TFSA Investors: This Dividend ETF Yields 3.2% and Is Up 24% This Year

Key impact: If you hold a Tax-Free Savings Account (TFSA), you can earn dividend income completely tax-free from this ETF — and it has already delivered a 24% gain so far this year.

Canadian investors looking for passive income have a strong option in the Invesco Canadian Dividend Index ETF (TSX:PDC). This fund currently yields 3.2% and has surged 24% year-to-date as of the article's publication. That means you get both income and capital growth, all inside your TFSA where no taxes apply.

What this ETF offers

The PDC ETF invests in stable, dividend-paying Canadian companies. Its focus is on reliable income, not risky bets. Here's what stands out:

• Yield: 3.2% annual dividend yield
• Year-to-date return: +24% (price appreciation plus dividends)
• Tax treatment: Zero tax inside a TFSA — dividends are yours to keep or reinvest
• Holdings: Diversified across Canadian dividend stocks

Because it's an ETF, you get instant diversification with one purchase. No need to pick individual stocks.

Who is affected

This matters for:

• TFSA holders looking for tax-free income
• Retirees or near-retirees who want reliable cash flow
• Long-term investors seeking compound growth through reinvested dividends
• Anyone with unused TFSA contribution room who wants to add a low-cost income generator

If you don't have a TFSA, you can still buy this ETF — but dividends would be taxable in a non-registered account.

What you should do

1. Check your TFSA contribution room — The 2025 limit is $7,000 (confirm with CRA). Make sure you have room before buying.
2. Review your portfolio goals — This ETF suits investors who want steady income with moderate growth. Not for high-risk traders.
3. Consider dividend reinvestment — Most brokers offer a DRIP (Dividend Reinvestment Plan). This lets you buy more shares automatically, compounding your returns tax-free.
4. Compare with other options — Look at similar Canadian dividend ETFs like XDV or CDZ. Compare fees (MER), yield, and holdings.
5. Consult a financial advisor — Before making changes, discuss how this fits your overall plan, especially if you're retired or have specific income needs.

Bottom line

The Invesco Canadian Dividend Index ETF (PDC) offers a 3.2% yield and has gained 24% year-to-date. Inside a TFSA, all dividends and capital gains are tax-free. This makes it a strong choice for Canadian investors seeking passive income without the tax hit.

Remember: Past performance doesn't guarantee future results. Always align investments with your risk tolerance and time horizon.