still raise concerns about balance sheet strength. Yet plenty of investors continue chasing BCE’s headline 5.2% yield without realizing the risk beneath the surface.
If you want a more sustainable, high-yielding Vanguard dividend exchange-traded fund (ETF) that pays monthly and has historically outperformed the S&P/TSX 60 index, forget about BCE and keep reading.
Why I like this Vanguard dividend ETF
When it comes to Canadian dividend investing, few funds check as many boxes as Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX:VDY). In my opinion, it’s one of the simplest and most reliable ways to earn a steady income while staying diversified across Canada’s top dividend payers.
This ETF targets companies with above-average dividend yields from the broader Canadian market, mainly in sectors known for dependable cash flow—financials, energy, and utilities. Those three together make up the bulk of the portfolio, which means investors get exposure to the country’s largest banks, pipelines, and telecoms all in one place.
The trailing 12-month distribution yield is around 3.55%, paid monthly, giving you a consistent income stream. Vanguard’s reputation for low costs holds true here as well, with a management expense ratio (MER) of just 0.22%—about $22 per $10,000 invested per year. That keeps more of the dividend income in your pocket instead of going toward fees.
Why VDY is one of the best Canadian dividend ETFs
In terms of tax efficiency, VDY’s distributions are primarily eligible dividends, which are tax-favoured in non-registered accounts. Most of this ETF’s payouts qualify for the dividend tax credit, making this ETF suitable both inside and outside registered accounts like a Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP).
Performance-wise, VDY has delivered an impressive 10-year annualized return of about 12.36%, outpacing many other Canadian dividend ETFs and even the S&P/TSX 60 Index over the same period. Much of that strength comes from the resilience of Canada’s biggest dividend stocks, which have continued to raise payouts and deliver steady capital gains through market cycles.
Simply put, VDY offers everything a long-term income investor could want: a strong yield, low fees, reliable monthly payouts, and a track record that proves dividend investing can deliver both income and growth.