There is also the tax-efficiency side to consider. Unless you are holding these ETFs inside a registered account such as a tax-free savings account (TFSA), registered retirement savings plan (RRSP), or another tax-sheltered account, those distributions may create tax liabilities.
Depending on the structure, distributions can consist of return of capital, dividends, ordinary income, or capital gains. Return of capital is common with covered-call strategies and lowers your adjusted cost base, but that does not mean taxes disappear forever. They are often deferred instead.
I bring this up because Canadian ETF providers have increasingly launched concentrated income products tied to single stocks, often using moderate leverage and covered-call overlays. Purpose Investments calls them Yield Shares, Harvest ETFs markets them as High Income Shares, and Ninepoint Partners has its High Shares lineup. If you spend enough time on Reddit, YouTube, or finance websites, you have probably seen advertisements for them.
The pitch is straightforward. Instead of spending, say, US$41,700 to buy 100 shares of Microsoft and then selling covered calls yourself, you can buy a single-stock yield ETF that does the work for you. The ETF pools investor capital, buys the underlying shares, often adds between 1.25 and 1.33 times leverage through borrowing, and then sells covered calls to generate premiums.
On the surface, it sounds attractive. You get exposure to a blue-chip company you already like while collecting regular monthly income along the way. But total return is what ultimately matters. After reinvesting distributions, are you actually doing better than simply buying and holding the stock itself?
That is the question I wanted to test. So, I compared two of the older single-stock, covered-call ETFs against the underlying stocks they are built around, and an equivalent Canadian Depositary Receipt (CDR). Bottom line up front: the results were mixed.
How do these single-stock yield ETFs work?
For this experiment, I focused primarily on the lineup from Purpose Investments because they were among the earliest providers to launch single-stock yield ETFs in Canada in 2022. Competing products from providers like Harvest ETFs and Ninepoint are still relatively new and do not yet have long enough track records for meaningful analysis.
I also intentionally focused on large-cap U.S. technology stocks because these are the types of companies that tend to attract covered-call strategies in the first place. There are a few reasons for that.
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First, the underlying shares are highly liquid, meaning options markets on them are extremely active. Investors get access to tight bid-ask spreads, multiple expiration dates, and a wide range of strike prices. Secondly, many of these stocks are volatile enough that selling covered calls can generate substantial option premiums, which makes them lucrative.
The first example I looked at was the Purpose Alphabet (GOOGL) Yield Shares ETF (YGOG), which is built around Alphabet. As of May 7, 2026, Purpose advertised a 10.69% distribution yield on YGOG. That figure is calculated by annualizing the ETF’s most recent monthly distribution relative to its NAV.
Structurally, YGOG is fairly straightforward. The ETF holds shares of Alphabet directly while applying 25% leverage. In practice, that means for every $100 of investor capital, the fund manager borrows an additional $25. On top of that, the ETF systematically sells covered calls on up to 50% of the portfolio. That helps generate income while still retaining some participation if Alphabet shares continue rising.
None of this is cheap. The ETF’s base management fee is 0.40%, but after accounting for leverage costs and other operational expenses, the actual management expense ratio (MER) rises to 1.71%, which is quite expensive compared to simply holding the stock itself.
What the back-test data says
I backtested YGOG from January 2023 through April 2026 against two alternatives: simply buying and holding Alphabet (GOOGL) shares directly, and buying the Canadian depositary receipt version, the Alphabet CDR, which trades in Canadian dollars.
The CDR does not charge an explicit management fee, but it still experiences ongoing drag from currency hedging costs and foreign withholding taxes on dividends, though in Alphabet’s case the dividend component is minimal given the company’s relatively small payout.
Source: Portfolio Visualizer
Interestingly, over this specific period, YGOG actually outperformed on a raw total-return basis. The Purpose ETF compounded at an annualized 58.50%, compared to 55.94% for Alphabet shares themselves and 52.32% for the Alphabet CDR.
