February can feel like the market’s second start of the year, and a Tax-Free Savings Account (TFSA) is a great place to chase monthly income. Dividends and distributions inside a TFSA stay tax free, so every deposit can go straight to spending or reinvesting. That matters when you’re building a paycheque-style portfolio, because consistency beats timing. It also keeps paperwork simple, which makes it easier to stay invested when volatility tries to really shake you out. And if you really want to keep things simple, an exchange-traded fund (ETF) can be the best way to go.
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ZWC
BMO Canadian High Dividend Covered Call ETF (TSX:ZWC) aims to deliver income from dividend-paying Canadian companies, then adds a covered-call strategy to boost cash flow. It owns large dividend stocks and sells call options on part of the portfolio to collect option premiums. Those premiums can support the monthly distribution, but can also cap some upside in strong rallies. People buy it for income first.
The portfolio leans toward Canada’s classic dividend names. Financials often take the biggest slice, with meaningful exposure to energy and other cash-generating sectors. The top holdings usually include major banks and large pipeline and energy companies. That mix can hold up better than high-growth sectors, but it also means the fund will rise and fall with Canada’s dividend engine. In a downturn, you should still expect drawdowns.
Over the last year, the story for ZWC has been steady demand for income products as investors juggle rate uncertainty and choppy markets. The fund’s assets kept climbing, and the unit price pushed toward the top of its recent range as Canadian dividend stocks held up. The monthly cash distribution stayed in focus, which is exactly what TFSA income builders want. Covered calls can also shine in sideways markets, as premiums arrive even when prices go nowhere.
Into numbers
For February 2026, the dividend stock announced a cash distribution of $0.105 per unit. Annualized, that’s about $1.26 a year if the rate stays flat. The distribution can change, so treat the yield as a moving target, not a promise. Even so, here’s what even $7,000 can bring in.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| ZWC | $21.78 | 321 | $1.43 | $458.51 | Monthly | $6,991.38 |
But, is it worth it? Costs matter with covered-call income funds. ZWC’s management expense ratio sits at 0.72%, and net assets stood around $2.11 billion in mid-February 2026. Size can help with liquidity and spreads, but it does not erase the fee drag. The real question is whether the option premiums and dividends, after costs, still leave you with income that feels worth it. Option income can swing.
Performance helps explain why investors keep returning to this strategy. ZWC posted a 22.8% return in 2025, after 12% in 2024. That’s a reminder that “income” does not have to mean “stagnant.” The trade-off stays the same, though: the covered-call overlay can trim upside when markets rip higher. You’re paying for a different return profile, not a free lunch.
Bottom line
Looking forward, the outlook ties to three drivers: dividend health, volatility, and rates. Dividend growth supports the base income, while higher volatility can boost option premiums and help support monthly cash payments. If rates fall and markets surge, more upside may get left on the table. If the economy weakens and dividends get cut, income can come under pressure even with premiums cushioning the blow. The fund can also lag if banks or energy fall out of favour.
As a TFSA pick for constant cash, ZWC makes a clean case. It pays monthly, holds familiar Canadian dividend names, and adds option income that can help smooth the ride. But it’s not magic. You give up some upside in big rallies, and the yield can include components that do not equal pure dividends. If you value tax-free monthly deposits more than perfect upside capture, it can fit the brief. Just make sure you can live with equity risk and occasional dull stretches.
