Passive Income: 3 Safe Ultra-High-Yielders Worth Pursuing Right Now

BMO Covered Call Utilities ETF (TSX:ZWU) is one of many yield-heavy stocks perfect for the average passive income investor’s portfolio!

There’s no shortage of appealing passive income plays, especially when it comes to the world of ETFs (Exchange-Traded Funds). Indeed, dividend stocks or REITs are fine on their own. But if you’re looking for greater diversification (and perhaps a slightly more swollen yield), a high-yield ETF is all too convenient for passive income investors.

In this piece, we’ll look at two interesting high-yield ETFs and one dividend stock that may be worth the attention of long-term income seekers.

BMO Covered Call Utilities ETF (ZWU)

The BMO Covered Call Utilities ETF (TSX: ZWU) takes the safety and security of the utility scene and doubles down on it with an intriguing covered-call strategy. Like most other covered call ETFs, passive income investors will be trading off some upside potential for the slightly higher yield. Indeed, the utility scene could stand to take off if rates sink at a quicker rate than the market expects.

However, given the utility industry’s run off lows and the enthusiasm over rapid-fire rate cuts (in reality, we may get less than three cuts in 2024), I’d argue that playing the ZWU is wise (and certainly more income-friendly) to play defence this time of year.

At writing, shares offer a nice 8.43% yield, which is incredibly impressive, thanks in part to the covered call strategy and yield of the ETF’s underlying constituents. With exposure to pipelines, electric utilities, and telecoms, you’re gaining broad exposure to some of the most yield-rich parts of the Canadian stock market right now.

BMO Canadian High Dividend Covered Call ETF (ZWC)

Sticking with the theme of covered call ETFs, we have the BMO Canadian High Dividend Covered Call ETF (TSX: ZWC), which offers a nice 7.66% yield at writing. The ETF owns a broad range of high-yield stocks, including those in the financial, energy, communication services, and industrial industries.

It’s more diversified than the sector-specific ZWU. Though the yield is smaller, I do like the play for passive income investors seeking more diversification. Unless you need the higher yield from the ZWU, I’d opt for the ZWC. That way, you’re getting instant diversification across sectors and stand to benefit from strength in any one of them as the broader market looks to pick up meaningful traction.

Bank of Nova Scotia

Finally, we have Bank of Nova Scotia (TSX: BNS), a Canadian bank with one of the richest yields out there. Currently, the dividend yield sits at 6.77%, making it the most tempting of Big Six Canadian bank stocks right now. The stock’s also cheap at 10.8 times trailing price-to-earnings.

With geographical exposure to international regions, the Bank of Nova Scotia has a lot to offer to upside-seeking income investors these days. So, whether you seek value, yield, or international banking exposure alongside the domestic business, BNS stock has something for everybody! It will be another volatile year, but if you can handle it, I’d not be afraid to be a buyer for 2024 and the next decade.

Foolish bottom line

There you have it: three income plays fit for any yield seeker. Of the trio, I like ZWC the best because it offers the perfect mix of yield and diversification across sectors.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends Bank of Nova Scotia. The Motley Fool has a disclosure policy.

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