For many Canadian investors, building a portfolio that consistently generates income can be a time-consuming and stressful process. Picking individual dividend stocks is time-consuming, requires research, and comes with the constant worry of whether a company will cut its payout. That’s why reliable exchange-traded funds (ETFs) are one of the best ways to boost your income.
ETFs are ideal because they offer many advantages, the main being the instant diversification that they provide. Because these funds often own hundreds of stocks in their portfolios, investors gain exposure to every single company in their portfolio at once.
So, not only do ETFs make it easier for investors because they lower the risk of investing right away by offering instant diversification, but they can also save you significant time and research since owning a few reliable ETFs means you have far fewer individual investing decisions to make, and a simpler way to generate income.
In fact, some ETFs focus specifically on high-quality dividend-paying companies. And the beauty of ETFs is that they do the heavy lifting for you. All the income gets paid out to you while the fund’s managers take care of the rest.
That’s why reliable ETFs are some of the best investments newer investors can make, especially if you’re looking to boost your passive income.
So, with that in mind, here are two of the most reliable ETFs you can use today to generate income without all the hassle.
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A reliable high-yield dividend ETF to boost your passive income
If you’re looking to boost your passive income with a simple and popular Canadian fund, the iShares S&P/TSX Composite High Dividend Index ETF (TSX: XEI) is one of the easiest ways to get broad exposure to Canada’s top dividend-paying companies.
The XEI ETF is ideal because it holds dozens of reliable Canadian blue-chip stocks, spanning sectors like financials, energy, and utilities, all of which have a long track record of paying and growing dividends.
That’s why it’s perfect for those who want income but don’t have the time to monitor individual company fundamentals. Instead of picking individual stocks, investors get a ready-made basket of high-quality dividend payers.
It’s worth noting that, although the XEI attempts to offer investors the highest-yield possible, it still prioritizes reliability. That means the yield isn’t as high as if it owned all the highest-yielding stocks on the TSX. However, the payout comes from companies with strong histories of sustaining dividends even during economic slowdowns, which is why it’s such a reliable ETF to buy.
So, although the fund has a net yield of just over 4% today, considering the diversification and reliability it offers, it’s easily one of the best ETFs dividend investors can buy to boost their income.
A unique dividend fund with a net yield of more than 5%
In addition to the XEI ETF, if you prefer even more income and would be willing to trade some upside capital gains potential for it, I’d strongly recommend investors consider the BMO Canadian High Dividend Covered Call ETF (TSX: ZWC).
The ZWC is similar in a lot of ways to the XEI, investing in high-quality and reliable dividend-paying companies. However, in addition, the ZWC ETF employs a covered call strategy.
Therefore, by selling covered calls on the stocks it owns, the fund generates extra income from the option premiums, which effectively boosts the overall yield you receive as an investor.
Because you’re selling covered calls, though, some of the capital gains potential is limited. However, in an environment with a lot of uncertainty and many stocks at or near all-time highs, that’s not the biggest concern for many investors.
So, if you’re an investor who’s looking to boost your income as much as possible with a high-quality and reliable ETF, the ZWC is unquestionably one of the best to consider right now.
