Looking for a Market Defence? Canadian Dividend ETFs Are a One-Stop Solution

Market volatility has become a real concern for investors in 2026. Rate cuts, inflation trends, and shifting sector leadership have created the perfect environment for investors to turn towards defensive holdings to complement growth. The challenge is finding a simple and reliable means to provide that market defence without needing to constantly rebalance individual holdings.

That’s where the appeal of Canadian dividend ETFs comes into focus. They offer a simple solution for investors by providing a basket of holdings under one name that delivers stability, income, and diversification.

That’s why investors seeking a market defence should consider some of these Canadian dividend ETFs.

Why choose ETFs?

Successful dividend payers typically share a few traits. They are profitable, mature, and operate in sectors where they provide essential services. Often, that translates into banks, utilities, telecoms and pipelines. These segments continue to generate steady cash flow irrespective of market conditions.

Dividend ETFs take that foundation and enhance it further. Rather than investing in a single business, investors in dividend ETFs have exposure to dozens of stable, income-producing businesses.

It’s not uncommon for a single dividend ETF to hold 20 or more companies. This substantially reduces the risk over owning a single stock.

That’s a critical benefit that is often overlooked. When markets fall, that stable income stream can help to offset declines elsewhere in the market. That makes Canadian dividend ETFs popular for longer-term investors.

Dividend ETFs also offer attractive yields. This makes them appealing for TFSAs, retirees, or any income-seeking investor.

Three Canadian Dividend ETFs to own

There’s no shortage of great dividend ETFs to choose from on the market, and more are always being added. Three stellar picks for any investor seeking TSX dividend ETFs are the Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX:VDY), iShares Canadian Select Dividend Index ETF (TSX:XDV), and BMO Canadian Dividend ETF (TSX:ZDV)

Vanguard focuses on higher-yielding Canadian stocks, with a heavy exposure to both pipelines and banks.

The fund offers both strong long-term performance and low fees. Dividends are paid out monthly, and Vanguard has maintained that cadence for over 14 years without fail.

As of the time of writing, VDY offers an attractive yield of 3.8%, making it an attractive option for TFSA investors seeking income.

Turning to iShares, prospective investors have access to one of the oldest dividend ETFs in Canada. The fund screens companies for dividend sustainability, ensuring that they not only maintain, but also grow their payouts.

As a result, the fund is more concentrated than VDY but holds a similarly attractive yield of 3.4%. XDV has paid out those dividends for two decades and currently pays out on a monthly cadence.

Finally, there’s ZDV, which provides a more balanced approach. Rather than focusing on yield, ZDV blends income with broader diversification. As a result, the fund casts a wider net, including holdings in multiple sectors such as financials, energy, utilities, telecoms and other segments.

That broader appeal makes it an alternative focused on market defence.

As of the time of writing, ZDV offers a yield of 2.9%, with a distribution history going back over a decade. The fund currently pays out on a monthly cadence.

Establish a market defence with these dividend ETFs

Dividend ETFs like the trio mentioned above can offer stability, income, diversification, and simplicity for investors. The defensive appeal of ETFs alone makes them compelling options for any diversified, long-term portfolio.

For those investors seeking a straightforward defensive strategy into 2026, Canadian dividend ETFs remain one of the most reliable tools available.

The post Looking for a Market Defence? Canadian Dividend ETFs Are a One-Stop Solution appeared first on The Motley Fool Canada.

Should you invest $1,000 in Vanguard FTSE Canadian High Dividend Yield Index ETF right now?

Before you buy stock in Vanguard FTSE Canadian High Dividend Yield Index ETF, consider this:

The Motley Fool Canada team has identified what they believe are the top 10 TSX stocks for 2026… and Vanguard FTSE Canadian High Dividend Yield 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 $20,155.76!*

Now, it’s worth noting Stock Advisor Canada’s total average return is 90%* – a market-crushing outperformance compared to 81%* 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 February 17th, 2026

More reading

• How to Make Money in a TFSA With Dividend Stocks
• Where to Invest Your $7,000 TFSA Contribution
• The Best Canadian ETFs to Buy With $100 on the TSX Today
• How to Structure a $50,000 TFSA for Practically Constant Income
• 3 Canadian ETFs to Buy and Hold Now in Your TFSA

Fool contributor Demetris Afxentiou 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.