For many Canadians, dividends provide a sense of consistency in an otherwise unpredictable market. They serve as a reminder that investing isn’t just about quick wins but about building wealth steadily through reinvestment and discipline. Over time, even modest payouts can accumulate into meaningful income.
That said, dividend investing has its trade-offs. Share prices can still fluctuate, and certain income-focused funds may sacrifice growth potential for yield. One option that continues to draw attention is the Canoe EIT Income Fund (TSX:EIT.UN), a monthly payer that offers investors a straightforward way to collect regular cash flow.
It’s not a stock or an exchange-traded fund (ETF), but one of the few closed-end funds (CEFs) still around today, an outdated structure that has endured because it has performed relatively well.
How does EIT.UN work?
Like a stock, EIT.UN trades on the TSX, but unlike an ETF, it doesn’t issue new units when demand rises. Instead, it runs on a fixed pool of capital, which means the market price can trade at a premium or discount to its net asset value (NAV).
Right now, units are priced at $15.48 versus a NAV of $15.88 – a slight discount. That’s fairly normal, but it’s worth keeping EIT.UN on a watchlist to avoid overpaying at a premium and scoop up deeper discounts during corrections when others are panicking.
The fund pays a steady $0.10 per unit every month, translating to a 7.8% annualized yield at recent prices. That payout has remained unchanged for years and is a key reason income-focused investors stick with it, even when flashier options appear elsewhere.
The ex-dividend date typically falls in the second-to-last week of each month, with payments landing in the middle of the following month. This makes it a reliable cash flow source for retirees or anyone prioritizing monthly income.
EIT.UN’s portfolio is split about evenly between Canadian and U.S. stocks, with holdings spread across sectors. Blue-chip names dominate, particularly dividend payers in energy, financials, and industrials.
To keep the yield elevated, the fund employs up to 1.2 times leverage, meaning it can borrow up to $0.20 for every $1 of equity. This boosts income potential but also increases downside risk, since leverage magnifies losses as much as it magnifies gains.
Should you invest in EIT.UN?
If your goal is to bank a steady payout every month and withdraw it, EIT.UN is well suited, especially in a Tax-Free Savings Account (TFSA). This fund is best for investors who want steady, tax-efficient monthly income that doesn’t fluctuate.
If you’re reinvesting dividends, however, EIT.UN makes less sense. A plain-vanilla ETF focused on long-term share price appreciation is usually more efficient, with lower fees and less friction. That said, EIT.UN isn’t a slouch when dividends are reinvested, posting an annualized return of 12.5% over the past 10 years.
The drawback is cost. With a 1.1% management fee, it’s as expensive as many mutual funds, while broad-market passive ETFs now charge as little as 0.03%. If fees matter, EIT.UN isn’t ideal. On top of that, investors need to manage the discount or premium to NAV when buying and account for the higher volatility that comes with the fund’s use of leverage.
