XEI ETF Rides Energy’s Rally
As geopolitical tensions lift energy prices, Canadian dividend investors are rediscovering the sector’s income potential — with XEI offering diversified exposure.
The conflict in Iran and its impact on equity markets have dominated headlines in investment publications, as the month-to-date returns for both developed and emerging equity markets have been negative in March 2026. While most equity sectors have underperformed in the current environment, the Energy sector has, understandably, seen strong gains as a secondary effect of the ongoing Middle East crisis. Although the energy sector is currently at the forefront of many minds, it has long held the attention of dividend investors due to its income-generating potential.
Canadian Energy & Income
Within Canada’s equity-dividend landscape, oil and gas companies have proven to be a reliable source of constant and growing dividends. Given Canada’s position as an energy superpower, ranking fourth among the world’s largest oil producers, rising energy demand and rising commodity prices in recent years have been a boon for oil and gas producers. In turn, many of these companies have moved to reduce their debt obligations and increase their cash flow generation. The reduction of outstanding debt brings greater financial flexibility and the ability to return capital to shareholders through consistent, growing dividend payments.
As noted in S&P Global’s 2025 Oil and Gas Dividend Report, the operational efficiencies Canadian oil and gas firms have achieved regarding Canada’s oil sands have enabled these companies to unlock significant economic value. In this context, Canadian oil and gas firms concluded 2024 with an estimated 7.6% year-over-year dividend increase, leading to a five-year compound annual growth rate of 10%.
XEI: Benefiting From Energy’s Upswing
Amid the ongoing events in the Middle East, the energy sector has been the only positive-performing area of the broader equity market. For Canadian investors seeking significant exposure to the energy sector, diversification into other sectors, and an income focus, the iShares S&P/TSX Composite High Dividend Index ETF (Ticker: XEI) meets the criteria.
XEI replicates the performance of the S&P/TSX Composite High Dividend Index, which includes 50 to 75 high-dividend-paying stocks. As of February 2026, the index has an approximate 30% allocation to the energy sector, followed by Financials (28%), and Utilities (13.3%); all sectors known for their reliable dividend payments. Looking at XEI's recent performance, it closely tracks the index, which is heavily influenced by developments in the energy sector.
At this juncture, if investors are looking for a solution that benefits from energy exposure while also being diversified in its market exposure, XEI is worth considering.
This article was written on March 27th, 2026. Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.
