Try Fund Library Premium
For Free with a 30 day trial!
More readers’ questions from our mailbox.
Q – What are your thoughts on BMO Ultra Short-Term Bond ETF (TSX: ZST) for income generation in a non-registered account? Is it lower risk than iShares Core Canadian Universe Bond Index ETF (TSX: XBB)? – M.M.
A – These are two very different ETFs. XBB invests in the beoad Canadian bond universe – short-, medium-, and long-term bonds, both government and corporate. ZST focuses on very short-term corporate bonds (maturity less than one year), but also holds some government issues.
In safety terms, that makes ZST the winner. It hasn’t lost money in a calendar year going back a decade. However, the returns are low, as you would expect from this type of fund. The average annual compound rate of return since inception (January 2011) is 2.18%.
XBB offers a better long-term result but can lose money in a bad bond year. It was launched in late 2000 and shows an average annual compound rate of return since inception of 4.16%. Its low point came in 2022 when it fell 11.78% as the Bank of Canada raised interest rates after the pandemic.
In terms of cash flow, XBB is currently paying 7.9 cents a month, for a yield of 3.3% as of the time of writing. ZST pays 12 cents monthly ($1.44 a year) to yield 2.9%. In both cases, distributions are not guaranteed and may change at any time.
To sum up, if you’re looking for a higher return, choose XBB. If your goal is maximum safety, go with ZST.
Q – What is your advice regarding BCE common shares? As you know, the price has decreased substantially in the last year, and the company recently cut the dividend by more than half.
My question: Is the new dividend sustainable? If it is, I would think that this stock would be a buy at this time. What is your opinion? – Tom C.
A – The dividend was cut from $3.99 a year to $1.75, to yield 5.8%. This will enable the company to grow its 2025 free cash flow, on which the payout ratio is based, by between 11% and 19%, according to management’s latest guidance. On that basis, the new payout level should be sustainable.
However, BCE is investing billions of dollars in expanding the Pacific Northwest fibre network of U.S.-based Ziply Fiber, which it acquired last year. This will be done through a strategic partnership to be known as Network FiberCo. Pension manager PSP Investments will own 51% of the partnership and potentially commit in excess of US$1.5 billion to the expansion. BCE will control 49%.
This is new territory for BCE, and some analysts are concerned that it represents added risk at a time when the company needs stability. This unease may weigh on the stock for some time.
Bottom line, the dividend yield at the new rate is still attractive, but the company has taken on more risk and the p/e ratio of the shares is very high. I suggest you approach BCE with caution.
Q – I have a small amount of iShares MSCI Europe Financials ETF (NSD: EUFN) and AltaGas (TSX: ALA) in my trading account. I’m moving these funds into a TFSA. Is it worth keeping these securities? At the moment, I have a loss of 20% on EUFN and 30% on AltaGas. – Maurice B.
A – Never transfer a losing security to an RRSP, RRIF, or TFSA. You’ll lose the right to claim a capital loss if you do. Instead, just sell the securities at the market. That will generate an acceptable capital loss. Transfer the cash into the TFSA and use it to buy back the securities you sold, or something completely different.
As for your two current holdings, EUFN had a dip in April but has been rising since and is ahead 35% year to date. AltaGas has slumped recently but is still up 11% so far this year. Both have moderate upside, although you may want something with greater growth potential for a TFSA.
If you have a money question, send it to me at gordonpape@hotmail.com and write Fund Library Question on the subject line. I can’t promise a personal response, but I’ll answer as many questions as possible in this space.
Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website.
Follow Gordon Pape on X at X.com/GPUpdates and on Facebook at www.facebook.com/GordonPapeMoney.
For more information and details on how to subscribe to Gordon’s newsletters, go to www.buildingwealth.ca/subscribe.
Notes and Disclaimer
Content © 2025 by Gordon Pape Enterprises. All rights reserved. Reprinted with permission. The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.
Image: iStock.com/Bet_Noire
Try Fund Library Premium
For Free with a 30 day trial!
Fund Library
