Opinions John Hood
Dividend 15 Split Corp.DFN.TOCOMMENTFeb 16, 2016
Stock price when the opinion was issued
As of Jun 08, 2026. Market Open.
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Takes 15 stocks, splits them into preferred and common, and here you're left with the common shares. The preferred shares get guaranteed dividends, and the common shares get everything else. Coming to more of a historical long-term level, which is stable. People buy this for the dividend, not for capital gains.
Overall, looks like a stable investment. He wouldn't worry about the dividend. He can't recommend a buy on it yet, as he'd have to do some more research to fully understand it as well as the dip in the chart.
They take a basket and they make a common shareholder that they give double dividend by leveraging and a preferred shareholder that they pay 5-5.5%. Sounds great but the basket of stocks has to go up significantly in a rapid way if not you lose money. This is the opposite to buy and hold.
They take bank stocks, or insurance and in some case energy companies, and then they split it internally into preferred shares or common shares, and then they write covered calls on the common shares. They are getting yields around 13-14%. That brings up the question: How is that possible? He’s been doing coverage calls for 30 years, if he get 10% or 12% he is very pleased, but you’re never going to do that consistently. What they’ve got is a very very good yield but if you take a look at the volatility, and there's a lot of volatility, in 2016 the market was down 15% and this stock was down 60%. In 2007-2008, the market was down 60% and this was down 80%. It’s a yield play. Never trust the yield. You have to look behind and see what’s going on there and what’s creating the yield. He wouldn’t touch this.
Basically a closed end fund. This pays about a 14% dividend. When you look at the stocks in this fund, primarily banks and some of the oils, none of them are paying that kind of a dividend, they are paying 4%-5%. When you find something that pays 14%, it is not time for a pat on the back, but is a time to say “look at this more closely”. The company uses Covered Calls on this. He has been using Covered Calls for 30 years, and has never been consistently able to get 14%, so there is something else going on. There has to be leverage of some form or another. You need to look at this more closely and see what is going on.