Opinions

Ben Cheng Canoe EIT Income Fund EIT.UN-T COMMENT Aug 07, 2008

Single largest closed-end fund, which invests predominately in income trusts. Trading at a significant discount to its NAV. Distribution they pay is probably more than they earn internally so there is a potential of a distribution cut.

Ben Cheng

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$5.620

Stock price when the opinion was issued

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BUY

A diversified trust mainly made up of income funds. Do a reasonably good job. A good, conservative, diversified way to play the income game.

COMMENT

Hasn’t looked at this for a while but it has come off considerably. Vulnerable to the price slide of the underlying commodity. Appropriately priced and he would need a reason for it to go up.

DON'T BUY

He is quite indifferent to this one currently. Looks fairly extended from his point of view. Also, in another year or so, income trusts will have to convert and there could be some concerted selling when they cut distributions.

COMMENT

It's a preferred share ETF. It provides income. It's a hybrid between a stock and a bond. This gives you a good position in a Canadian taxable account.

COMMENT

Pays an 11% dividend yield. How are they paying that? They probably hold a lot of Canadian infrastructure but those stocks pay only 3-4%. The US component is also dragging down that yield. There's a mismatch here in holdings vs. the 11% yield. The total return will probably be 5-7%, but the high yield will limit share performance. This is a warning. Look at their top holdings and see how you feel about that.

Unspecified

Are dividends safe? He can't see the underlying companies from his terminal and apologizes for that. If good underlying companies, dividends are relatively safe. If engineering of distribution yields, he would be concerned.

COMMENT

Not a fan of closed fund since the underlying securities will deviate from the net asset value of the fund. There are big dislocations. Underlying holdings are good quality companies. On a weighted basis, the yield is 3%, but the fund is paying 8%. This comes from the capital gains. It is not pure yield.

HOLD

Good way to allocate capital. It's fine. Funds are not really his style. You can continue to hold it.

WEAK BUY

Does not like closed end funds due to pricing details. Nature of fund can cause big price gyrations. Is a good vehicle for income otherwise.

COMMENT

It is a basket of common stocks including big U.S. companies. He is not sure about it but it is doing well for the caller. Income is the focus.

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Ben Cheng Canoe EIT Income Fund EIT.UN-T COMMENT Aug 07, 2008

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