Where to Invest Your TFSA Contribution for Steady Dividends

This unique TSX close ended fund has been paying a steady $0.10 share distribution for a decade now.

Tony Dong, MSc, CETF®

Author Bio Tony turned a series of marijuana stock losses in 2017 into a self-employment venture, focused on helping retail investors build better portfolios with exchange-traded funds (ETFs). He is the founder of ETF Portfolio Blueprint and the Lead ETF Analyst for ETF Central, a partnership between Trackinsight and the New York Stock Exchange. He also currently writes freelance for MoneySense, U.S. News & World Report, Kiplinger, and 24/7 Wall St., and runs an investing-focused newsletter called The Dumb Money Dispatch with 3,300+ subscribers. Outside of finance, Tony owns a small ranch in rural British Columbia, raising goats and chickens, and also volunteers as a wildland firefighter in his local community. His background includes service in the Canadian Armed Forces as a reservist and stints in corporate security. Education Master of Science (MSc) in Enterprise Risk Management, Columbia University Bachelor of Arts (BA) in Criminology, Simon Fraser University Certified ETF Advisor (CETF®), The ETF Institute Securities Industry Essentials (SIE), FINRA Canadian Securities Course (CSC), Canadian Securities Institute Areas of Expertise ETFs, mutual funds, Berkshire Hathaway, indexing, dividend stocks, royalty trusts, REITs, infrastructure, aerospace & defence, passive income investing, portfolio construction, risk management, RRSPs & TFSAs. Social Media Profiles https://www.linkedin.com/in/tzld96/ https://www.youtube.com/@okanaganhomesteader Favorite Investment Quote "Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1." - Warren Buffett

Published February 19, 2025 9:15 pm EST

Nothing sucks more than a dividend cut – especially if you’re relying on that income. That’s why if you’re going to buy dividend stocks for income, you need to watch the payout ratio.

This metric measures how much of a company’s earnings are paid out as dividends. A high payout ratio can be a red flag, as it suggests dividends might not be sustainable if earnings decline.

Using an exchange-traded fund (ETF) for dividends can help, since diversification reduces the risk of any single company cutting its payout. However, ETF distributions can fluctuate, making them less predictable.

But there’s another option – the Canoe EIT Income Fund (TSX: EIT.UN). This is a closed-end fund (CEF) designed to pay a fixed $0.10 per share distribution every month, no matter what.

Here’s why EIT.UN is the perfect investment if your top priority is steady dividends paid every month.

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What is EIT.UN?

EIT.UN is an income-first closed-end fund that splits its portfolio 50% Canadian stocks, 50% U.S. stocks, all selected for quality and income generation.

Its monthly distribution has been locked at $0.10 per share for over a decade, with payouts funded through stock dividends, realized capital gains, and return of capital.

It pays like clockwork – the ex-dividend date is usually on the 22nd of the month, with distributions hitting investor accounts on the 15th of the following month.

Beyond income, EIT.UN has also been a strong total return performer. With reinvested distributions, it has delivered an annualized 12.2% return over the past 10 years.

Risks to be aware of

Since EIT.UN is a CEF, its market price can trade above (premium) or below (discount) its net asset value (NAV).

As of February 6, EIT.UN trades at $15.35, while its NAV is $15.90 – meaning it’s currently at a discount. You should only consider buying when it trades at a discount, as paying a premium means you’re overpaying relative to the value of the underlying holdings.

Another key risk is that EIT.UN uses leverage to boost returns. While this can enhance gains, it also increases risk in volatile markets. This CEF is more volatile than your average exchange-traded fund (ETF).

Leverage isn’t cheap either. Compared to low-cost ETFs, EIT.UN comes with a hefty 2.1% management expense ratio (MER) – something to keep in mind when weighing its benefits against its costs.