For investors chasing steady monthly income, Timbercreek Financial (TSX:TF) looks mighty tempting. The dividend stock offers a whopping 10.16% dividend yield at writing after all. But the big question is, how safe is that dividend?
That’s why today, it might be a better option to consider the monthly dividend exchange-traded fund (ETF), Harvest Diversified Monthly Income ETF (TSX:HDIV). It offers a far more balanced and dependable option than TF at writing. At first glance, both promise attractive yields, but the difference lies in what supports those payouts. So, let’s look at each.
Diversification
HDIV’s strength is in its built-in diversification. It doesn’t rely on one business model or industry to fund distributions. Instead, it holds a basket of other Harvest ETFs that focus on sectors like technology, healthcare, utilities, financials, and consumer staples. These sub-funds use covered-call strategies to generate premium income, which HDIV passes on to investors in the form of monthly dividends. That approach spreads risk across dozens of stable companies while smoothing out returns through option income. The result is a yield near 10.3%, but backed by global leaders rather than high-risk borrowers.
Timbercreek Financial, by contrast, depends almost entirely on commercial mortgage lending, a market under heavy strain as high interest rates squeeze borrowers and depress property values. Its loan book is concentrated, opaque, and exposed to credit risk. If just a few large loans default or refinancing dries up, the dividend stock’s cash flow could quickly erode. Timbercreek’s yield looks appealing, but it’s fragile. It’s based on leveraged lending, not diversified cash flow. HDIV’s yield, however, is supported by hundreds of income-producing holdings and the disciplined structure of an ETF that adjusts to market conditions automatically.
Sustainable
Another key difference is transparency and liquidity. HDIV trades like any ETF, with its holdings fully disclosed and updated regularly. You can buy or sell shares instantly on the TSX without worrying about loan defaults or property valuations. Timbercreek’s underlying loans, however, are private and illiquid, so investors can’t see what’s inside the portfolio in real time, and there’s no easy way to know how healthy the borrowers are. That lack of visibility makes it difficult to assess risk, especially in a tightening credit environment. With HDIV, what you see is what you get. That’s a diversified, rules-based income strategy designed to weather different market cycles.
There’s also the issue of dividend sustainability. Timbercreek’s payout ratio routinely exceeds 150%, leaving almost no margin of safety if loan income declines. HDIV’s distributions come from option premiums and dividends on its underlying stocks, which are far more predictable. Even if one sector underperforms, the others typically offset it. This built-in resilience allows HDIV to maintain steady monthly payouts without stretching its resources. Over time, that kind of consistency compounds powerfully, as investors can reinvest those dividends tax-free within a Tax-Free Savings Account or defer taxes in a Registered Retirement Savings Plan.
Foolish takeaway
In short, both HDIV and Timbercreek Financial may advertise high yields, but only one earns it the right way. HDIV’s diversified income streams, transparent structure, and disciplined management make it a far superior choice for long-term investors who want monthly income without taking on unnecessary risk. Timbercreek’s yield looks tempting on the surface, but HDIV’s is far more sustainable, and sustainability is what ultimately keeps the income flowing year after year.
