If you’re looking for dependable income, the first thing you should look at is the payout ratio. The payout ratio measures how much of a company’s earnings are being paid out as dividends.
What’s considered “safe” can vary by industry, but as a general rule, a payout ratio between 40% and 70% is often viewed as sustainable for most companies. Go too low, and you’re not getting much income. Go too high, and there may not be enough of a cushion if earnings decline.
Things get a bit more complicated when you move from stocks to funds. Funds pay distributions, not dividends, and those distributions can come from multiple sources.
Some of it may be dividends from the underlying holdings, but it can also include interest income, capital gains, or even return of capital. That means the yield you see isn’t always a direct reflection of what the portfolio is earning.
That’s where managed distribution policies come in. Some funds set a target payout in advance and distribute a fixed amount on a regular schedule, usually monthly. Behind the scenes, the fund manager uses a mix of income, gains, and other sources to meet that target. This approach can make income planning much simpler, especially for investors who rely on consistent cash flow.
One example is Canoe EIT Income Fund (TSX: EIT.UN). As of April 14, it offers an annualized yield of about 7.1% based on its most recent monthly distribution. Here’s what you need to know before investing.
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What is EIT.UN?
EIT.UN is a closed-end fund, which means it has a fixed pool of capital. Unlike exchange-traded funds, new units aren’t constantly created or redeemed. Because of that, the fund can trade at either a premium or a discount to its net asset value. As of April 13, the fund closed at $16.89, while its net asset value stood at $17.09. That means it’s currently trading at a slight discount.
The portfolio itself is actively managed and relatively concentrated, holding just 56 stocks. Roughly half are Canadian, and the other half are U.S. companies. The focus is on quality businesses with growth potential, rather than simply chasing the highest yields.
Another key difference is the use of leverage. EIT.UN can borrow up to 20% of its portfolio, effectively increasing exposure to its holdings. This can enhance returns in strong markets, but it also increases downside risk during weaker periods.
Despite that, the long-term track record has been solid. Over the past 10 years, the fund has delivered a 13.71% annualized total return, assuming distributions are reinvested before taxes. That’s after accounting for a relatively high 1.1% management fee.
EIT.UN’s distributions
The defining feature of EIT.UN is its fixed monthly distribution of $0.10 per unit. It has paid this amount consistently, month after month, making it a popular option for income-focused investors. On an annualized basis, that translates into the roughly 7.1% yield seen today.
For the April 2026 distribution, the ex-dividend date is April 22. That’s the date you must own the fund by to be eligible for the upcoming payment. The payout itself will be made on May 15, 2026.
This schedule tends to follow a predictable pattern, simply rolling forward each month. That consistency makes it easier to plan around if you’re relying on the income.
That said, the composition of those distributions can vary. Because the fund draws from multiple sources, including dividends, capital gains, and return of capital, the tax treatment in a non-registered account can be more complex.
This is one reason why EIT.UN is often better suited for a Tax-Free Savings Account, where distributions are not taxed, and record-keeping is much simpler.
