February can really feel just like the market’s second begin of the yr, and a Tax-Free Financial savings Account (TFSA) is a superb place to chase month-to-month revenue. Dividends and distributions inside a TFSA keep tax free, so each deposit can go straight to spending or reinvesting. That issues while you’re constructing a paycheque-style portfolio, as a result of consistency beats timing. It additionally retains paperwork easy, which makes it simpler to remain invested when volatility tries to actually shake you out. And in case you actually need to preserve issues easy, an exchange-traded fund (ETF) could be one of the simplest ways to go.
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ZWC
BMO Canadian Excessive Dividend Coated Name ETF (TSX:ZWC) goals to ship revenue from dividend-paying Canadian firms, then provides a covered-call technique to spice up money movement. It owns massive dividend shares and sells name choices on a part of the portfolio to gather possibility premiums. These premiums can assist the month-to-month distribution, however also can cap some upside in sturdy rallies. Individuals purchase it for revenue first.
The portfolio leans towards Canada’s traditional dividend names. Financials usually take the largest slice, with significant publicity to power and different cash-generating sectors. The highest holdings often embrace main banks and enormous pipeline and power firms. That blend can maintain up higher than high-growth sectors, but it surely additionally means the fund will rise and fall with Canada’s dividend engine. In a downturn, you need to nonetheless anticipate drawdowns.
Over the past yr, the story for ZWC has been regular demand for revenue merchandise as buyers juggle charge uncertainty and uneven markets. The fund’s property stored climbing, and the unit worth pushed towards the highest of its latest vary as Canadian dividend shares held up. The month-to-month money distribution stayed in focus, which is strictly what TFSA revenue builders need. Coated calls also can shine in sideways markets, as premiums arrive even when costs go nowhere.
Into numbers
For February 2026, the dividend inventory introduced a money distribution of $0.105 per unit. Annualized, that’s about $1.26 a yr if the speed stays flat. The distribution can change, so deal with the yield as a shifting goal, not a promise. Even so, right here’s what even $7,000 can usher in.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| ZWC | $21.78 | 321 | $1.43 | $458.51 | Month-to-month | $6,991.38 |
However, is it price it? Prices matter with covered-call revenue funds. ZWC’s administration expense ratio sits at 0.72%, and internet property stood round $2.11 billion in mid-February 2026. Measurement will help with liquidity and spreads, but it surely doesn’t erase the charge drag. The actual query is whether or not the choice premiums and dividends, after prices, nonetheless go away you with revenue that feels price it. Possibility revenue can swing.
Efficiency helps clarify why buyers preserve returning to this technique. ZWC posted a 22.8% return in 2025, after 12% in 2024. That’s a reminder that “revenue” doesn’t must imply “stagnant.” The trade-off stays the identical, although: the covered-call overlay can trim upside when markets rip greater. You’re paying for a distinct return profile, not a free lunch.
Backside line
Trying ahead, the outlook ties to 3 drivers: dividend well being, volatility, and charges. Dividend development helps the bottom revenue, whereas greater volatility can increase possibility premiums and assist assist month-to-month money funds. If charges fall and markets surge, extra upside could get left on the desk. If the economic system weakens and dividends get minimize, revenue can come beneath strain even with premiums cushioning the blow. The fund also can lag if banks or power fall out of favour.
As a TFSA decide for fixed money, ZWC makes a clear case. It pays month-to-month, holds acquainted Canadian dividend names, and provides possibility revenue that may assist clean the trip. But it surely’s not magic. You hand over some upside in massive rallies, and the yield can embrace parts that don’t equal pure dividends. In case you worth tax-free month-to-month deposits greater than excellent upside seize, it might probably match the transient. Simply be sure to can stay with fairness danger and occasional boring stretches.