Although the TSX Composite benchmark started 2025 on a solid note by surging 3.3% in January, uncertainty about future interest rate moves and escalating trade tensions have made investors cautious in the last few weeks. As a result, the Canadian market index has turned mixed in February, currently trading without any notable month-to-date change.
With market volatility persisting, you might want to look for stable, income-generating investments to weather uncertainty. One of the best ways to generate reliable passive income is through high-yield dividend ETFs (exchange-traded funds), which offer diversification, steady payouts, and lower risk than individual stocks. In this article, I’ll highlight two of the best high-yield dividend ETFs on the TSX and explain why they could be great additions to your portfolio.
BMO Covered Call Canadian Banks ETF
The first high-yield dividend ETF you may want to consider is BMO Covered Call Canadian Banks ETF (TSX:ZWB). It’s designed for investors seeking higher income while maintaining exposure to Canada’s biggest banks. It offers a high annualized dividend yield of 6.7%, paid monthly, to provide consistent passive income. Unlike most stocks that pay dividends quarterly, ZWB’s monthly payouts can help smooth cash flow, making it a great option for retirees or investors.
The fund invests in top Canadian banks like Royal Bank of Canada, Toronto-Dominion Bank, and Bank of Nova Scotia, which have a strong history of stability and profitability. Another advantage of this ETF is its covered call strategy, which generates extra income and helps reduce downside risk during market volatility. While this approach may limit upside potential, it allows the ETF to offer a steady, more predictable return.
With a medium-risk rating and a 0.71% management expense ratio, the ZWB ETF balances cost efficiency and performance. It’s also dividend-reinvestment plan (DRIP) eligible, which allows investors to automatically reinvest dividends for long-term growth. Given all these positive factors, BMO Covered Call Canadian Banks ETF is a solid pick for investors seeking reliable monthly income with lower volatility.
iShares S&P/TSX Canadian Dividend Aristocrats Index ETF
Another great high-yield dividend ETF to consider in 2025 is iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (TSX:CDZ). This ETF is built for income-focused investors who want exposure to established Canadian companies with a strong track record of increasing dividends for at least five consecutive years. With a 3.8% distribution yield and monthly payouts, it offers reliable passive income to long-term investors.
CDZ mainly tracks S&P/TSX Canadian Dividend Aristocrats Index, ensuring a well-diversified portfolio across sectors like financials, utilities, real estate, and energy. With over 90 holdings, including big names like BCE, Telus, and Enbridge, it tries to balance income and stability.
CDZ is also DRIP eligible for investors reinvesting dividends, which can help compound your returns over time. Its management expense ratio is 0.66%, which looks reasonable for the diversification and income it provides. Overall, this ETF is ideal for long-term investors seeking consistent income and lower volatility, a smart way to navigate market uncertainty while getting paid every month.
