Generating steady monthly income from your investments is much easier when you own an asset with a consistent payout history.
Most dividend stocks pay quarterly, with payout amounts fluctuating based on company performance and board decisions. Ideally, dividends increase over time, but there’s never a guarantee.
Some exchange-traded funds (ETFs) are structured to prioritize stable monthly distributions, making income planning more predictable. One such ETF is the iShares Diversified Monthly Income ETF (TSX: XTR), which offers exposure to a mix of dividend stocks, bonds, and real estate investment trusts (REITs) to balance yield and stability.
With XTR’s current monthly distribution set at $0.04 per share, here’s what you need to know about how many shares you’d need to own to generate $500 per month in passive income.
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What is XTR?
This ETF is designed to generate steady monthly income by holding a mix of dividend-paying stocks, fixed-income securities, and real estate investment trusts (REITs).
Instead of investing in individual companies or bonds, XTR follows an ETF-of-ETFs strategy, meaning it holds other ETFs that focus on income-generating assets.
The portfolio includes U.S. and Canadian dividend stocks, Canadian corporate bonds, U.S. high-yield bonds, U.S. investment-grade bonds, and Canadian long-term bonds, among other income-oriented investments.
This structure helps balance equity market upside with the stability of fixed income, making it a well-rounded option for income seekers.
XTR charges a 0.61% management expense ratio (MER), which includes the fees of the underlying ETFs. Currently, the fund pays a 4.2% trailing 12-month yield, with monthly distributions for consistent cash flow.
How much do you need to buy to earn $500 a month?
The math is straightforward thanks to XTR’s steady $0.04 per share monthly distribution. Since the payout is fixed, you can calculate exactly how many shares you need to generate $500 per month.
Each share of XTR pays $0.04 per month, adding up to $0.48 per year ($0.04 × 12 months). To earn $500 monthly, you divide your target income by the per-share monthly payout:
$500 ÷ $0.04 = 12,500 shares
Now that you know you need 12,500 shares, the next step is calculating how much that investment would cost at today’s price. As of March 11, each XTR share trades at $11.40. To buy 12,500 shares, you’d need to invest:
12,500 × $11.40 = $142,500
That means to earn $500 per month, you’d have to invest about $142,500 in XTR at its current price.
If you’re not holding XTR in a Tax-Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP), you’ll need to factor in taxes on the distributions. In a non-registered account, part of the income may be taxed as dividends, interest, or return of capital, which can affect your after-tax return.
