VDY vs XEI comes down to one question: do you want a Canadian bank fund or a Canadian income fund? Vanguard's VDY puts about half of its money in the Big Six banks and has delivered the stronger return over one, three and five years. iShares' XEI spreads its income across energy, banks and utilities, pays a higher current yield (3.44% against 2.85% on trailing distributions at the October 15, 2026 close) and sends a steadier cheque each month. Both charge the same 0.22% management expense ratio. Below, the two funds are compared on cost, holdings, income, returns and risk, using fund-company pages and Financial Modeling Prep market data, with the arithmetic shown.

VDY and XEI side by side

Both are Canadian-listed, Canadian-dollar ETFs that hold Canadian dividend stocks and pay monthly. The differences start with the index each one follows.

VDY's index, MER, holdings count and launch date are from Vanguard Canada's fund page, which also lists a 2.97% distribution yield as at September 30, 2026. XEI's index is named on the iShares fund page; its MER, holdings count and launch date are from Financial Modeling Prep fund data. The trailing yield in the table is simply the last 12 distributions divided by the October 15 closing price: C$2.1981 / C$77.14 = 2.85% for VDY, and C$1.3710 / C$39.89 = 3.44% for XEI.

What you actually own: banks versus a broader mix

This is the difference that matters most. Holdings and sector weights below are from Financial Modeling Prep fund data dated October 15–16, 2026.

• VDY: Royal Bank ($RY.TO) alone is 15.9% of the fund and Toronto-Dominion ($TD.TO) 11.2%. Add Bank of Montreal, Scotiabank, CIBC and National Bank and the Big Six make up 49.4% of the fund. The ten largest holdings total 70.0%.
• XEI: no holding is above 5.7%. The largest are Suncor ($SU.TO) at 5.7%, Canadian Natural ($CNQ.TO) 5.2%, TD 5.1%, Enbridge ($ENB.TO) 5.0% and Royal Bank 4.8%. The ten largest total 45.9%, and it holds utilities such as Fortis ($FTS.TO) and telecoms such as BCE ($BCE.TO) that barely register in VDY.

In plain terms: buying VDY is close to buying the Canadian banks plus the big pipelines and oil producers. Buying XEI is buying a wider basket of Canadian income stocks in which no single company or sector dominates. For a deeper look at the banks that drive VDY, see our Big Six dividend yield comparison.

Income: what C$10,000 paid over the past year

At the October 15, 2026 close, C$10,000 bought about 129.6 units of VDY (C$10,000 / C$77.14) or 250.7 units of XEI (C$10,000 / C$39.89). Applying the last 12 distributions:

• VDY: 129.6 x C$2.1981 = about C$285 a year.
• XEI: 250.7 x C$1.3710 = about C$344 a year.

The shape of the income differs too. Over the past 12 months, XEI's monthly payment stayed between C$0.112 and C$0.117 per unit. VDY's ranged from C$0.16375 to C$0.21121, a swing of about 29% between its smallest and largest month. If you budget around a monthly cheque, XEI's payments are the easier ones to plan on.

Over longer periods, both have grown their payouts, though not in a straight line. Calendar-year distributions per unit, from Financial Modeling Prep data:

From 2023 to 2025, VDY's annual payout rose 11.2% and XEI's 12.9%. But XEI's fell 5.3% from 2024 to 2025, a reminder that ETF distributions pass through whatever the underlying companies pay and are not a promise.

Returns and drawdowns since 2021

The figures below are a simple calculation from Financial Modeling Prep closing prices: the change in price plus the distributions paid, without reinvesting them. The S&P/TSX 60 fund XIU ($XIU.TO) is included as a broad-market yardstick.

VDY's lead is the bank trade. Over the past year, Royal Bank's shares rose 35.2% and TD's 50.5%. With almost half its money in the banks, VDY rode that rally; XEI, with about a fifth of its money in the five largest banks, captured less of it.

On the downside the two have behaved similarly. Measured on closing prices, VDY's deepest fall in the five years was 20.5% and XEI's was 22.6%, both bottoming on October 27, 2023. In the spring 2025 sell-off, from their January highs to April 8, 2025, VDY fell 11.5%, XEI 10.0% and XIU 13.0%. Neither fund is a shelter from a Canadian bear market. They are simply less volatile than some of the alternatives.

The risk each fund asks you to accept

Every income fund concentrates somewhere. The question is where you would rather be concentrated.

• VDY's risk is the banks. A Canadian housing downturn, rising loan losses or a squeeze on lending margins would hit roughly half the fund at once. The banks have been strong dividend payers, but their share prices have fallen sharply before: on closing prices, CIBC fell 42.1% and Scotiabank 41.4% from their earlier highs to their lows of October 27, 2023.
• XEI's risk is commodities and rates. About 31% sits in energy, which moves with oil and gas prices, and 12.6% in utilities, which tend to struggle when bond yields rise. The fund is more diversified by company, but it is not immune to an oil-price slump.

An investor who already owns the big banks directly, or through a pension, may find that VDY doubles up exposure they already have. An investor with no bank exposure may see VDY as a simple, low-cost way to get it.

Tax and account placement

Both funds hold Canadian companies, so their distributions are mostly Canadian dividends. In a TFSA there is no foreign withholding tax to lose on that income, unlike US dividend stocks, a cost we explain in our guide to US withholding tax in a TFSA. In a non-registered account, eligible Canadian dividends receive the federal dividend tax credit. Either way, the tax treatment is broadly the same for VDY and XEI, so it should not decide the choice between them.

How to choose between VDY and XEI

1. Check what you already own. If you hold Canadian bank shares, XEI adds less overlap.
2. Decide between income and total return. XEI currently pays more per dollar invested; VDY has returned more.
3. Look at the monthly pattern. If you spend the distributions, XEI's narrow range is easier to plan around.
4. Do not choose on fees. At 0.22% each, cost does not separate them.
5. Consider both. Holding the two together leaves the banks and energy as the largest exposures, but with a wider spread of companies than VDY alone.

For more on dividend investing in Canada, see our look at Canadian dividend growth stocks and our coverage of Canadian low-volatility ETFs. Daily coverage is in the Markets section and on the Wall Street Conservative front page.

FAQ

Is VDY or XEI better for a TFSA?

Both suit a TFSA because they hold Canadian stocks, so no foreign withholding tax is lost. XEI paid more income over the past year (3.44% trailing against 2.85%); VDY returned more. Pick based on whether you want bank exposure.

Do VDY and XEI pay monthly?

Yes. Both pay monthly. Over the past 12 months, XEI's payment ranged from C$0.112 to C$0.117 per unit and VDY's from C$0.16375 to C$0.21121.

Which has lower fees, VDY or XEI?

Neither. Both have a 0.22% management expense ratio, which is C$22 a year on C$10,000.

Why is XEI's yield lower than it used to be?

Mostly because its price rose. XEI closed at C$31.90 on October 15, 2025 and C$39.89 a year later, up 25.1%, while its annual payout was roughly flat. A higher price with similar distributions means a lower yield.