Topic: How To Invest

Q: Hi. What is your opinion concerning this ETF: iShares Canadian Financial Monthly Income ETF? Thanks.

Article Excerpt

A: iShares Canadian Financial Monthly Income ETF, $7.44, symbol FIE on Toronto (Units outstanding: 92.9 million; Market cap: $691.2 million; www.blackrock.com/ca), invests primarily in the common shares, preferred shares and corporate bonds of firms in the Canadian finance industry. The fund charges investors an MER of 0.97%, which is high by ETF standards. However, its distributions to those investors now yield 6.7%, which is also high. The ETF’s portfolio does not generate enough dividend income to cover both those high distributions to unitholders as well as its management expenses and fees. To make up the difference, iShares Canadian Financial Monthly Income ETF must make capital gains by trading the stock holdings of its portfolio. If those gains don’t materialize, then the fund will be forced to either cut its distributions—or more likely in the short term—sell some of its stockholdings to raise cash to maintain those high monthly payments to investors. In selling some of its holdings, the fund’s distributions will then include a..

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