In 2026, investors seeking steady cash flow face significant challenges amid an environment of interest rate fluctuations and market volatility. While the Toronto Stock Exchange offers no shortage of high-yield options, elevated dividends often come with elevated risk. The key question is: how can you “refuel” your passive income portfolio to find the right balance between yield and safety?
The following two Canadian investment ideas with income-boosting potential could inject momentum into your portfolio for the new year.
Currently, telecom giant Telus offers a dividend yield nearing 9.6%. For investors who can stomach higher risk, this represents a powerful income “booster.” This substantial yield reflects market concerns over industry headwinds facing the company, such as pricing competition, slower consumer device upgrades, and the expansion of disruptor Freedom Mobile.
Although the stock’s multi-year lows may indicate deep value, investing in Telus is more of a momentum play within volatility. While the dividend appears secure in the near to medium term, investors should focus squarely on the company’s actual progress in reducing debt, improving its balance sheet, and growing free cash flow. If management can achieve these financial targets in 2026, the high dividend is likely sustainable.
This stock is therefore suited for investors willing to exchange higher volatility risk for a nearly 10% yield—a rare level for a blue-chip of its caliber. It is not the “base fuel” for a smooth ride but a “high-octane option” with the potential for significant income generation.
For investors pursuing a smoother income journey, particularly retirees, the BMO Canadian High Dividend Covered Call ETF (TSX:ZWC) offers an “extension” strategy. This ETF invests in a basket of Canadian high-dividend stocks and employs a covered call strategy. This involves sacrificing some potential share price upside in exchange for premium income, which effectively enhances the fund’s overall yield and reduces volatility.
In a context where the TSX Index may continue its strength, choosing ZWC means accepting capital appreciation below the benchmark in return for more predictable and enhanced cash flow. It acts like a “high-efficiency range extender” for a portfolio, providing consistent and robust supplemental power to passive income while controlling volatility, making it suitable as part of a core income allocation.
“Refueling” your passive income portfolio for 2026 hinges on matching the “fuel type” to your personal risk tolerance. Investors who prefer powerful performance and can handle a bumpier ride might consider high-yield, high-volatility opportunities like Telus. Those seeking a stable journey and wishing to minimize road risks could look to steady, strategy-enhanced tools like the ZWC ETF.
Regardless of the path chosen, closely monitoring the fundamentals and cash flow of your investments remains the essential prerequisite for keeping your income engine running smoothly.
