4 Best High-Yield ETFs in Canada (June 2026)
The best high-yield ETFs in Canada include ZWC.TO (~0.70% MER), XHY.TO (~0.55%), VDY.TO (~0.22%), and FIE.TO (~0.85%). These ETFs generate income through dividends, bonds, and covered call strategies, making them suitable for TFSA, RRSP, or non-registered investors seeking higher yield with added risk.
High-yield ETFs are designed for Canadian investors who want to maximize income from their portfolios, often delivering higher distributions than traditional dividend funds. ETFs like ZWC.TO and VDY.TO generate income from Canadian dividend-paying stocks, while XHY.TO focuses on high-yield corporate bonds and FIE.TO combines multiple income sources into one diversified portfolio.
The key trade-off with high-yield ETFs is balancing income with risk. ZWC.TO boosts yield using covered call strategies, XHY.TO offers higher income through exposure to lower-credit-quality bonds, and FIE.TO blends equities, bonds, and preferred shares. Higher yield often comes with greater volatility, credit risk, or reduced capital appreciation.
In this guide, we break down the best high-yield ETFs in Canada, comparing yield sources, diversification, fees, and risk so you can choose the right ETF for your TFSA, RRSP, or income-focused portfolio.
At a Glance: Quick Comparison
Side-by-side snapshot of fees, yield, and returns. Data updates daily.
| ETF | MER | AUM | Yield | YTD | 1Y |
|---|---|---|---|---|---|
Top ZWC.TO BMO Canadian High Dividend Covered Call | 0.65% | $2.4B | 5.66% | +9.25% | +29.34% |
XHY.TO iShares U.S. High Yield Bond Index ETF (CAD-Hedged) | — | $1.1B | 6.12% | -1.86% | +4.29% |
VDY.TO Vanguard FTSE Canadian High Dividend Yield | — | $8.4B | 3.24% | +22.35% | +51.45% |
FIE.TO iShares Canadian Financial Monthly Income Common Class | — | $1.4B | 4.50% | +12.31% | +35.00% |
What Is an ETF?
A high-yield ETF in Canada is an exchange-traded fund that focuses on generating above-average income by investing in high-yield assets such as dividend-paying stocks, corporate bonds, preferred shares, or using strategies like covered calls. These ETFs prioritize income over growth, making them popular for income-focused investors.
For example, ZWC.TO (~0.70% MER) generates income through a covered call strategy on Canadian equities, while VDY.TO (~0.22% MER) focuses on high-dividend Canadian companies. XHY.TO (~0.55% MER) invests in high-yield (junk) corporate bonds, offering higher income but with increased credit risk, and FIE.TO (~0.85% MER) combines equities, bonds, and preferred shares for diversified income.
High-yield ETFs are commonly used in TFSAs and non-registered accounts for income generation. However, investors should understand that higher yield often comes with higher risk, including credit risk, market volatility, and reduced long-term capital growth.
The 4 Best ETFs: Ranked & Reviewed
Detailed breakdown of each pick with live data.
BMO Canadian High Dividend Covered Call
$22.56
+9.25% YTD
NA
Returns
YTD
+9.25%
1Y
+29.34%
3Y
+17.94%
5Y
+11.38%
iShares U.S. High Yield Bond Index ETF (CAD-Hedged)
$16.35
-1.86% YTD
NA
Returns
YTD
-1.86%
1Y
+4.29%
3Y
+7.35%
5Y
+2.74%
Vanguard FTSE Canadian High Dividend Yield
$76.20
+22.35% YTD
Vanguard FTSE Canadian High Dividend Yield Index ETF seeks to track, to the extent reasonably possible and before fees and expenses, the performance of a broad Canadian equity index that measures the investment return of common stocks of Canadian companies that are characterized by high dividend yield. Currently, this Vanguard ETF seeks to track the FTSE Canada High Dividend Yield Index (or any successor thereto). It invests primarily in common stocks of Canadian companies that pay dividends.
Returns
YTD
+22.35%
1Y
+51.45%
3Y
+28.21%
5Y
+18.26%
iShares Canadian Financial Monthly Income Common Class
$11.22
+12.31% YTD
Returns
YTD
+12.31%
1Y
+35.00%
3Y
+26.11%
5Y
+13.62%
Pros & Cons
Pros
- Higher income potential from multiple sources including dividends, bonds, and option premiums
- Access to different income strategies such as covered calls (ZWC.TO) and high-yield bonds (XHY.TO)
- Diversification across asset classes with ETFs like FIE.TO
- Suitable for income-focused investors seeking regular cash flow
Cons
- Higher risk from credit exposure in bond ETFs like XHY.TO
- Covered call strategies can limit capital appreciation during strong markets
- Higher MERs (~0.55%–0.85%) compared to traditional index ETFs
- Total return may lag growth-focused ETFs over the long term
Compare These ETFs Head-to-Head
Drill into a side-by-side breakdown of performance, AUM, and yield.
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Frequently Asked Questions
What is the best high-yield ETF in Canada?
ZWC.TO is a popular high-yield ETF because it combines Canadian dividend-paying stocks with a covered call strategy to boost income. Investors seeking bond-based income may consider XHY.TO (~0.55% MER), which offers higher yield through exposure to high-yield corporate bonds but comes with greater credit risk.
What’s the difference between VDY.TO and XHY.TO?
VDY.TO focuses on Canadian dividend-paying stocks, while XHY.TO invests in high-yield corporate bonds. VDY.TO offers income with equity exposure and potential growth, whereas XHY.TO provides higher yield but carries credit risk and is more sensitive to interest rates and economic conditions.
Are high-yield ETFs good for a TFSA?
High-yield ETFs can be held in a TFSA, where distributions and capital gains are tax-free. However, investors should focus on total return and risk, as higher-yield ETFs like ZWC.TO or XHY.TO may sacrifice long-term growth or introduce additional volatility.