If I told you that putting $7,000 to work today could earn you $42 a month tax free, with the added possibility of your investment value rising or falling, would you say yes?
It’s totally fair if you said no. But Iâd question it if you turned around and spent that same amount on a used car that loses value and generates zero income.
If you have Tax-Free Savings Account (TFSA) room and want to build a steady, hands-off income stream with potential for long-term growth, this TSX-listed fund might be exactly what you’re looking for.
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Let’s do some math first
At a current share price of $15.64, a $7,000 TFSA contribution buys you roughly 447 shares of this fund. Each of those shares currently pays $0.10 per month, a payout thatâs been steady for over a decade.
Multiply that out, and youâre looking at $44.70 in monthly tax-free income. Thatâs $536.40 a year, with zero taxes owed and no complicated forms to file. You can do whatever you want with those payments.
Withdraw them to help cover groceries, your phone bill, or a night out. Or, if you want to snowball your income stream, use them to buy more shares. That means next monthâs payout will be even higherâand that cycle continues.
Tell me what the fund is!
OK, the boring partâs over. The fund in question is Canoe EIT Income Fund (TSX: EIT.UN), one of the most well-known closed-end funds (CEFs) on the TSX.
Itâs been paying a steady $0.10 per share monthly for over a decade and is structured a bit differently from your average exchange-traded fund (ETF) or mutual fund, so hereâs what you need to know.
EIT.UN is about a 50/50 split between U.S. and Canadian stocks. Its managers build a diversified portfolio of high-quality companies across sectors. You wonât find speculative penny stocks here; this is mostly blue-chip territory with an income focus.
To boost returns even more, the fund uses 1.2 times leverage, meaning for every $100 it has in assets, it borrows $20 more to invest. That adds risk but also enhances yield when markets are stable or rising.
Now for a unique feature of closed-end funds: unlike mutual funds or ETFs, CEFs like EIT.UN donât create or redeem new units daily. Instead, they trade on the exchange like a stock. This means the fund can trade at a premium or a discount to its net asset value (NAV)âessentially the per-share value of its underlying holdings.
As of this writing, the NAV is $15.64, while the fund trades at $15.72. Thatâs a slight discount, but premiums and discounts can shift, so itâs something to watch. Try not to buy at a premium, ever!
Finally, itâs not just about the income. Over the past 10 years, if you reinvest all those monthly payments, EIT.UN has delivered a 10.93% annualized total return. Thatâs pretty competitive for a fund built around income first and growth second. And itâs all happening right here on the TSX and eligible for your TFSA.
