There are thousands of exchange-traded funds (ETFs) available now, and a large slice of them focus on Canadian stocks. You can keep things simple with a broad-market fund that tracks something like the S&P/TSX Capped Composite Index, or you can zoom in on specific sectors such as energy or financials.
If you want to narrow it down even further, the Canadian financial sector includes ETFs that target only the big six banks, which remain extremely popular among income-focused investors thanks to their above-average yields and monthly payout schedule. Below are two higher-risk, higher-yield options from Hamilton ETFs and Global X Canada that stand out.
1.25X leveraged Canadian banks
Hamilton Enhanced Canadian Bank ETF (TSX:HCAL) gives investors a way to increase exposure to Canadian banks inside registered accounts, where you normally can’t borrow on margin.
The ETF handles the leverage internally. For every $1 invested, you get about $1.25 of exposure to an equal-weight portfolio of the Big Six banks. Because Hamilton can borrow at institutional rates, the cost of leverage is usually far lower than what retail investors would pay using margin.
This structure amplifies both yield and risk. Your income goes up because you’re effectively investing more in dividend-paying bank stocks, and your capital appreciation potential also increases during strong markets. But in a downturn, losses can be steeper, so it’s not a free lunch.
Right now, the ETF pays a 4.65% yield with monthly distributions, and the added leverage has helped it outperform most Canadian bank ETFs with a 24.29% annualized total return over the last five years.
1.25X Canadian banks with covered calls
For an even higher-income option, Global X Enhanced Equal Weight Canadian Banks Covered Call ETF (TSX:BKCL) takes the same 1.25 times leveraged bank exposure and adds a covered call overlay.
Covered calls involve selling call options on the underlying stocks to generate immediate income. The trade-off is less upside because you’re giving up some potential gains in exchange for a higher cash payout today.
Thanks to both leverage and the call premium, the current yield sits at 13.56%, paid monthly. This makes the ETF attractive for investors who prioritize cash flow above long-term growth.
Just keep expectations realistic. Higher yields come with trade-offs, and the share price may not appreciate much because of the constant call-writing and regular ex-dividend drops. It’s designed for income-first investors who understand these risks.
