Yield targets depend entirely on what you’re investing in. As of February 2026, the baseline is the Bank of Canada’s policy rate of 2.25%. That’s the closest thing to a “risk-free” yield you’ll find, reflected in high-interest savings accounts.
Move into dividend stocks, particularly Canadian banks, and yields rise into the 3% to 4% range. Step further into real estate investment trusts or royalty trusts and you can push higher still.
But once you start talking about 10% yields, you’re entering the realm of financial engineering. That usually means leverage, covered calls, or a combination of both.
These tools can boost income, but they come with trade-offs: higher fees, capped upside, and more complex risk. Still, if you understand those trade-offs, a 10% yield is possible.
One example is the Global X Equal Weight Canadian Bank Covered Call ETF (TSX: BKCC), which currently offers a 10.2% annualized yield with monthly payouts. Here’s how it works and what you need to know.
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BKCC: The portfolio
BKCC starts with a simple foundation: Canada’s big six banks. It tracks a equal weight Canadian bank index, meaning each bank receives the same allocation at each rebalance.
That matters. Canada’s banking sector is concentrated. If you weight by market capitalization, the largest banks dominate the portfolio. Equal weighting reduces that concentration risk.
When one bank rallies and another lags, the periodic rebalance trims winners and adds to laggards. In theory, that enforces a systematic “buy low, sell high” discipline within a narrow sector.
On its own, though, a basket of Canadian banks won’t produce a 10% yield from dividends alone. That’s where the second layer comes in.
BKCC: The covered calls
To boost income, BKCC sells covered call options on its underlying bank holdings. In plain English, it sells part of the future price appreciation in exchange for immediate option premiums.
The amount of income generated depends on several factors: how close the option strike price is to current bank share prices, how long until the options expire, and the level of volatility in the banking sector. Higher volatility generally means richer option premiums.
The trade-off is straightforward. If bank stocks surge beyond the option strike price, BKCC’s upside is capped. It won’t fully participate in strong rallies. Over time, that can reduce total return compared to a plain bank ETF.
This is why total return matters. If you plan to reinvest every distribution, a traditional non-covered call bank ETF may be more efficient. But if you need consistent monthly income and are comfortable sacrificing some upside, BKCC can deliver that 10% target.
It’s also worth noting the cost. BKCC charges a 0.50% management expense ratio, plus roughly a 0.21% trading expense ratio. That’s significantly higher than a plain-vanilla bank ETF, and those fees directly reduce long-term returns.
