Constant revenue means getting paid the identical quantity on the identical time—whether or not that’s quarterly or, ideally, each month. The most effective situation is when payouts develop over time, however generally simply avoiding dividend cuts is half the battle.

For this function, there’s actually just one TSX-listed closed-end fund (CEF) that does all of it: Canoe EIT Earnings Fund (TSX:EIT.UN). Should you’re acquainted with exchange-traded funds (ETFs), a CEF works in an identical means, however with some necessary variations. Right here’s what you could know.

How EIT.UN works

EIT.UN is one in all Canada’s largest CEFs, holding a roughly 50/50 mixture of U.S. and Canadian dividend-paying shares. To spice up revenue, it makes use of about 1.2 occasions leverage—borrowing modestly to speculate a bit greater than its fairness base.

EIT.UN can also be actively managed, that means it doesn’t observe an index. Its portfolio supervisor, Rob Taylor, selects shares utilizing a bottom-up strategy, that means particular person firm fundamentals drive selections somewhat than broad market components.

This permits the fund to tilt towards companies with robust stability sheets, dependable dividends, and development potential, however it additionally means outcomes rely upon the supervisor’s stock-picking talent.

Not like ETFs, CEFs commerce at both a premium or a reduction to their web asset worth (NAV). Proper now, EIT.UN trades at a small low cost, that means you should purchase its holdings for barely lower than their underlying worth.

EIT.UN month-to-month payout

EIT.UN pays a hard and fast $0.10 per unit each month. At at the moment’s value, that works out to a 7.75% annualized yield. The distribution is funded from a mixture of dividends, capital positive factors, and return of capital.

For simplicity, EIT.UN is greatest held inside a Tax-Free Financial savings Account (TFSA), the place you don’t have to fret concerning the tax character of payouts or report something to the CRA.

How a lot you’d earn

With $7,000 in a TFSA and the fund buying and selling at $15.47 per unit, you possibly can purchase about 452 shares. At $0.10 per share per thirty days, that place would generate roughly $45.20 in month-to-month revenue, which is totally tax-free inside a TFSA.

The Silly takeaway

Should you’re simply reinvesting the month-to-month distributions, EIT.UN in all probability isn’t value it. Development-oriented ETFs are cheaper, extra tax-efficient, and higher fitted to compounding over the long run.

But when your aim is to truly withdraw the revenue, EIT.UN automates that course of in a dependable means—paying you an identical quantity each month with out having to promote shares your self.