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

Written by Daniel Da Costa at The Motley Fool Canada

There’s no question that one of the best ways to build wealth over the long haul is by generating passive income, especially when that income is reliable and doesn’t require constant monitoring or active decision-making. That’s why some of the best investments you can buy for passive income in 2026 are high-yield exchange-traded funds (ETFs).

Owning investments that earn you reliable passive income is always important, but in 2026, it matters more than usual.

Between geopolitical tensions, uncertainty around interest rates, and markets that have already rallied hard in certain areas, it makes sense to consider shoring up your portfolio and buying higher-yield investments that can help mitigate volatility.

ETFs make this even easier because they offer instant diversification, lower single-stock risk, and a more hands-off way to build income.

That’s why if you’re looking to boost your passive income in 2026 without taking on unnecessary risk, two of my favourite high-yield investments aren’t actually stocks; they’re high-quality ETFs.

If you’re looking to boost the passive income your portfolio generates in 2026, there’s no question that one of the best ETFs to consider is BMO Canadian High Dividend Covered Call ETF (TSX:ZWC).

There are two main reasons why the ZWC ETF is a top pick for dividend investors today. First, it holds a diversified portfolio of high-quality Canadian dividend-paying stocks across sectors like financials, utilities, telecommunications, and energy. These are mature, well-established businesses that already generate strong and predictable cash flow.

That’s essential, because these stocks on their own already provide investors with sustainable dividends and high yields.

Why the ZWC ETF is specifically made for passive-income seekers, though, isn’t just because it owns a portfolio of high-quality dividend stocks. The other main reason is the covered call strategy it uses.

In order to boost the income, it returns to investors, the fund writes covered calls on a portion of its holdings, collecting option premiums in exchange for giving up some upside if those stocks rally sharply.

Those premiums are then added to the dividends the underlying stocks already generate, which is what allows the ZWC to pay a significantly higher distribution than a traditional dividend ETF.

The fund also charges a higher manager expense ratio (MER) because of this strategy, but even with a MER of 0.72%, the ZWC still offers investors a net yield of more than 5.1% today, showing why it’s one of the best high-yield ETFs that passive income seekers can buy in 2026.

And while investors can choose to buy covered call ETFs at any time, they’re particularly attractive looking ahead to the rest of 2026.

With so much uncertainty and many stocks already trading at or above their fair value, markets may grind higher, but a massive bull run isn’t guaranteed. In that kind of environment, trading some upside for immediate, reliable income can make a lot of sense.

Unsurprisingly, in addition to the ZWC ETF, another top high-yield fund I like in 2026 for many of the same reasons is BMO Covered Call Canadian Banks ETF (TSX: ZWB).

The ZWB ETF is structured exactly like the ZWC, except it focuses exclusively on Canada’s major banks. This is key because bank stocks are well-known as some of the best dividend stocks to own for the long haul, since Canadian banks are some of the most stable and dominant financial institutions in the world.

They operate in a highly regulated environment, generate enormous amounts of recurring revenue, and have a long history of paying dividends through multiple economic cycles.

The ZWB ETF is ideal because it offers exposure to all of the major Canadian banks at once, which helps reduce single-bank risk while still benefiting from the sector’s overall strength. And with its covered call strategy, the ETF currently offers a net yield of 4.7%.

So, if you’re going to trade off some capital gains potential for higher income, 2026 looks like exactly the kind of year where that trade-off can make sense.

The post Here Are My 2 Favourite ETFs to Buy for High-Yield Passive Income in 2026 appeared first on The Motley Fool Canada.

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Fool contributor Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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