Top Canadian ETFs for Building Passive Income in 2026

Generating stable passive income is a smart way to build wealth over the long term. Investments such as high-yield exchange-traded funds (ETFs) offer flexibility and instant diversification, allowing investors to reinvest dividends or use them for living expenses. High-quality ETFs like the BMO Canadian High Dividend Covered Call ETF and the BMO Covered Call Canadian Banks ETF are top picks for passive income seekers, offering yields of 5.6% and 5.2% respectively.

These ETFs provide a balance between generating income and managing risk through diversification and covered call strategies, making them ideal for investors looking to boost their passive income. When building a portfolio, it’s essential to consider currency risk and tax efficiency, with Canadian stocks being advantageous as they avoid currency conversion and foreign withholding tax inside a Tax-Free Savings Account (TFSA).

Canadian equity ETFs are a logical foundation for a portfolio, with three solid options available: the iShares S&P/TSX Composite High Dividend Index ETF, the iShares S&P/TSX 60 Index ETF, and the iShares Core S&P/TSX Capped Composite Index ETF. These ETFs offer a range of benefits, including established Canadian companies with a history of paying dividends, significant exposure to Canada’s largest companies, and broad market coverage across large, mid, and small caps.