When people think about monthly income, real estate is usually the first thing that comes to mind. But rental income is rarely as passive as it sounds. You have tenant risk, maintenance, vacancies, financing costs, and a lot of ongoing work that shows up at the worst possible time.
If you already have money sitting inside a Tax-Free Savings Account (TFSA), a cleaner path to monthly income is using high-yield exchange-traded funds (ETFs). These are not your plain-vanilla dividend ETFs.
They use strategies like covered calls and leverage to boost cash flow. That extra income comes with more complexity, higher fees, and more risk, but if income is the primary goal, these tools are designed for exactly that.
Here is how I would personally structure a $40,000 TFSA portfolio focused on monthly income, using just two ETFs with decent diversification built in.
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50% in U.S. stocks
The first building block is Hamilton Enhanced U.S. Covered Call ETF (TSX: HYLD). This ETF is a fund of funds. Instead of owning individual stocks directly, it holds a basket of Hamilton’s YIELD MAXIMIZER covered call ETFs.
Those underlying funds span broad U.S. equities as well as sectors like technology, financials, healthcare, energy, gold producers, and real estate investment trusts. The goal is to roughly mirror the sector mix of the S&P 500, but with an income-first approach.
HYLD generates income primarily by selling covered call options on its holdings. In simple terms, it gives up some upside potential in exchange for an immediate option premium, which is paid out to investors as monthly income. Because of this structure, you should not expect strong price appreciation. Most of the return is delivered in cash distributions.
Leverage is the second income lever. For every $100 in assets, HYLD borrows about $25, resulting in 1.25x or 125% exposure. This magnifies both income and risk. In strong or sideways markets, it can enhance returns. In sharp downturns, losses are also amplified.
At current levels, HYLD pays a distribution yield of about 12.27%, with monthly payouts. Allocating $20,000 to this ETF would generate meaningful U.S. dollar exposure and a large portion of the portfolio’s income.
50% in Canadian stocks
To balance the U.S. exposure, the second half of the portfolio goes into Hamilton Enhanced Canadian Covered Call ETF (TSX: HDIV). HDIV uses a similar structure to HYLD, but it focuses entirely on Canadian equities.
It also holds a basket of Hamilton YIELD MAXIMIZER ETFs and applies covered call strategies across the portfolio. Because of Canada’s market structure, the sector mix skews heavily toward financials and utilities, with meaningful exposure to energy and gold as well.
Like HYLD, HDIV employs leverage at approximately 1.25 times. The combination of leverage and covered call income allows it to generate a high monthly distribution, but it also means investors need to be comfortable with higher volatility and drawdowns during market stress.
At current levels, HDIV pays a distribution yield of about 10.53%, again with monthly payouts. A $20,000 allocation provides Canadian dollar income and diversifies the income sources away from just one market.
