iShares Cdn Financial Monthly Income ETF (FIE.TO)

Doesn't like it at all. The problem is never trust yield. If an ETF is paying a yield that's higher than the yields of the stocks within that ETF, then where is the money coming from? The way this is presented to investors is unclear and
incorrect.

People buy this for the 6% yield, but the banks and high-yield companies inside this ETFs yield only half that. Where's does the rest come from? This is about a return of your own capital to goose the yield, not a return on capital. You end up with a lower adjusted cost base, so when you sell it yet get whacked with a heavier tax.

Not one of his favorites. One of those ETFs where there is the possibility of Return of Capital as opposed to Return on Capital.

It is a straight pass-through of distributions. When an ETF has a fixed distribution that is higher than what is in it, then you are getting some of your own capital in your distribution and the ETF provider could alter it.

Preferreds and dividend payers. It is a great holding bu concentrated in the sector. It is at all time highs. He is reducing his exposure to the financial sector now. If it goes higher he would reduce more.

How do you get your income? A nice way to get it is to own a monthly income ETF, you have to pay a fee for that. The issue is, do you buy your bank shares directly or own a bank ETF, and pay the manager 45 or 50 basis points to have the privilege of getting monthly checks. If you don’t have a lot of capital and you still need it, then it may be a better way than buying individual bank shares.

Good quality banks and insurance companies. It is not a good time to step in at this time. It is at all time highs. Its bonds are short term corporate bonds so you don’t have interest rate risk. The risks are far too high with these companies right now, however. He does not think Trump will cause interest rates to go up the way analysts predict.

It pays a fixed yield of 7%, but nothing yields that. You are getting back about 3% of your own capital. It is very concentrated in the financial area, so it we get into a financial driven systemic problem, this one will underperform.

Likes this as a diversifier. You have about 22% of preferreds, 11% of corporate bonds, all of the banks and a lot of financials, some of the big dividend payers in Canada. It isn’t diversified much beyond financials, so there is a lot of sector concentration. If you are going to put this in your portfolio, and it is 10%-20%, he would be good with that. Make it a core holding. Valuation-wise right now, he doesn’t like financials. Thinks they underperform for the next year or 2.

(Market Call Minute.)

A product that pays money from a number of different ways. Canadian financials, REITs, Corporate bonds. A mixed bag of different things that are paying money. Yield is about 3.9%, but when you gross that up with some of the Return of Capital, it might be more like 7%-7.2%, etc. This is for people that want a strong income, but it is grinding down the Adjusted Cost Basis, because some of that money you are getting is Return of Capital.

A collection of Canadian banks and insurers. It moved up nicely since the February lows. We had a run and there is some question on where oil prices are going. He would not accumulate at this time.

Common stock, preferred shares, corporate bonds and income trusts. Dividend paying stocks got hit pretty badly. This is a good time to get into this one, or hold it if you already have it. There is a return of capital so that is part of why the unit has gone down. The fund is selling itself to pay part of the distribution. He would not use it, but right now you would be getting in at a pretty low point. He would not want to sell it.

Paying out more than it should because you are getting a return “of” capital, not a return “on” capital. This is made up of a bunch of other ETF’s, and he doesn’t like anything where he is not getting sustainable dividends, but would prefer something like BMO Covered Call Cdn Banks (ZWB-T).

For a 17-year hold? This is paying about 8% percent. The problem is that none of the constituent stocks pay 8%, so where are they getting the 8% from? This has to come out of return of capital, which is the problem with this type of product. Consider BMO Covered Call Cdn Banks (ZWB-T) instead.