Estimating dividend payouts isn’t all the time easy. Relying on which metric you employ, your earnings estimate could be off by fairly a bit. The trailing 12-month yield displays what a inventory or fund has paid over the previous yr, whereas the ahead yield tasks what it’d pay based mostly on latest bulletins. The previous reveals precise historical past, whereas the latter depends on expectations that may change.
That’s why I favor to do the maths manually utilizing the latest per-share payout. Most dividend shares have variable funds, however one exception is the Canoe EIT Revenue Fund (TSX:EIT.UN), which pays a constant $0.10 per share each month.
That predictability makes it simple to calculate your annual earnings and construct a transparent plan. Right here’s how EIT.UN works—and the way to determine what number of shares you’d have to generate $2,000 in annual earnings, tax-free, inside a Tax-Free Financial savings Account (TFSA).
EIT.UN defined
EIT.UN is a closed-end fund, that means it has a set variety of shares that commerce on the inventory market fairly than being created or redeemed each day like common exchange-traded funds (ETFs).
In the meanwhile, it trades at a small low cost to its internet asset worth (NAV)—round $15.36 market value versus $15.89 NAV—so buyers are successfully shopping for its underlying portfolio at a slight discount.
The fund holds roughly 40 Canadian and U.S. shares, cut up about 50/50, and is actively managed. It could actually use as much as 1.2 occasions leverage, permitting it to boost returns barely utilizing borrowed capital.
The hallmark of EIT.UN is its regular $0.10 month-to-month distribution, a mix of capital positive aspects, dividends, and return of capital. As a result of a few of this earnings isn’t taxed as eligible dividends, it’s easiest to maintain the fund in a registered account like a TFSA to keep away from tax issues.
Regardless of being marketed as an earnings fund, its complete return efficiency has been sturdy. With dividends reinvested, EIT.UN has delivered a 10-year annualized complete return of 13.06%, outperforming the S&P/TSX 60 and the S&P 500.
EIT.UN dividend math
The month-to-month payout is $0.10 per share, or $1.20 per share yearly. To earn $2,000 per yr, divide your goal earnings by the annual payout: $2,000 ÷ $1.20 = 1,667 shares (rounded).
At a present share value of $15.38, which means you’d want to speculate about $25,630 to generate $2,000 in annual earnings, earlier than taxes. Held in a TFSA, these month-to-month funds can be tax-free, making it a simple, predictable supply of passive earnings.
To earn EIT.UN’s month-to-month dividend, it’s worthwhile to personal shares earlier than the ex-dividend date. For instance, the October ex-dividend date was October 22, with a cost date of November 14.
The identical sample repeats month-to-month, so keep watch over subsequent month’s ex-dividend date—you have to be a shareholder of report by that day to obtain the next month’s payout.
