For investors looking for a stable monthly income, Timbercreek financial (TSX:TF) looks extremely tempting. After all, the dividend share offers no less than a 10.16% dividend yield at the time of writing. But the big question is: how safe is that dividend?
Therefore, a better option today might be to consider the monthly dividend exchange-traded fund (ETF), Harvest Diversified Monthly Income ETF (TSX:HDIV). It offers a much more balanced and reliable option than TF when writing. On the surface, both promise attractive returns, but the difference lies in what underpins these payouts. So let’s look at each.
Diversification
HDIV’s strength lies in its built-in diversification. It does not rely on one business model or sector to finance distributions. Instead, it includes a basket of other Harvest ETFs that focus on sectors like technology, healthcare, utilities, financial services and consumer staples. These sub-funds use covered call strategies to generate premium income, which HDIV passes on to investors in the form of monthly dividends. This approach spreads risk across dozens of stable companies, while smoothing returns through option income. The result is a yield of almost 10.3%, but backed by global leaders rather than high-risk borrowers.
Timbercreek Financial, on the other hand, is almost entirely dependent on commercial mortgage lending, a market that is under severe pressure as high interest rates squeeze borrowers and depress real estate values. The loan portfolio is concentrated, opaque and exposed to credit risk. If just a few large loans default or refinancing dries up, dividend stocks’ cash flow can quickly erode. Timbercreek’s yield looks attractive, but is fragile. It is based on leveraged loans, not diversified cash flow. However, HDIV’s returns are backed by hundreds of income-generating investments and the disciplined structure of an ETF that automatically adjusts to market conditions.
Durable
Another important difference is transparency and liquidity. HDIV trades like any ETF, with its holdings being fully disclosed and updated regularly. You can buy or sell stocks directly on the TSX without having to worry about loan defaults or real estate appraisals. However, Timbercreek’s underlying loans are private and illiquid, so investors can’t see what’s in the portfolio in real time, and there’s no easy way to know how healthy the borrowers are. That lack of visibility makes it difficult to assess risk, especially in a tighter credit environment. With HDIV, what you see is what you get. That’s a diversified, rules-based income strategy designed to weather different market cycles.
There is also the issue of dividend sustainability. Timbercreek’s payout ratio routinely exceeds 150%, leaving virtually no margin of safety if loan income declines. HDIV’s payouts come from option premiums and dividends on the underlying stocks, which are much more predictable. Even if one sector underperforms, the others usually compensate. This built-in resilience allows HDIV to maintain stable monthly payouts without expanding its resources. Over time, that kind of consistency becomes more powerful, as investors can reinvest those dividends tax-free in a tax-free savings account or defer taxes in a registered retirement savings plan.
Silly takeaway
In short, both HDIV and Timbercreek Financial advertise high returns, but only one earns them properly. HDIV’s diversified income streams, transparent structure and disciplined management make it a much better choice for long-term investors who want monthly income without taking on unnecessary risk. Timbercreek’s yield looks tempting at first glance, but HDIV’s is much more sustainable, and sustainability is ultimately what keeps the revenue flowing year after year.
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