SPLIT SHARE CORPORATIONS EXPLAINED | DIVIDENDS YIELDS ON STEROIDS FOR HIGH INCOME SEEKING INVESTORS!
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- เผยแพร่เมื่อ 17 ต.ค. 2024
- #dividends #investing #passiveincome #tsx
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The 5 main Takeaways to remember about to Split corps:
They are designed specifically for Income investors trying to squeeze out as much income as possible from a portfolio of High quality Dividend paying stocks
It's called a split because there are 2 classes of shares, each with their own stock symbol. Preferred shares, and Capital Shares (Sometimes called Class A shares)
The Preferred shares are not worth looking at in my opinion as they are essentially like ordinary preferred shares and have a low fixed dividend yield . If you want consistent and safer income it's much more lucrative to invest in Covered Call ETFs.
The Capital Shares or Class A shares is where the Yield power is. Using Leverage and Covered Calls, the fund is able to pay high dividend yields which in most cases are over 10% Annually.
Split Corporations typically have a NAV threshold or a “NAV minimum” in order for the dividends of the Capital shares to be paid out.
Split Corporations, or Split Share funds are similar to Dividend ETFs. They typically hold a portfolio of Dividend Paying stocks.It can be 10 stocks, 50 stocks or even 1 Stock believe it or not.
It's called a Split because there are 2 classes of Shares, Preferred Shares and Capital Shares (Sometimes called Class A shares). Each one trades under their own stock symbol and has a separate NAV… or Net Asset Value. More on that a little later…..
For example, a popular Split Share fund in Canada called Dividend 15 has the Preferred shares listed with stock symbol DFN.PR.A and the Capital shares are listed with the Stock symbol DFN.
Now i won’t be talking about the Preferred shares too much because after analysing pretty much all the Split share funds on the Canadian Stock market, i came to the conclusion that they are simply not worth it. Like Preferred shares in general, they are classified as “Fixed Income” Securities, like Bonds. The ones I analysed tend to have a fixed dividend Yield of about 5%-5.5% so you can easily find better value elsewhere, like with a Covered Call ETF.
It's the Capital shares that are interesting and have the really high dividend yields.
So how are the 2 types of Shares funded or how do they generate the dividend payments to us, the shareholders. Well , for the Preferred Shares is pretty simple, they are funded with the dividends from the dividend stocks within the portfolio. Also, in terms of stock price fluctuation, they tend to move very little.
The Capital Shares are funded by any left over dividends plus other income producing strategies the fund manager uses. The most common method is using covered calls.
I absolutely love the Covered Call strategy and own a lot of Covered Call ETFs.If you don't know what a Covered Call strategy is, check out my other videos where I discuss it in detail.Simply put, it's a 0 risk strategy to boost the dividend yield. This is achieved by selling call options on the stocks within the portfolio.
It’s now time to discuss the risk involved with these funds. There is essentially 1 but very important risk to explain, and this is what took me a while to understand fully.
Like ETFs, the value of these funds, which changes daily with stock market fluctuations is tracked with a NAV, or Net Asset Value. You can see the NAV on the website for each of the funds, just like ETFs.
Now the NAV of a Split Share fund is calculated by combining the value of both the Preferred shares and Class A shares because they each have their own NAV. Combine the 2 and you have the “UNIT NAV”. So 1 UNIT NAV, is equal to the NAV of 1 Preferred Share and 1 Class A share.
And here’s the catch, … If the Unit NAV of the fund is below a certain threshold, the Class A shares will not get the monthly dividend. The dividend will only be paid out if the NAV is equal to, or higher than the NAV threshold. Almost all the Split Corps i analysed have a NAV threshold of 15$. It seems to be the common number… I guess it's just the way they are set up. Keep in mind this rule does not apply to the Preferred shares , as they are a fixed amount. This rule only applies to the Capital Shares.
Short Split Guide by Brompton Funds: www.bromptongr...
What's up everyone!
lot's of people asking about Split Corps, hope you like the video. Let me know if you're going to invest in one of the Split Corps mentioned here: Brampton Split SBC & SBC. PR.A 10:04 | Dividend 15 13:20 | E-Split 16:26
Thanks for that awesome video !
It's a pleasure!
Was looking at DFN and noticed they missed Oct distribution as the nav unit was not less then 15. Were you surprised to see this Adrian?
Learned something new today! Split share funds! 👍
HOW IS NOT EVERYONE TALKING ABOUT THIS?? DIVIDEND GAME CHANGER. THANK YOU.
because you give up virtually all opportunity for growth to receive income. Fine if that is what you want, but my balanced portfolio of stocks and *some* growth ETF's performs far better overall. Again, if you just want income and ignore growth, go for it. If you want to grow your portfolio, read between the lines.
@@paulnieuwland3460 Eventually, we would have to sell the positions. Basically, we just hope that when we sell, the NAVs of those dividend ETFs do not drop too much.
Excellent Financial Information Video!! I Thank You for taking the time to make this video public on TH-cam.
Thanks Adrian!! Got my first DFN dividend yesterday, feeling more confident to buy more!!
Congrats! DFN is a good one! Stay tuned for my next video where i review all my favorite Splits and the reasons why.
@@PassiveIncomeInvesting Can you also review the Splits Share Corps in the US?
They are not called split funds in the us but you have a few like opp . But you guys have a lot of good choices . I made a video specifically for us ETF’s. And another on the way for us closed end funds
Do you think they will renew there contract since it's supposed to expire 2024. Also, they have missed payments several times last year..
@@noorfaris6348 I just rewatched this video and Adrian does say that they normally renew the contract. If they don't they have to pay you the NAV for your shares so you won't lose money.
Hi Adrian, i took notes on every single videos you made, especially your key points and the final summary of each video. it was means a lot to me. Thank you for the excellent videos you spent a lot of time making. Many thanks to you.....
Glad you’re learning Nana . Thanks an for the kind words !
I enjoy the transparency in your videos. I'm just a young guy who recently started working - my first goal is to build a portfolio that'll pay me $100 a month. Thanks!
Thanks for the feedback! Excellent first goal, you can do it easily. Good Luck!
That's fantastic, i wish i would have been as smart as you when i first started my career journey. Best of luck and stay frugal and you wont regret it.. :)
Thanks, we got lucky and found good saving and investing info early on! But it's never too late to start. Good luck to you too!
Thank you and congratulations Erica and Adrian. You've built a large investment portfolio and you are serving your fellow man by sharing how you did it. Furthermore, your videos are very educational and undoubtedly, have opened the eyes of many. I understand that you are Canadian citizens and the majority of your investments are through Canadian Exchanges. My question is, how does an USA citizen invest in the Canadian ETFs and Split Share Corporations? Any information you can share would be appreciated. Thank you.
Thanks for the feedback , stay tuned for the next video !
There might not be much capital appreciation, but if you reinvest your dividends, you’ll get growth from the compounding effect. What I’ve noticed with DFN is that the annual dividend does not change very much, if at all; so your dividend yield % will vary depending on how much the stock is selling for at the time you purchase them.
The dividend is set in stone , it will never change and you are absolutely correct about Compounding interest
Two other Canadian youtube channels on investing suggested to check you out...super glad I did and I subscribed...DFN and PDV are two that I have held for over a decade...LOVE them totally!
Hi Adrian,
I discovered your videos not too long ago and was introduced to a few interesting investment products.
Thank you for doing all the legwork before introducing the investing!!
Thank you Adrian , i had never heard of this split share corp before, very interesting. thank you
My pleasure!, just make sure you do your own research before investing!
@@PassiveIncomeInvesting 100% thx
Never knew about these and now they are in my "dividend income" portfolio. Thanks!
Excellent!
You asked me to leave more comments so here it is, this video is great and to the point, now as a Brazilian with a webull account, can I apparently invest on these Canadian split funds, what is Canadian law for dividends to non Canadians? I think the US holds 30 or 15% in tax of their dividends to non Americans? PS. I'm British as well, but the British brokerage are shit, can't find any stocks and funds of your portfolio, that's why I used my South American citizenship to open a webull account. Cheers loving your channel now lol x
using these heavily to help build my portfolio faster.... $75/month dividends on total holdings of $7900 sure helps :)
Great video. Eye opening for me. What happens to your money when the fund expires, if it expires?
You get whatever the nav is
I didnt even know split share corporations exist until I watched this channel.
Yeah ! It took me a while to find them, learn about them and fully understand them . You’re lucky you found my channel 😊
I can’t find any Split-share funds here in the US. Do you know of any I can buy?
Very good sharing. I have never known the split corporation fund existed. I found it very helpful and started investing ENS. Thanks Adrian.
Hello, it’s great information which you shared here. I am just wondering about FIE ETF it has 7% dividend and it’s growth. If it was you will you prefer FIE or covered call or split income
Adrian do you trade covered call options yourself on specific stocks you hold?
Nope, I don't trade options at all, like i don't trade stock . I only hold funds that use the strategy. If i did i would have to change my channel name to ACTIVE Income Investing :)
great video!!! Adrian, a new subscriber ,got just one question , can we hold "Split Shares" in ones TFSA account, really appreciate your help. keep the Good work!!!
Yes you can! I hold a lot of my Split funds in my TFSA since they give such high dividends. This way they are all Tax free!
13% return is nuts, very good way to reinvest the dividends into a growth stock if you want to reduce risk. I cant really see any reason why this would be a bad move.
Great video, if I hold this in a taxable account can I transfer in kind to my TFSA or do I have to sell first
Sure you can
Very helpful video. 👍👍
Very informative! My question is: If these split shares are so great, why isn't everyone doing it? Please let me know, as I'm very interested to learn more. Thanks so much.
Because It’s not mainstream and they’re mostly misunderstood .... like a lot of other great things out there
Thank you for explaining this!!
You are a Gem of a person my friend!! Awesome video
Wow, thank you!
Passive Income Investing When will you post the video on which Split Corps are the best!
@@Gangsterslay hey, i'm filming it right now, should be out in a couple of days. stay tuned!
was able to publish it tonight! th-cam.com/video/lhxJv8gJrfk/w-d-xo.html
Concise and useful information. Thanks.
Hello
Which platform or bank can we use to invest in these dividend funds?
For BMO funds, should we buy them through BMO only?
No , these are publicly traded funds in the stock market , you can use any platform to purchase them . They trade like regular stocks
rewatching
Hey! Can you tell me if there are any benefits to hold both DFN.TO and DF.TO in the same portfolio? Thank you!
I can’t see any
Thank you very much Adrian, your video is very educational, i learned a lot from you. Could you talk about the negative growth dividend rates from Split Class A shares? How it's effected to dividends and NAV? Thank you so much and wishing your success and health.
You’re welcome ! . Dividends are usually set in stone for split fund class a funds . They are already very high so they don’t need to grow 😉. Don’t forget what these funds are designed for : income
In your example of SBC at 11:25, with the stock price of $8.70, the NAV of $7.98 seems to make sense. I was trying to understand why the unit NAV is so high at $18.03.
So is the unit NAV, $18.03=$7.98 + $10.05 (money from covered calls + dividends)?
The nav is simply what 1 share is worth . The unit nav is what 1 class a share and 1 preferred share combined is worth
Great video and well explained!
Thanks , appreciate it !
Thanks for the very informative video! How do you find split corps? I own BK which has a MER of 0.65% but had I known about SBC with MER of 0.55% at purchase time I would have chosen it.
Good question , I found a bunch within my td broker . When you find one , they will list “similar “ stocks so I basically looked at all of them in the tsx . Also you can look at the website for one fund and see if they have similar funds . This is how I discovered all of them , my favourite being brompton funds and Quadravest . I had bk as well but I don’t like the structure where the dividend varies monthly , I prefer sbc for the 6 banks . Make sure to check out my second split corps video where you can download a nice list. Also don’t be too concerned with Mers . If you like the fund and it’s giving you high Income consistently ...paying the mer is worth it
@@PassiveIncomeInvesting Awesome, thanks! About to watch the second video now
Let me know what you think !! 😀
Thank you for the detailed explanation bro
Instead of bonds, would you say that one can invest in a preferred shares ETF as an equivalent risk profile?
Ya pretty much.... but I’d rather invest in covered call ETF’s , they are safe enough. If you ask me
Hi Adrian, Great video! Can we DRIP these split stocks on TD Web Broker or Questrade? Do they charge commissions for Drip?
Hey there’s , well you need to make sure it’s drip eligible first . I’m pretty sure ens is . Then you need to ensure your broker offers the drip service . Usually drip is free ... no charge
@@PassiveIncomeInvesting Thanks for your reply 🙏
This is the explanation I’m really looking for!
Hey bro, awesome video and very informative for a newbie to Split Share. thx 🙏🏽
Thanks brother, Glad it was helpful!
Stay tuned for more INCOME geared stock picks!
Thank you and I have learned something new
Great !
Thanks for the video! What do you think about FFN?
Higher risk split fund with higher reward !
Can you do a video for US companies?
Im having awesome returns from DFN and DF, bought them when they were 50% cheap. If somethings goes wrong, thyre easy to sell.
Or …. Nothing will go wrong if you never sell them
What happens if the covered calls are exercised? Then the fund manager has to sell the underlying stock at the strike price (hopefully recooperating the original stock buy price or more) and buy back the stock to maintain the portfolio holdings. Is this correct?
Yeah but all that’s handled by them
One thing I am having a hard time wrapping my head around is: if something like DFN has such an amazing track record and the highest yield of a corp with such a good track record, why wouldn't we want to invest all of our money in that one fund? Is it simply for the fact that past performance does not indicate future performance, despite a really solid past performance?
Good question !! You can if you want … but to me it’s irresponsible, you gotta diversify . Also it’s a leveraged fund . Think of it as the fund manager using margin . It’s higher risk …. But everything has a different gauge on “risk “ don’t they ?😎
@@vladimpala3847 What are YOU talking about? I was referring to DFN in particular. If you don't consider never missing a dividend payment since 2004 and then missing only five months in 2020 because of covid solid performance, you need to go back to some sort of classroom and learn a thing or two.
I think it was 4 they missed , not 5 😎
@@PassiveIncomeInvesting more to my point, my good sir! 👍
Great poetry … it’s how all funds are designed and are meant as a fail safe to preserve the fund long term . I confirmed this with the multiple split fund managers . It’s nothing to be afraid of . Like the dark 😎
Why my Scotia bank private banking financial advisor didn't me ethis split share etf?
She only sold me their structured notes and mutual funds.
Because they don’t make money off that lol
@Passive Income Investing , Adrian, in your first List with the investments, you were missing at least 'Bonds' i would have even added 'Cryptos' and 'commodities'. one could argue about the last 2, but BONDS....!?
You mean my spreadsheet package ?
@@PassiveIncomeInvesting Hello Adrian, No, the Investments mentioned in this Video 0:19 to 0:25
Can you recommend a good split share fund here in the US? 😀💰
They don’t have any there
@@PassiveIncomeInvesting no wonder I couldn't find any 🤣
I'm. Confused. If I buy a stock 1 week before ex divident date and sell it on record date. Will I still get the divident?
Yes
As you mentioned, the success rate of these funds are pretty high. Would you care to elaborate at @09:05 why you would not put all your money in split share despite the high yield?
It’s my personal opinion basically , if you have too much , your income can be impacted heavily during a market crash , even thought it might be temporary it’s something I want to mitigate
Thanks Adrian! What do you think about EIT? Is it also a split share corporation?
Great question!! I had the same one myself as EIT has some characteristics of Split Funds: It uses Leverage, and It has Preferred Shares (2 sets) and Regular shares. It does not however, use Covered calls. On their site they officially say "Closed-end fund" so in my view it's kind of like a "HYBRID"?? I even emailed Canoe with this very question. No answer back yet.
Im just curious to know how you would make money if the share price keeps dropping? Looking to buy ENS but the price is already down 21.80% so after 2years and 6months you would of only made 1.2% = 56$ in profit out of 4500$ invested?
You hold it forever , forget the price that doesn’t matter
Hi Adrian what is the risk of the split Corp funds expiring ? Would that be a big risk of losing a big chunk of your investment? I just received my first dividend from Brompton. It was sweet but going to keep it at 15% of my profolio as I don’t want to over invest in one stock. Thanks again for your videos and tips.
Hey Rob , they usually renew it when it’s close it expiring so I would t worry about that . Even if it expired (the fund is terminated) you will get the nav value at termination returned to you . So if the nav of the class a shares is 7$ at termination you get 7$ a share . So if you bought them less than the nav price you actually make a profit . 15-20% is my range also . Still can’t ignore the fact that these are huge money makers .
@@PassiveIncomeInvesting I bought mine for $10 a share. Is that a decent price based on nav ?
Which stock ?
@@PassiveIncomeInvesting SBC.TO
Don’t worry about it Rob that’s a really low risk split . It’s the 6 big banks of Canada ! At 10$ your making 12% interest a year . Look at it it this way : after 8 years or so, you will make 100% of your money back
How as a U.S. citizens can I buy these split shares?
You should still be able to buy them via your. Rocker with the stock symbol . They are listed on the Canadian exchange . I’m in Canada and I can invest in us stocks no problem . Keep in mind you will have to pay withholding taxes and I think it’s really high for you guys
New subscriber here. Thanks for the info on split shares. What will happen to these in an environment where interest rates increase?
Nothing , this is equity , not fixed income like bonds
Thank you for the great explanation! I'm curious what would happen if a split share fund were to "terminate"? What would happen to you investment in that fund?
You would get whatever the nav of the fund is worth , in cash . I thing to worry about , the popular ones always renew , no reason not to , there making management fees
@@PassiveIncomeInvesting Well, if that ever happens, would you get the cash automatically? How does the cash go in to your account?
Yes
I'm guessing split share corps are then better suited for individuals who prefer an aggressive portfolio because of the leverage being used correct? Because most funds are unsustainable at 10% dividend yields. I think I would make a split corp a small % of my portfolio since leverage is a little on the scary side...great when you're making money, but can destroy you if the market goes the wrong way. Plus does it concern you at all that split shares corps like DFN for example have a downtrending price since its inception? The price continues to fall over time.
Price trends don’t bother me . I buy and hold . Splits are for aggressive income , and I agree they shouldn’t make up the bull of a portfolio . I’m comfortable at 20% very important that not all splits are created equal . Some are actually very safe and have never missed dividends or rarely miss them . I always preach to have a balanced approach
Solar energy etf recommenced. . ? Solar energy company growing
any idea how much mgmt.fee they.charge?
They are on their websites
Difference between yield vs dividend payments?
Interest rate vs interest payment
I am not focused on dividends at the moment as I am focusing more or growth
Great video
New subscriber here
Happy to support a fellow finance channel
👍😀
Thanks for subbing. To each their own!
Is split share corp more risky then covered call etf?
Yes because they have leverage
Hi is there a MER on theses stocks ?
Yea of course , they are managed funds so they have fees like ETF’s . They can be found on their website ( some are easier to find than others ) or your broker might have the mer info
Isn't most of the stated dividend from a split corp. a return of capital?
Roc isn’t bad like most people think . Watch my return of capital video !
That cash register sound is truly and deeply annoying. It also has the bonus of being so much louder than the underlying sound. It's the worst, but the rest of the video is alright. Thanks for the explanation, I used to have FTN, but sold them after they did a reverse split.
You should have kept it like I did , but instead you lost a bunch of capital and for what ? A lack of patience ? I lost 60% of my shares and still have a 10% yield .
Where can I get the NAV per unit for DF and DFN?
On the funds homepage. Scroll down to the bottom , you will see the unit nav . Subtract 10 dollars and that gives you the nav for the class A shares
@@PassiveIncomeInvesting So the NAV per unit for Share A or both must be higher than 15.00 to get dividend?
Unit nav is both of them put together . The unit nav needs to be 15$ or higher , correct
@@PassiveIncomeInvesting Thank you Adrian! I guess DF will get dividend for share A since its price increased a lot last week.
No it’s under 15 unit nav , df is trash ,
Thanks for your help really good video and by the way
FORZA AZZURRI
I love your videos. Very educational and not repetitive. However, I don't appreciate what you said in minutes 20:35.
What did I say ?? I don’t get it . Why don’t you appreciate it ? You should be happy that I’m honest and lead by example by investing every extra I get . You should do that also
These are interesting but I fear the fund getting terminated. Basically you can take a major loss if that ever happens. Why do they even have that date? To freak us all out...?
They have the termination date because that's how these funds are set up. I was skeptical at first also, but when in doubt, look at the history. They keep extending the date. Some have been around for over 10 Years. Check out the second part of my series on Split Corps where i discuss my top 5 picks (they are the safest ones)
Another thing, look at what companies are in the fund, they are all Big Cap, Blue CHIP Dividend Aristocrats.
These are an option for Income Hungry Investors, if you are too scared (like my grandmother), you can always invest in regular Covered Call ETFs :)
Hello Adrian,
I am near to 50 years. I came here as immigrant. Most of my life in canada i have done machine operator job. So don't have much savings. Though my son is graduating this year. so I am planning to start investment as from april 2022 i dont have to pay for his graduation. So far we have max 15000 dollar in our saving. No TSFA. No RRSP. Fact is cannot save with such a low income. But When i thinking about my retirement in few year , I really get scare how we will sustain. So I am planning to start invest 100 dollar everymonth . Can you please suggest where to start? No idea about investment.
Paresh patel
Start by opening a self directed tfsa account my friend
is it still good to buy DFN?
Hard to answer ! It really depends on many factors including your portfolio, risk tolerance and goals
Split share funds. It’s a no for me lol.
NEVER STOP LOOKING 0_o
Call me Fox Mulder :)
@@PassiveIncomeInvesting FBI Special Agent hunting for paranormal dividend potential xD
Hahaha love it. A Netflix limited series
P