High-yield stocks can be risky. The payout often depends on a single business staying healthy. When cash flow tightens, the dividend can drop fast, taking the share price down with it. A very high yield can also signal that the market expects trouble. So that “income” can end up getting paid back to you through capital losses.
That said, high-yield exchange-traded funds (ETFs) can be different for passive income. These spread risk across many holdings, and some of the yield comes from option premiums rather than a single company’s earnings. This can make the cash flow steadier, which is why today we’re going to focus on one.
HDIV
Hamilton Enhanced Canadian Covered Call ETF (TSX:HDIV) has had a strong run in 2025, with total returns including distributions in the low 30% range year to date as of November, roughly 20% over the prior year. That performance lines up with what you would expect when Canadian financials and other large TSX sectors trend higher, with HDIV having meaningful exposure to those areas while also paying out monthly cash.
HDIV works by investing in a diversified, multi-sector portfolio that is built primarily from covered-call ETFs focused on Canada, and it aims to pay attractive monthly income while still trying to deliver long-term capital appreciation. A big feature, and a big risk lever, is that HDIV uses leverage through cash borrowings to try to enhance income and returns. This can help when markets cooperate, but can magnify drawdowns when markets don’t.
On holdings, HDIV tends to express its exposure through underlying Hamilton sector ETFs. It has a heavy tilt to financials alongside meaningful weights in energy, materials, and some technology and communications. A recent fund document shows a sector mix led by financials at roughly two-fifths of the portfolio, with energy and materials next. This makes the fund feel more “TSX-like” than global-income products, just with an options-and-leverage twist.
Considerations
The more important takeaway for passive-income investors is how HDIV behaves across different market moods. In strong up markets, it can still do well, but the covered-call overlay typically means it captures less of the full upside than a plain vanilla equity ETF would. In choppier or sideways markets, the option premium can help fill the gap, which is part of why investors often look at it when they want income they can actually feel hitting the account each month.
HDIV can be a solid long-term high-yield passive-income option if your priority is consistent monthly cash flow and you understand what you are giving up to get it. The fund has a clear, regular monthly distribution history in 2025, with per-unit payouts generally around the $0.17 to $0.18 range. This can make budgeting and reinvesting feel straightforward inside a TFSA. It also spreads exposure across multiple sectors rather than making you rely on one high-yield company staying perfect.
The key caveat is that the same mechanics that support the yield can also create long-term friction. Covered calls can cap upside in roaring bull markets, leverage can deepen losses in sudden selloffs, and the all-in cost picture matters more than people think. HDIV is option-based; leveraged structures can come with higher total expenses and borrowing costs. If you can live with those trade-offs, HDIV can fit as an income sleeve in a broader TFSA plan, especially for investors who want income now but still want some participation in equity growth.
Bottom line
The clean way to think about it is this: HDIV is built to turn a diversified slice of Canadian equities into a steadier monthly paycheque by layering on covered calls and leverage. The 2025 performance shows it can work when conditions line up. Right now, here’s what $7,000 can bring in still through dividends alone.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| HDIV | $20.70 | 338 | $2.07 | $699.66 | Monthly | $6,996.60 |
It isn’t a free lunch, but if you treat it as a tool, keep your position size sensible, and pair it with simpler long-term holdings, it can be a practical way to target high yield — all without taking the single-company dividend risk that trips up a lot of investors.
