Opinions
John Hood
Dividend 15 Split Corp.
DFN-T
DON'T BUY
Dec 27, 2017
$10.930
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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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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.