Living off dividends in Canada.

The number is bigger than the yield suggests

At the rates the funds here currently pay, $5,000 a month takes between $441,676 and $612,960 invested, depending on the fund. That is the arithmetic, and it is the easy part.

It is also the most optimistic version. It assumes today's distribution rate continues, every dollar stays invested, and none of it is taxed — three assumptions that are each wrong to some degree, and wrong in the same direction. Work it out for your own target.

The income shrinks unless you feed it

This is the part that surprises people. A distribution is not a coupon; it is set from what the fund earned, and it moves. 9 of the 10 funds covered here have cut theirs at least once — UMAX has changed its payment 22 times downward.

If you spend every dollar, your unit count never grows, so a cut lands directly on your income with nothing to absorb it. Reinvesting part of the distribution is what keeps the position growing fast enough to offset a declining rate. Every fund page here shows both paths from the same starting amount, and the gap after a few years is not small.

The practical version: plan on spending less than the fund pays. If you need $5,000, build toward a portfolio that produces meaningfully more and reinvest the difference.

What you keep is not what arrives

Outside a registered account, the distribution is taxed — but not at one rate, and for these funds often at close to nothing in the early years, because most of what they pay is return of capital.

That is a genuine advantage and it is temporary. Return of capital lowers your adjusted cost base, and a cost base cannot go below zero. Live off a high-payout fund long enough in a taxable account and the shelter runs out, after which every further dollar is a capital gain in the year you receive it. See where that lands.

Inside a TFSA none of this applies, which is the strongest argument for using the room on exactly these holdings. What changes in a TFSA.

The failure mode

It is not a market crash. It is a distribution cut arriving in the same quarter as an unplanned expense, with no cash on hand — so units get sold at a bad price to cover it, permanently reducing the income that pays for everything after.

Keep roughly a year of expenses in cash, outside the portfolio. It looks like a drag on returns and it is the thing that stops one bad month from becoming a smaller portfolio forever.

And note that funds paying monthly on the same schedule do not smooth anything. All ten covered here share an ex-date, so twelve payments a year means one deposit a month and nothing in between. When they pay.