Yield targets rely totally on what you’re investing in. As of February 2026, the baseline is the Financial institution of Canada’s coverage fee of two.25%. That’s the closest factor to a “risk-free” yield you’ll discover, mirrored in high-interest financial savings accounts.
Transfer into dividend shares, notably Canadian banks, and yields rise into the three% to 4% vary. Step additional into actual property funding trusts or royalty trusts and you may push greater nonetheless.
However when you begin speaking about 10% yields, you’re coming into the realm of economic engineering. That often means leverage, coated calls, or a mixture of each.
These instruments can increase revenue, however they arrive with trade-offs: greater charges, capped upside, and extra complicated threat. Nonetheless, in the event you perceive these trade-offs, a ten% yield is feasible.
One instance is the World X Equal Weight Canadian Financial institution Lined Name ETF (TSX:BKCC), which presently affords a ten.2% annualized yield with month-to-month payouts. Right here’s the way it works and what you want to know.
BKCC: The portfolio
BKCC begins with a easy basis: Canada’s massive six banks. It tracks a equal weight Canadian financial institution index, that means every financial institution receives the identical allocation at every rebalance.
That issues. Canada’s banking sector is concentrated. Should you weight by market capitalization, the biggest banks dominate the portfolio. Equal weighting reduces that focus threat.
When one financial institution rallies and one other lags, the periodic rebalance trims winners and provides to laggards. In principle, that enforces a scientific “purchase low, promote excessive” self-discipline inside a slim sector.
By itself, although, a basket of Canadian banks received’t produce a ten% yield from dividends alone. That’s the place the second layer is available in.
BKCC: The coated calls
To spice up revenue, BKCC sells coated name choices on its underlying financial institution holdings. In plain English, it sells a part of the longer term worth appreciation in trade for rapid possibility premiums.
The quantity of revenue generated is dependent upon a number of elements: how shut the choice strike worth is to present financial institution share costs, how lengthy till the choices expire, and the extent of volatility within the banking sector. Greater volatility usually means richer possibility premiums.
The trade-off is easy. If financial institution shares surge past the choice strike worth, BKCC’s upside is capped. It received’t absolutely take part in robust rallies. Over time, that may scale back complete return in comparison with a plain financial institution ETF.
That is why complete return issues. Should you plan to reinvest each distribution, a conventional non-covered name financial institution ETF could also be extra environment friendly. However in the event you want constant month-to-month revenue and are snug sacrificing some upside, BKCC can ship that 10% goal.
It’s additionally value noting the price. BKCC fees a 0.50% administration expense ratio, plus roughly a 0.21% buying and selling expense ratio. That’s considerably greater than a plain-vanilla financial institution ETF, and people charges immediately scale back long-term returns.