# best monthly income ETF 2016



## jumbalaya (Jan 17, 2013)

Received 300k from my HELOC, and would like to buy a monthly dividend ETF to cover my interest charges each month. Buying in non-registered account. What should I get? Is it still between CDZ and XDV?

I obviously would prefer investing in normal ETFs, decreasing the dividend tax bleed, but I don't want the interest charges to affect my cash flow. I'll be giving up some potential gain for "security" day-to-day


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## supperfly17 (Apr 18, 2012)

jumbalaya said:


> Received 300k from my HELOC, and would like to buy a monthly dividend ETF to cover my interest charges each month. Buying in non-registered account. What should I get? Is it still between CDZ and XDV?
> 
> I obviously would prefer investing in normal ETFs, decreasing the dividend tax bleed, but I don't want the interest charges to affect my cash flow. I'll be giving up some potential gain for "security" day-to-day


Buy 4280 shares of RY, enjoy your quarterly dividend of 3380$.


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## jumbalaya (Jan 17, 2013)

ha ha.

I want monthly anyway


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## Eclectic12 (Oct 20, 2010)

CDZ has paid anywhere from 100% eligible dividends to a low of 33.78% over the last five years.

XDV seems to have paid a high of 86.3% to a low of 53.54% over the same period.


Both have paid RoC that likely would be tax deferred until one sells the units (or holds for an extremely long time period).


Cheers


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## jumbalaya (Jan 17, 2013)

so it really is between those 2? I guess I'll be picking the one with lower MER...


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## tygrus (Mar 13, 2012)

Never invest to break even. Thats crazy. If you are going to risk $300k, then get a real return.

$150k into REITs to cover your interest (use your TFSA room to shelter), rest into a nice safe boring 5% ETF index. Enjoy your $600 monthly extra income. (btw eligible dividends are taxfree to $50k)


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## Eclectic12 (Oct 20, 2010)

jumbalaya said:


> so it really is between those 2?
> I guess I'll be picking the one with lower MER...


Those are the one's you've asked about ... I tend to buy individual stock to have no annual MER but that takes more work.

I believe I saw in the holdings energy companies ... which have been leading the charge at slashing or dropping dividends so I am not sure how much "safety" there is. The top holdings seemed to be financials so it may take a while before the general economy slowdown would be felt.


Cheers


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## Eclectic12 (Oct 20, 2010)

tygrus said:


> ... (use your TFSA room to shelter), rest into a nice safe boring 5% ETF index.


The OP can confirm but my understanding is that the point is to write off the interest charges. Holding he investments in one's TFSA would negate the tax destructibility for the interest charges.




tygrus said:


> ... (btw eligible dividends are taxfree to $50k)


Where the $50K is one's *only* source of income .... correct. 

Otherwise, YMMV.


Cheers


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## Grover (Jun 3, 2013)

Are you trying to do a smith maneuver ?


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## Emjay85 (Nov 9, 2014)

Grover said:


> Are you trying to do a smith maneuver ?


Probably just leverage investing. Looking for the monthly income to pay for his cost to carry the LOC while the shares increase in value.


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## Eclectic12 (Oct 20, 2010)

I believe a previous thread mentioned paying cash for the house then another thread indicated an 80% HeLOC was arranged so I suspect it is more about no margin, low interest cost leveraged investing.

The OP knows for sure.


Cheers


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## My Own Advisor (Sep 24, 2012)

"Never invest to break even. Thats crazy. If you are going to risk $300k, then get a real return."

+1 The whole point of "investing" is to get a real return / achieving a profit.

I would avoid monthly ETFs and just go with solid dividend paying stocks. Otherwise, index invest.


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## Nerd Investor (Nov 3, 2015)

If you're willing to buy stocks instead there are a lot of big names out there yielding 5% or more (most of the Canadian banks for example). 
I know you said you'd like monthly payments, I assume that's to avoid cash flow issues but if you leave yourself a cushion to get through the first quarter, you should be fine after. (ie: getting $100 a month or $300 a quarter shouldn't matter much long-term).

While I agree leveraging to break-even doesn't generally make much since, if someone is investing such that their income in eligible dividends is equal to their interest payments, they will come out slightly ahead due to the tax efficiency of that arrangement. Obviously if the rates go up or the dividends are cut though, that plan gets thrown out of wack.


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## jumbalaya (Jan 17, 2013)

tygrus said:


> Never invest to break even. Thats crazy. If you are going to risk $300k, then get a real return.
> 
> $150k into REITs to cover your interest (use your TFSA room to shelter), rest into a nice safe boring 5% ETF index. Enjoy your $600 monthly extra income. (btw eligible dividends are taxfree to $50k)


Most of it is invested in VXC or VCN. Just need something to help cover interest payments monthly.



Eclectic12 said:


> The OP can confirm but my understanding is that the point is to write off the interest charges. Holding he investments in one's TFSA would negate the tax destructibility for the interest charges.


Yup, I am planning to write off interest charges.



Emjay85 said:


> Probably just leverage investing. Looking for the monthly income to pay for his cost to carry the LOC while the shares increase in value.


Yes, 100% correct.



Eclectic12 said:


> I believe a previous thread mentioned paying cash for the house then another thread indicated an 80% HeLOC was arranged so I suspect it is more about no margin, low interest cost leveraged investing.


Yup.



My Own Advisor said:


> I would avoid monthly ETFs and just go with solid dividend paying stocks. Otherwise, index invest.


I'm bad at picking stocks, and would rather pick something that will last 30 years and leave it be. I think CDZ is a good way to do it because it's diversified.
I am index investing with most of the money.


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## digitalatlas (Jun 6, 2015)

Isn't this a bad idea. Perhaps someone could explain to me. 

You're going to pay, 3 to 4 percent to service the LOC? Dividends will yield about that much as well. 

Then you have to pay tax on the dividend returns, admittedly at the lower dividend rate, but still have to pay tax. 

So you're relying completely on appreciation of the asset, which you will also need to pay capital gains if you ever sell them. Or you could be at a loss of you sell at a time when the market is down. 

You could be running negative for quite some time. And what about increases in interest rates? 

I've got a pretty hefty LOC available to me a prime + 1, and thought Bolt this before but thought it was too risky. 

This reminds me a buying a cash flow negative rental property hoping to rely only on price appreciation. Not a good idea if you're trying to be sustainable and not just speculate.


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## humble_pie (Jun 7, 2009)

Nerd Investor said:


> If you're willing to buy stocks instead there are a lot of big names out there yielding 5% or more (most of the Canadian banks for example).
> 
> While I agree leveraging to break-even doesn't generally make much since, if someone is investing such that their income in eligible dividends is equal to their interest payments, they will come out slightly ahead due to the tax efficiency of that arrangement.
> 
> Obviously if the rates go up or the dividends are cut though, that plan gets thrown out of wack.



leveraging break-even in order to obtain a tax write-off does not make any sense to me. What happens to the borrower who buys bank stocks in order to obtain bank dividends, but then the bank stock itself declines by 10%? i'm left wondering how that borrower can be "slightly ahead."

right now i'm thinking that a Brexit will gravely imperil the world banking system ... lots of british momentum for a Brexit ...


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