The ideal TFSA stock: a 7% yield that delivers consistent cash

Contrary to what the name suggests, I believe that the Tax Free Savings Account (TFSA) used as an investment vehicle is much better than a mere savings account. Every contribution you make to a TFSA is with after-tax dollars. This means that returns on eligible investments you hold in a TFSA are not subject to tax on interest, capital gains, dividends or otherwise. The key is to follow the rules and be disciplined in how you use the account.

The key to creating a successful, self-driving TFSA portfolio is identifying the types of assets you can hold in tough economic conditions, not just those that deliver great growth while the market is already doing well.

A stable, monthly dividend-paying stock can be an excellent way to continue to enjoy returns on your investment, even when the market is not doing well. Granted, you can feel the impact of lower stock prices. However, a well-capitalized and well-managed investment can continue to fill your account balance with cash while you wait for things to return to normal.

Diversification is another key element in creating a successful, self-driving portfolio. Today I will discuss a choice that checks all the right boxes, especially for those who are not afraid to take a slightly higher risk.

Kano EIT Income Fund

Kano EIT Income Fund (TSX:EIT.UN) is a Canadian closed-end fund that trades on the TSX like stocks, but offers investors exposure to a group of income-producing assets from Canada and the US in a one-ticket asset. The $2.69 billion market cap fund manages a diversified portfolio consisting of some fixed income securities, but primarily dividend stocks from the US and Canada.

Instead of betting on the cash flows of one company to maintain reliable returns, you can tap into the potential of dozens of income-producing assets in one investment. One thing I like about the fund, and that investors with a higher risk tolerance will appreciate, is the fact that it uses leverage to boost the returns of its portfolio.

The fund effectively uses approximately 20% of the portfolio value for this, which means that it invests 120% of the portfolio value by borrowing an additional 20%. This tactic works well when it comes to increasing returns compared to what investors would otherwise get by investing in the group of stocks individually. The reason some may not like the leverage is that it is a double-edged sword and potentially increases losses.

How is the income?

At the time of writing, the Canoe EIT Income Fund is trading at $16.96 per unit. The fund pays its investors $0.10 per share every month, which translates into a juicy dividend yield of 7.26%. The returns of individual stocks and fixed income assets don’t even come close to the kind of returns this fund can provide.

In June 2025, the fund reported total revenues of $200 million and an increase in net assets attributable to common shareholders of approximately $0.95 per unit. However, it is important to remember that many of the positive results came from realized capital gains.

Silly takeaway

Canoe EIT Income Fund provides a simple path to investing in a diversified group of income-producing assets in the form of a single ticker. Leverage increases potential returns and losses, but can be better overall in the long run. I think this exchange-traded fund could be an excellent long-term investment for a self-directed TFSA portfolio.