Skip to main content

It’s a new year but there is still a backlog of questions from 2022, so let’s deal with some of them today.

Worried about Firm Capital

Q - I hold Firm Capital MIC (FC-T) in my RRIF and I am becoming increasingly concerned. My cost is $14.03 so I am down about 24 per cent. Of course, I love the income, but the market appears to be saying that it is at risk. Being in a RRIF there is not even an opportunity for tax loss selling. Would appreciate your guidance. - Richard I.

A - This is a long-running story with this company. FC is a mortgage investment corporation, which means it is highly interest-rate sensitive. The share price will rise when interest rates fall and vice-versa. I have always encouraged readers to focus on the dependable cash flow, which hasn’t changed in years, and ignore the month-to-month price movements. I encourage you to do the same.

The company recently reported third quarter earnings of $8.2-million, an increase of 8.1 per cent from the same period last year. No sign of any financial distress there.

If you can’t live with the ups and downs, then wait for the next interest rate cycle and sell when the shares get close to your cost price. But frankly, I’d keep it for the dependable cash flow. – G.P.

Wants to invest a million in one stock

Q - I have a bit more than a million in retirement savings. I’m 64 years old. I’ve been watching Dividend 15 Split Corp. (DFN-T) with a 15-per-cent monthly dividend payout. Can you think of a reason why I shouldn’t just put everything into that and receive a monthly dividend in excess of $12,500? – Marc L,, Stanley Bridge PEI

A - Sounds too good to be true, doesn’t it? So, let’s take a closer look. This is a split corporation based on the S&P/TSX 60 Index. It’s been around for many years and is well-managed. The shares pay a monthly distribution of 10 centrs ($1.20 a year), which works out to a yield of 15.9 per cent at a recent price of $7.53. What could go wrong?

The share price, that’s what. Earlier this year, the stock hit a 12-month high of $8.83. If you’d had the misfortune to buy at that point, your million dollars would now be worth about $853,000. Yes, you’d have the dividends, but your capital would have taken a hit.

In short, it’s not risk free. Weigh the pros and cons carefully. The advice I always offer in these circumstances is don’t put all your money in one place. – G.P.

Inflation-linked bonds

Q - I read in The Globe and Mail about inflation linked bonds. Do you have any thoughts about them? Any recommendations? – John M.

A – These bonds are issued by governments and both the principal and interest payments are protected against inflation. Sounds like a winning combination, but things are not always what they seem. The FTSE Russell Real Return Bond Index was down 13.81 per cent for 2022. The iShares Canadian Real Return Bond Index ETF (XRB-T) lost 14.14 per cent.

One of the problems with XRB is that it’s a long-dated fund with a weighted average maturity of 16.43 years and a real yield of 1.41 per cent. That’s not a combination that’s likely to attract investors.

Another difficulty with these bonds in general is that investors don’t receive the inflation bonus on the principal until the bond matures. That could be many years in the future and a lot can happen in the interim.

If you want to invest in this sector of the bond market, I advise staying short term. In September, my Income Investor newsletter recommended the iShares 0-5 Years TIPS Bond Index ETF (XSTP-T) for risk-averse investors. Since then, we’ve recorded a small capital gain of 41 cents and received distributions of 55.6 cents. The gain on our original recommended price is about 2.4 per cent in a little over three months. It’s not a lot, but it’s on the plus side of the ledger. A word of caution if cash flow is important to you: the fund makes monthly distributions, but they are erratic and twice recently there has been no monthly payout at all. – G.P.

Harvest Healthcare ETF

Q – I would like your views regarding these ETFs: HHL and HHL.U (U.S. dollars). Their yields are about 8 per cent, which is very attractive, and they have a low volatility. I don’t have clarity about how much the management fee will reduce the yield. Also, I would like to buy them in my TFSA (in CAD and USD) but I’m not sure if I buy the HHL.U will the 15-per-cent withholding tax be deducted? If the 15 per cent is still withheld, the yield still be around 6-7 per cent, correct? - Carolina A.

A – These are the trading symbols for the Harvest Healthcare Leaders Income ETF. HHL is in Canadian dollars while HHL.U is in U.S. currency. The fund invests in 20 large-cap healthcare companies from around the world, on an equal-weighted basis. Key holdings include Pfizer, Johnson & Johnson, Stryker, Merck, etc.

HHL has posted a five-year average annual compound rate of return of 9.28 per cent and is up 3.30 per cent this year (to Nov. 30). HHL.U has gained an average of 10.18 per cent over five years and 3.83 per cent this year. Based on those results, the U.S. dollar units have done better historically, but that could change any time, depending on the currency exchange rate.

The Canadian dollar units distribute 5.83 cents a month, or about 70 cents a year. At a recent price of $8.22, they yield 8.52 per cent. The U.S. units pay 5.83 US cents (about 70 US cents a year). HHL.U was recently trading at US$8.53 to yield 8.21 per cent. The Canadian dollar units therefore offer a slightly better yield.

All results are reported net of management fees.

The units in both versions of this fund will be subject to withholding tax in a TFSA or non-registered account because all the stocks are foreign companies. The withholding is the same for both classes of units since they are based on the same portfolio. Note that the 15 per cent is taxed on the underlying dividends of the securities, not on the entire distribution of the fund. Some of the distribution comes from writing covered call options. That portion is generally taxed as capital gains in non-registered accounts but not in TFSAs. – G.P.


Q - Is HXT a better alternative to the venerable XIU? It seems to have a lower MER and automatically reinvests dividends (so you don’t see any DRIP activity on your account). Is there a catch? - David K.

A – XIU is the symbol for iShares S&P/TSX 60 Index ETF. It invests in a portfolio of large cap Canadian stocks and has been around since 1999. Performance has been good, with a 10-year average annual compound rate of return of 8.99 per cent to the end of November. The management expense ratio (MER) is 0.18 per cent.

HXT is the trading symbol for the Horizons S&P/TSX 60 Index ETF. That’s the same index as XIU tracks so it should be no surprise that both hold the same securities in roughly the same proportion. HXT has a slightly better 10-year average annual return, at 9.12 per cent, which would appear to be due in large part to its lower MER of 0.04 per cent. Note, however, that the low management fee is due in part to a rebate of 0.04 per cent that could be withdrawn. Even without that, however, HXT will still be cheaper.

This is an example of how a lower fee can give you a slight edge in returns. It’s not a lot but over the years it adds up, especially on large amounts of money. – G.P.

If you have a money question, send it to and write Globe Question in the subject line. Sorry, I can’t guarantee a personal response, but I’ll answer as many questions as possible here.

Gordon Pape is Editor and Publisher of the Internet Wealth Builder and Income Investor newsletters. For more information and details on how to subscribe, go to

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Report an editorial error

Report a technical issue

Editorial code of conduct

Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 22/04/24 11:59pm EDT.

SymbolName% changeLast
Horizons S&P Tsx60 Index ETF
Ishares S&P TSX 60 Index ETF
Firm Capital Mortgage Inv. Corp
Dividend 15 Split Corp
Ishares CDN Real Return Bond Index ETF
Ishares 0 To 5 Year TIPS Bond Index ETF
Harvest Healthcare Leaders Income ETF
Harvest Healthcare Leaders Income ETF USD

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe