1 Canadian Dividend Stock I’d Buy Before Inflation Heats Up Again

Inflation can sneak back fast. When it does, investors usually want income, stability, and some chance of growth without taking wild risks. The best dividend-style picks often have monthly cash flow, diversified exposure, and assets that don’t rely on perfect market conditions. That’s why iShares Convertible Bond Index ETF (TSX:CVD) deserves a look. It’s an exchange-traded fund (ETF) built for income-focused investors who want a TSX-listed option before inflation heats up again. So, let’s get into it.

CVD

CVD gives investors exposure to Canadian convertible bonds. These are bonds that can usually convert into shares under certain conditions, making them a bit of a hybrid. They can offer income like a bond, but also some growth potential if the underlying companies perform well. For investors worried about inflation, that mix can feel useful. Traditional bonds can struggle when rates rise, but convertibles may get help from the equity side if companies keep growing through higher prices.

The fund is managed by BlackRock Canada and seeks to track the FTSE Canada Convertible Bond Index. It launched in 2011, trades in Canadian dollars, and pays monthly distributions. That monthly payout is a big part of the appeal. Investors don’t need to wait every quarter to collect income from a dividend stock.

Over the last year, CVD has quietly held its own. The fund recently showed a one-year return of about 10.6%, helped by steadier fixed-income conditions and a better market backdrop for credit. Its calendar-year performance also looked solid, with a 7.74% return in 2025 after a stronger 13.03% return in 2024. That doesn’t mean investors should expect double-digit gains every year. Yet it does show that CVD can participate when markets recover, while still offering an income-focused structure.

Why buy now?

The latest income numbers also make the fund interesting. CVD recently paid monthly distributions of about $0.075 per unit, with a trailing distribution of around $0.88 per unit. Based on recent prices, that puts the yield near 5%. That’s not sky-high, but it’s attractive for investors who want regular cash flow without reaching into riskier single-stock dividends.

Valuation works differently here because CVD is an ETF, not an operating company. There’s no standard price-to-earnings ratio to lean on, and investors shouldn’t judge it like a bank, utility, or telecom. Instead, the key questions are yield, price stability, credit quality, fees, and how convertibles behave if rates stay sticky. The fund’s expense ratio sits around 0.69%, so investors pay for the strategy. That’s worth watching, especially if returns cool.

Looking ahead, CVD could fit well if inflation starts heating up again, but the economy doesn’t fall apart. Higher inflation can pressure bonds, but it can also support companies with pricing power. Convertible bonds sit between those two worlds. They may not protect investors as directly as energy stocks, infrastructure, or real assets, but they offer a smoother way to stay invested while collecting income.

Bottom line

The risk is that CVD isn’t a magic inflation shield. If interest rates rise sharply, bond prices can still feel pressure. If stocks fall hard, the convertible side can hurt too. And because the fund holds a smaller slice of the Canadian market, investors should use it as part of a portfolio, not the whole plan. Still, for someone who wants a monthly income, moderate growth potential, and a less obvious TSX-listed choice, it checks a lot of boxes. In fact, this is what even $7,000 can bring in.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENTCVD$18.00388$0.89$345.32Monthly$6,984.00

Sure, CVD won’t grab headlines like a hot growth stock. That’s not its job. It offers monthly income, Canadian exposure, and a hybrid structure that can make sense when inflation risks return. For investors who want to prepare without panicking, this ETF looks like a practical dividend-style buy to consider before prices heat up again.

The post 1 Canadian Dividend Stock I’d Buy Before Inflation Heats Up Again appeared first on The Motley Fool Canada.

Should you invest $1,000 in iShares Convertible Bond Index ETF right now?

Before you buy stock in iShares Convertible Bond Index ETF, consider this:

The Motley Fool Canada team has identified what they believe are the top 10 TSX stocks for 2026… and iShares Convertible Bond Index ETF wasn’t one of them. The 10 stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 … if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have over $18,000!*

Now, it’s worth noting Stock Advisor Canada’s total average return is 94%* – a market-crushing outperformance compared to 85%* for the S&P/TSX Composite Index. Don’t miss out on our top 10 stocks, available when you join our mailing list!

Get the 10 stocks instantly #start_btn6 { background: #0e6d04 none repeat scroll 0 0; color: #fff; font-size: 1.2em; font-family: 'Montserrat', sans-serif; font-weight: 600; height: auto; line-height: 1.2em; margin: 30px 0; max-width: 350px; text-align: center; width: auto; box-shadow: 0 1px 0 rgba(0, 0, 0, 0.5), 0 1px 0 #fff inset, 0 0 2px rgba(0, 0, 0, 0.2); border-radius: 5px; } #start_btn6 a { color: #fff; display: block; padding: 20px; padding-right:1em; padding-left:1em; } #start_btn6 a:hover { background: #FFE300 none repeat scroll 0 0; color: #000; } @media (max-width: 480px) { div#start_btn6 { font-size:1.1em; max-width: 320px;} } margin_bottom_5 { margin-bottom:5px; } margin_top_10 { margin-top:10px; }

* Returns as of April 20th, 2026

More reading

• This 6.5% Dividend Play Sends a Cheque Like Clockwork
• The Bank of Canada Held Rates: Here Are 3 Stocks to Watch
• 1 Magnificent Canadian Dividend Stock Down 13.9% to Buy and Hold for Decades
• 2 Canadian Blue-Chip Stocks I’d Buy Before the Next Rally
• 2 TSX Stocks That Could Benefit From Canada’s New Market Reality

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.