Here Are My 2 Favourite ETFs to Buy for High-Yield Passive Income in 2026

These two reliable ETFs are easily some of the top funds that Canadian investors can buy for compelling passive income in 2026.

Daniel Da Costa

Daniel joined the Motley Fool Canada team in 2019 with years of experience in banking and investing. Growing up the son of a proprietary stock trader and educator, Daniel’s always found joy in helping Canadians to improve their financial situations. With the Motley Fool, Daniel sees an even more rewarding way to impact Canadians positively. A student and great admirer of Warren Buffett, he’s always looking for investments offering growth at a reasonable price. Outside of finance, Daniel enjoys spending his time with family, sailing, and watching Formula One.

Published March 31, 4:30 pm EDT

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Key Points

With 2026’s higher uncertainty and slower growth, prioritize ETFs that balance reliable income with long‑term growth rather than chasing yield alone.
iShares S&P/TSX Composite High Dividend Index ETF (TSX:XEI) is a strong core holding—diversified exposure to Canada’s top dividend payers with a yield near 4% and long‑term dividend‑growth potential.
BMO Canadian High Dividend Covered Call ETF (TSX:ZWC) boosts income (~5.75% yield) via a covered‑call overlay, trading some upside for higher, more consistent distributions in volatile or sideways markets.

When it comes to investing and finding high-quality stocks and exchange-traded funds (ETFs) to buy in 2026, there’s no question that one of the biggest goals for most investors is building passive income.

However, already just a quarter of the way into the year, that goal has become a lot more complicated.

Interest rates aren’t falling as quickly as many expected, inflation is still uncertain, and volatility remains elevated due to the war in the Middle East. That means simply parking your money in cash or Guaranteed Investment Certificates may not be enough if you actually want your income to grow over time.

And that’s exactly why more investors are looking for reliable Canadian ETFs to buy for passive income in 2026.

However, when looking to boost income, one of the biggest mistakes that investors often make is focusing only on the yield. When you’re building a passive-income portfolio, though, you need to balance both reliability and yield.

That’s why finding reliable ETFs to buy for high-yield passive income isn’t only about generating income today; you also want your portfolio to continue growing over time.

So, with that in mind, here are two of my favourite ETFs to buy right now, one that acts as a foundation for long-term growth and one that helps boost your income today.

ETFs can contain investments such as stocks — Source: Getty Images

A core ETF to buy and hold for long-term income and growth beyond 2026

If you’re building a passive-income portfolio for the long haul, the most important piece is having a strong foundation. That’s why iShares S&P/TSX Composite High Dividend Index ETF (TSX:XEI) is one of the best funds to buy for high-yield passive income in 2026.

The XEI is one of the best ETFs to buy and hold for long-term dividend growth because it offers instant diversification and owns many of the largest and most reliable companies in Canada, including banks, pipelines, utilities, and telecom stocks.

These are businesses that generate steady cash flow, operate in essential industries, and have long track records of paying and increasing their dividends.

That’s what makes XEI such a strong core holding; it focuses on owning high-quality companies that can grow both their earnings and their dividends over time.

That’s important for long-term investors because, in addition to offering a yield just shy of 4% today, which may not be as high as some other income-focused ETFs, you still get the full benefit of the market’s upside.

That’s why it’s such a strong long-term holding for passive income-focused investors. Over the long haul, as the TSX and Canadian economy continue to grow, your investment and the passive income it generates both grow with it.

So, over time, you’re not just collecting income, you’re also building wealth as those dividends increase and your capital appreciates.

A high-yield ETF to help boost your income

Once you have a solid foundation in place, that’s when it can make sense to buy a higher-yield ETF to complement your core holdings and boost your income in 2026.

So, if you’re looking for both a reliable long-term investment and a higher-yielding fund for more immediate income, BMO Canadian High Dividend Covered Call ETF (TSX:ZWC) is a top choice.

The reason the ZWC can significantly boost your income is that, instead of just holding dividend stocks, it also uses a covered call strategy to generate additional income.

In simple terms, the fund sells call options on a portion of its holdings, which allows it to collect premiums and increase the overall yield it pays to investors. That’s why the ZWC can offer a significantly higher yield, currently sitting at roughly 5.75%, than a traditional dividend ETF.

And in an environment like 2026, where markets may be more volatile or trade sideways, that strategy can be especially effective, because instead of relying on strong price appreciation, it turns that volatility into income.

However, since the fund is selling potential upside through those options, it won’t benefit as much in environments when markets rally strongly.

That means the share price tends to be more stable, but you’re giving up some long-term capital gains potential in exchange for higher income today, which is why it’s one of my favourite ETFs to buy to help boost passive income in 2026.