The 10% Monthly Income ETF That Canadians Should Know About

Chasing yield isn’t a good idea for retired passive-income investors who can’t afford to take on significant capital downside risks. Undoubtedly, chasing yield, in general, can be harmful to one’s wealth, even if the dividend (or distribution) stays intact or even grows further. At the end of the day, capital gains matter, even for investors who aren’t looking to buy low and sell high. At the end of the day, dividends and capital gains potential are what income investors should seek to achieve.

And while it’s nicer to have the yield do more of the heavy lifting for total return, I think dividend growth and stability are underrated attributes, especially for retirees who might be drawn to the yield more than the underlying business fundamentals. Indeed, one should invest in a stock for the business first, rather than invest for the yield, and hope that things work out for the better.

In any case, building a portfolio of high-yielding stocks can be tricky, especially for firms with questionable balance sheets. For passive-income investors seeking to get more yield by means of an exchange-traded fund (ETF), there are intriguing covered call options out there, which don’t necessarily increase one’s risk of downside.

But, of course, there are trade-offs, and with covered calls, it’s the risk of missing out on potential capital gains. Capped upside is never great, especially if you’re going for superior total returns over time. But there is a class of higher-growth covered call ETFs out there that can offer more growth potential and supercharged yields.

Here’s a growthier covered call ETF with a huge yield

In this piece, we’ll check out an interesting covered call ETF that yields a towering 10% at the time of this writing. Of course, the yield tends to fluctuate quite a bit in any given month. But if you’re comfortable with covered calls and want more yield rather than upside potential, an ETF like Hamilton Enhanced Canadian Covered Call ETF (TSX:HDIV) could be worth keeping tabs on going into the new year.

So, what’s the deal with the HDIV ETF? The ETF bets on a broad basket of Canadian sector ETFs, many of which offer hefty yields. Additionally, the ETF stacks on covered call premium income, which makes for a more attractive yield, but at the cost of call option-induced upside caps. With generous payouts monthly and the potential to do well in flat markets (the TSX Index will be due for a breather after a shockingly good 2025 of gains), the HDIV stands out as a must-watch, at least for the income-oriented investor.

Further, the ETF touts greater growth potential than other covered-call ETFs, in part due to the 25% cash leverage.

Could that be a way of minimizing the impact of capped upside?

Perhaps. But leverage tends to increase risk and volatility, and for many investors, raising the bar on risk isn’t the way to go about getting more yield. That said, 25% leverage is far less than the two- or three-times leveraged ETFs (way too much leverage) many investors might be more familiar with. Though 25% isn’t an obscene amount, leverage is leverage, and it could make the down markets a bit more painful to deal with if you’re not used to choppy waters.

The bottom line

In any case, the HDIV is a riskier covered call ETF, but definitely growthier, especially in up markets. In the past year, shares have gained close to 20%, which has absolutely crushed the performance of most other covered-call ETFs. It won’t be the right fit for more conservative income investors, but it definitely brings a unique strategy to the table, with 25% leverage that increases the risk/reward scenario by some degree.

The post The 10% Monthly Income ETF That Canadians Should Know About appeared first on The Motley Fool Canada.

Should you invest $1,000 in Hamilton Enhanced Multi-Sector Covered Call ETF right now?

Before you buy stock in Hamilton Enhanced Multi-Sector Covered Call ETF, consider this:

The Motley Fool Stock Advisor Canada analyst team identified what they believe are the 5 best stocks for investors to buy now… and Hamilton Enhanced Multi-Sector Covered Call ETF wasn’t one of them. The 5 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 $20,568.17!*

Now, it’s worth noting Stock Advisor Canada’s total average return is 99%* – a market-crushing outperformance compared to 77%* for the S&P/TSX Composite Index. Don’t miss out on our top 5 list, available when you join Stock Advisor Canada.

See the 5 Stocks #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 January 5th, 2026

More reading

• 1 High-Yield ETF to Buy for Top-Notch Passive Income
• My Blueprint for Monthly Income Starting With $40,000

Fool contributor Joey Frenette 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.