# CIBC 512 - Income fund



## Hawkdog (Oct 26, 2012)

currently 12.64/unit.
MER = 1.48% - no fee
pays .06 per unit per month.
I have 2290 units, so each month it drips in about 10.6 units ($134 month/$1607 per year)

I have owned this one for years.

Anyone else own this or have any thoughts on it?

Wondering if I should move some of it into the actual bank stock,


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## tombiosis (Dec 18, 2010)

Funny you should ask this...I also have owned this one for a few years...about 1600 units now...but I just bought 100 shares of CIBC as well...I guess we think alike! The fund scores well on the bank's website, (whatever that's worth), its done ok this year, comparitively speaking, but I really don't like paying that MER.
Incidentally, my CIBC shares are up since I bought a few weeks ago, I paid 77 and it was over 81 bucks today. Decent Divi too...
I am going to sell some of the fund units when I re-balance


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## Hawkdog (Oct 26, 2012)

thanks for the reply!
Its been a good fund, but mutual funds are losing favor so that's my biggest concern. 
Good job with the CIBC shares!


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## james4beach (Nov 15, 2012)

Hawkdog said:


> Anyone else own this or have any thoughts on it?
> Wondering if I should move some of it into the actual bank stock,


CIBC stock is very different from this mutual fund; totally different. Wondering why you would want to make that switch?

As far as mutual funds go, the CIBC Monthly Income Fund looks pretty good. I've watched it for many years, but don't own it because I can accomplish the same thing with lower cost using ETFs. They seem to have managed their fund well, though.

Monthly Income Fund is basically 50/50 stocks and bonds. I generally like their allocations, and at 20% corporate bond exposure at least they're not swimming in the extremely-bubbly sector. One thing you may want to know, however, is that they pay out far more in their monthly distribution than the fund earns in dividends and interest. In each monthly distribution, only 1/3 comes from actual dividends and income. The other 2/3 comes from capital gains and return of capital (lots of RoC).

That means tax caveats... make sure you track your ACB changes because RoC isn't immediately taxable, but reduces the ACB such that you pay more capital gains later when you sell.


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## Hawkdog (Oct 26, 2012)

Thanks for the feedback.

I have owned this fund for year, before the rise in popularity in ETFs. It one i have just bought and forgot about.
My concern is that mutual funds are falling out of favor, so I am thinking I should move it into a stock or or should look at an ETF.

I have this fund in my rrsp so i am not considered about the tax implications at this point.

thanks for the info on where the payout comes from, I was not aware, good stuff appreciate that.


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## dogcom (May 23, 2009)

I own it in a small TFSA account and will move it to the brokerage side after I have put more money into it.


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## doctrine (Sep 30, 2011)

There is no window in time in the last 5 years when you would have done better by owning CIBC than CIBC 512 Income fund. In fact the outperformance is as much as +40% over the last 3 years. This will likely accelerate, as CIBC is now steadily raising their dividend and now buying back stock as well.

CIBC 512 distributes at current rates 5.6% but there is a 1.48% fee so you are only actually getting 4.2% (the 1.48% comes out of your base price). CIBC stock pays 4.6% right now and increases it every year. This seems fairly straightforward to me. (I own CIBC stock) Good luck with their fund though, but I'm looking forward to next year's dividend increase which is paid for partially by your contributions.


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## Sherlock (Apr 18, 2010)

I don't think you can compare an income fund to cibc stock, or any single stock. 512 is meant to be a balanced income fund, if you own it you don't have to worry about diversification. Obviously it would be foolish risk-wise to put all your money in a single bank stock, whereas you could put your entire portfolio (the canadian part of it at least) in 512 and forget about it. I think it's better to compare 512 to something like XEI or ZMI. The only reason to own 512 instead is if you add or take out money often and don't want to get hit with transaction fees every time, otherwise an ETF like XEI or ZMI is better due to its lower MER.


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## Hawkdog (Oct 26, 2012)

I think you have cibc and the fund mixed up in your first sentence? 
And yes as much as 40%, if you bought during the big drop in 2008/09. if you didn't buy at the dip and owned previous then it was as much as 40% loss that year

Kudos to those that bought during the dip.

Glad I can help out your divis, thanks for the feedback, i was looking for this sort opinion and logic to owning the stock. 

however, if i were to buy the stock today:
CIBC $30,000 /81.00 - 370 shares * .94 = 348 or x4 = 1392 per year - not including increase in units due to drip or share price increase
CIBC 512 $30,000/13.00 - 2307 units *.06 = 138 or x12 = 1661 per year - not counting increase in units due to drip or unit price increase

not sure about my math - its very simple, but not sure now would be the right time to jump in, i will look at it if it dips.
in the mean i will definitely look at the ETF examples posted on here, thanks for the tips!





doctrine said:


> There is no window in time in the last 5 years when you would have done better by owning CIBC than CIBC 512 Income fund. In fact the outperformance is as much as +40% over the last 3 years. This will likely accelerate, as CIBC is now steadily raising their dividend and now buying back stock as well.
> 
> CIBC 512 distributes at current rates 5.6% but there is a 1.48% fee so you are only actually getting 4.2% (the 1.48% comes out of your base price). CIBC stock pays 4.6% right now and increases it every year. This seems fairly straightforward to me. (I own CIBC stock) Good luck with their fund though, but I'm looking forward to next year's dividend increase which is paid for partially by your contributions.


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## doctrine (Sep 30, 2011)

Your math is correct but you are not accounting for the 1.48% MER on CIBC 512. CIBC stock has no such MER. This fund, in order to maintain net asset value, has to pay the 5.6% yield plus 1.48% MER, so must find stocks that are yielding by 7.08% per year.

Let's look at the top 5 holdings, as of 30 Nov, based on the Morningstar.ca report and what their yields are:

1. TD Bank - yielding 3.8%
2. Canada Hsg Tr No 1 2.05% (fixed income)
3. Royal Bank Of Canada - yielding 4.05%
4. CIBC (lol) - yielding 4.6%
5. Suncor Energy - yielding 1.6%

The average yield of the top 5 holdings comprising 22% of assets is 3.2%. That means the fund receives 3.2% in dividends and interest income, deducts 1.48% and then pays out 5.6%. In order to do so, they have to sell 3.88% of the net assets of the fund, every single year. Potentially, there are capital gains that can be sold, but in a down year, these obligations still have to be met and so they will either sell out of base asset value or perhaps they can just return the money of new investments if they are receiving a lot of inflows. 

Do you really want to be invested in a fund that half the time is likely selling assets in order to make distributions? Why not just own, for example, some of the top holds directly, like the stock of the very company selling the fund (which the fund also owns!). You don't have to be a rocket scientist to see that Suncor, TD, CIBC and RY are decent companies and purchase them on your own.

Last point, do you expect the monthly distributions on CIB512 to increase or stay the same? I predict it will not increase due to reasons above, and meanwhile within 3 years at current dividend growth rates the same CIBC stock will be yielding more income than the income fund, and potentially with significantly higher capital gains as well.


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## Hawkdog (Oct 26, 2012)

Thanks I get what your putting down.

I guess my worry is that I would be tempted to put it in something like TR.un, which i currently own as well and is paying more in the 8% range.


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## Belguy (May 24, 2010)

If you had to choose between the following four investments, which would you choose and why?

https://www.cibc.com/ca/mutual-funds/no-load-income/monthly-income-fund.html

http://funds.rbcgam.com/pdf/fund-pages/monthly/rbf591_e.pdf

http://ca.ishares.com/product_info/fund/overview/XEI.htm

http://www.etfs.bmo.com/bmo-etfs/glance?fundId=83021


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