Opinions
Richard Croft
Dividend 15 Split Corp.
DFN-T
COMMENT
May 10, 2016
$10.490
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DON'T BUY
DON'T BUY
You get a magnification of performance both on the upside and the downside. So much easier to just buy the individual holdings, collect the dividend, get the capital appreciation, and not pay a fee. Why buy this manufactured security when you can buy the real thing? Doesn't trade well, and you're locked in.
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WEAK BUY
These companies are hybrids created by the big brokerages and owned by banks like Woody Gundy. They enhance yield by splitting off the growth portion of a stock from the yield-paying portion. Usually, this works, but you're giving up growth opportunities. Fees are involved, though. He doesn't own these derivatives. Not a bad idea for a retail investor looking to increase income.
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HOLD
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.
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If you think interest rates are going to rise at some point later in the year, these things will continue to do well. This is leveraged to a certain sector in the economy, and if that drops, you can suffer. The return you are getting on this is the yield. If you Buy call options on this, that would play out and you do very well. This is a leveraged exposure to a sector that has done very well.