Do you know what stocks have paid dividends for hundreds of years and consistently grown them for decades? That would be the big Canadian banks. They’ve long been the backbone of Canadian investor portfolios thanks to their stability, profitability, and reliable payouts.
But there’s one catch: those dividends are typically paid quarterly. Even if you owned all six banks, you’d still only be getting a cheque every few months. If you want monthly income from the banks, you’ll need to use an exchange-traded fund (ETF) that’s built for that purpose.
Here’s one I like that turns up the income using a bit of leverage and why it may be worth considering if you’ve got a higher risk tolerance and want to generate serious cash flow.
Introducing HCAL
Hamilton Enhanced Canadian Bank ETF (TSX:HCAL) aims to deliver 1.25 times the returns of the Solactive Equal Weight Canada Banks Index. That means it invests in the exact same six-bank index—but with a twist.
The index itself weights each of the Big Six banks equally and rebalances regularly, which naturally enforces a buy-low, sell-high discipline. But what sets HCAL apart is its use of modest leverage. For every $100 you invest, the ETF borrows an additional $25 to amplify exposure to the banks.
This can boost income and capital appreciation during strong markets, but it also means sharper losses if Canadian bank stocks fall. In other words, you get more bang for your buck but also more risk.
With $563.6 million in assets under management, HCAL is well established and not at risk of shutting down. The management fee comes in at 0.65%, which is on the higher side but expected, given the use of leverage and monthly payouts.
How much income could I earn?
If you invested $7,000 in HCAL at a share price of $25.47, you could buy approximately 274 shares. Each share currently pays a monthly distribution of $0.1270, which means you’d receive about $34.80 per month in passive income, or just over $417 annually. If this is all within your Tax-Free Savings Account, there’s no tax to pay on it.
Keep in mind, though, that this payout isn’t guaranteed. HCAL’s price is volatile because of its built-in leverage, and if Canadian bank stocks fall, this ETF is likely to fall even further. The distribution has remained steady for some time, but in a worst-case scenario, like a bank dividend cut, that could change. Still, on the upside, if banks rally, HCAL gives you more exposure to that rebound, too.
