Canadian investors love the stability and dividends of our big banks. For those seeking monthly income and steady returns, bank ETFs are among the most reliable income-generating options on the market. In this post, we’ll compare some of the best Canadian bank ETFs designed for income investors, focusing on those that pay monthly distributions.
🏦 Why Bank ETFs Are Popular in Canada
Canada’s financial sector is dominated by a handful of strong, well-capitalized institutions — the “Big Six”: RBC, TD, Scotiabank, BMO, CIBC, and National Bank.
These banks have a history of paying consistent dividends, even during economic downturns.
Bank ETFs allow investors to:
- Get instant diversification across major Canadian banks.
- Earn attractive monthly income.
- Enjoy professional management and liquidity without picking individual stocks.
💵 Top Monthly-Paying Bank ETFs in Canada
Below are the top-performing and most popular ETFs for Canadian income investors who want consistent monthly distributions.
🟩 1. Hamilton Enhanced Canadian Financials ETF (HMAX)
- Dividend Yield: ~12.8% (monthly)
- AUM: $1.7B+
- MER: ~0.92%
- Leverage: No leverage
- Provider: Hamilton ETFs
Overview:
HMAX (Hamilton Canadian Financials Yield Maximizer ETF) is among the highest-yielding financial-sector ETFs in Canada, paying roughly 12–13% annually in monthly distributions.
It invests primarily in Canada’s Big Six banks — RBC, TD, Scotiabank, BMO, CIBC, and National Bank — along with major insurance companies such as Manulife, Sun Life, and Intact Financial. These firms anchor Canada’s economy and are known for their resilience and steady dividend histories.
Where HMAX stands apart is its aggressive covered call strategy. The fund writes at-the-money (ATM) call options on a portion of its holdings — meaning the strike prices are close to the current market price. This generates maximum option premium income, which significantly boosts its yield.
However, this also means less participation in market upside since many holdings may be called away during strong rallies. In other words, HMAX prioritizes income stability over capital appreciation, making it ideal for income-seeking investors, retirees, or those who want to enhance cash flow in a low-interest-rate or sideways market environment.
Importantly, HMAX is not leveraged, and all holdings are in Canadian dollars, reducing currency risk for domestic investors. It’s an excellent option for those who value predictable monthly income from Canada’s strongest financial institutions.
Summary:
- Strategy: Covered calls (At-the-Money)
- Focus: Maximum income generation
- Yield: ~12–13%
- Ideal for: Income investors prioritizing cash flow over growth
Pros:
✅ Extremely high monthly yield
✅ Broad exposure to banks and insurers
✅ Great for income-focused portfolios
Cons:
⚠️ Limited upside potential due to covered call strategy
⚠️ Not ideal for pure growth investors
🟦 2. BMO Covered Call Canadian Banks ETF (ZWB)
- Dividend Yield: ~5.7% (monthly)
- AUM: $3.5B+
- MER: ~0.83%
- Leverage: Non-leveraged
- Provider: BMO Global Asset Management
ZWB (BMO Covered Call Canadian Banks ETF) is one of Canada’s most trusted income ETFs, offering exposure to the Big Six Canadian banks through a more conservative covered call strategy than HMAX.
ZWB’s portfolio includes RBC, TD, BMO, Scotiabank, CIBC, and National Bank, and it’s built to provide consistent monthly income while preserving a portion of the upside potential in rising markets.
Unlike HMAX, ZWB writes out-of-the-money (OTM) call options. This means the strike prices are slightly above the current share price, allowing the ETF to collect option premiums while still retaining some upside participation if bank stocks rise. As a result, ZWB’s yield (around 5–6%) is lower than HMAX, but investors benefit from better capital appreciation potential over time.
This OTM approach makes ZWB an excellent fit for balanced or conservative investors who want monthly income without fully sacrificing growth. In addition, ZWB’s distributions are often tax-efficient, consisting largely of eligible Canadian dividends and option premiums, which are taxed more favourably than interest income in non-registered accounts.
Managed by BMO Global Asset Management and backed by over $3.5B in AUM, ZWB offers liquidity, stability, and simplicity — a go-to ETF for long-term Canadian income portfolios.
Summary:
- Strategy: Covered calls (Out-of-the-Money)
- Focus: Balance between income and upside growth
- Yield: ~5–6%
- Ideal for: Conservative investors or retirees seeking steady income with growth potential
Pros:
✅ Reliable monthly distributions
✅ One of Canada’s largest and most established covered call ETFs
✅ Simple, low-risk exposure to the Big Six banks
Cons:
⚠️ Slightly higher MER
⚠️ Limited capital appreciation compared to plain index ETFs like ZEB
🟨 3. iShares S&P/TSX Capped Financials Index ETF (XFN)
- Dividend Yield: ~2.6% (monthly)
- AUM: $1.8B+
- MER: 0.60%
- Leverage: Non-leveraged
- Provider: iShares (BlackRock Canada)
XFN (iShares S&P/TSX Capped Financials Index ETF) is a broad, low-cost exposure to Canada’s financial sector, offering investors a pure-play, growth-oriented approach to the country’s banks, insurers, and asset managers. Unlike covered call ETFs such as ZWB or HMAX, XFN does not use options strategies — it’s a straightforward index-tracking ETF, designed to mirror the S&P/TSX Capped Financials Index.
The ETF’s holdings include Canada’s Big Six banks (RBC, TD, Scotiabank, BMO, CIBC, National Bank), along with major insurance and financial services companies like Manulife, Sun Life, Intact Financial, and Brookfield Asset Management. This blend provides exposure to both banking profitability and insurance stability, giving investors well-rounded coverage of the financial industry.
With a dividend yield of about 2.5–2.7% paid monthly, XFN’s income stream is modest compared to covered call ETFs, but it offers stronger long-term growth potential. Because it doesn’t sell call options, XFN retains full exposure to capital gains during bull markets — making it more suitable for growth-oriented or total-return investors who want to participate fully in rising bank stocks.
From a cost perspective, XFN has a management expense ratio (MER) of 0.60%, which is reasonable given its large-cap exposure and liquidity. Its distributions are composed mainly of eligible Canadian dividends, making it tax-efficient for investors in non-registered accounts.
In summary, XFN is a solid, low-maintenance choice for investors who believe in the long-term strength of Canadian financials and prefer to capture both dividends and price growth without the trade-offs of a covered call strategy.
Summary:
- Strategy: Passive index tracking (no covered calls)
- Focus: Growth and dividend income from Canada’s largest financial firms
- Yield: ~2.6% (monthly)
- MER: 0.60%
- Ideal for: Long-term investors seeking growth + moderate income
Pros:
✅ Diversified financial exposure
✅ Better total return potential
✅ Monthly dividends with low volatility
Cons:
⚠️ Lower yield than covered call ETFs
⚠️ Smaller income stream for pure income seekers
🟧 4. Hamilton Enhanced Canadian Bank ETF (HCAL)
- Dividend Yield: ~4.7% (monthly)
- AUM: ~$690M
- MER: ~2.09%
- Leverage: 1.25x leveraged
- Provider: Hamilton ETFs
HCAL (Hamilton Enhanced Canadian Bank ETF) offers investors a unique way to boost income and returns from Canada’s most stable sector — the Big Six banks. Managed by Hamilton ETFs, HCAL uses a modest leverage strategy (approximately 1.25x) to enhance both yield and total return potential, while still maintaining a monthly distribution.
The ETF holds a concentrated portfolio of Canadian bank stocks, including RBC, TD, Scotiabank, BMO, CIBC, and National Bank. These institutions are known for their profitability, global diversification, and strong dividend track records — making them a cornerstone of most Canadian portfolios.
By applying 1.25x leverage, HCAL increases its exposure to the underlying bank stocks by 25%. This means that if Canadian banks perform well, HCAL’s total return and income can outperform non-leveraged bank ETFs like ZEB or ZWB. However, leverage also works both ways — in market downturns, losses are magnified compared to traditional ETFs.
HCAL does not use covered calls, so it retains full participation in market upside. Instead, it focuses on capital growth and dividend income, which it distributes to investors monthly. The fund’s MER is higher (~2.09%) due to the cost of leverage, but many investors find this acceptable given the enhanced yield (around 4.5–5%) and strong long-term potential when Canadian banks recover or interest rates stabilize.
From a portfolio-construction standpoint, HCAL fits best as a core satellite position for investors who already own conservative ETFs or GICs and want to boost returns without going into high-yield or covered call products.
Summary:
- Strategy: Modest leverage (1.25x) on Canadian bank stocks
- Focus: Enhanced income and growth (no covered calls)
- Yield: ~4.5–5% (monthly)
- MER: ~2.09%
- Ideal for: Long-term investors comfortable with moderate risk and seeking higher total returns
Pros:
✅ Higher income potential
✅ Focused on Canada’s most stable sector
✅ Strong historical performance when rates stabilize
Cons:
⚠️ Leverage increases volatility
⚠️ More sensitive to interest rate changes
🧠 Final Thoughts: Which Is Best for You?
| ETF | Yield | Growth Potential | Risk Level | Ideal For |
| HMAX | 🔥 Very High (~12–13%) | ⚡ Partial | Moderate | Income-focused investors seeking high yield with some upside exposure |
| ZWB | 💰 Moderate (~5–6%) | ✅ Balanced | Low–Moderate | Investors looking for a balanced approach between steady income and market growth |
| XFN | 💵 Lower (~2.6%) | 🚀 Full | Low | Growth-oriented investors focused on long-term capital appreciation |
| HCAL | ⚡ Medium (~4.5–5%) | 🚀 Strong | Moderate–High | Investors seeking enhanced total returns through moderate leverage |
📊 Key Takeaway
If your goal is to generate steady monthly income, covered call ETFs like ZWB and HMAX offer a powerful mix of yield and stability.
If you can handle more volatility, HCAL can boost returns — but always remember that higher yield = higher risk.
Diversifying across 2–3 of these ETFs can balance income, risk, and growth, making them ideal tools for Canadian income investors in 2025.