Quote:
Originally Posted by Iceman-19
What's the bad part of it being a split corp?
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Split share corporation - Wikipedia, the free encyclopedia
Dividend 15 - Quick Facts
"How the dividends are paid:
The Preferred shares pay fixed monthly dividends of $0.04375 each. They are funded from the dividends distributed by the 15 companies in the portfolio. The preferreds do not participate in the growth of the 15-stock portfolio.
Class A shares participate in the growth of the 15-stock portfolio. They also receive monthly cash dividends of $0.10 each.
The Class A dividends are “predominately funded by the additional income earned from the covered call writing program,” notes a company publication. That is, income is collected from selling call options on the 15 stocks, and is supplemented with capital gains realized in the event the call options are exercised. Another source of income is the excess in dividends not required to fund the preferred shares dividend."
If I even make an attempt to explain why the split corp route can be dangerous it will just sound retarded... but here is food for thought...
The major risk IMO, is that as the life of the split corp comes to an end, there will be very rapid sell off, if you cannot get out in time you will see your share value plummet like a rock with no hopes of recovery. The trouble is, when will people start to pull out? 2012? 2013? 2014...? If you get caught on the slide down, it is very likely that all the profits from dividends paid will be lost thanks to the share value.
On the flip side you can go the preffered route and secure a share price that will not fluctuate, but you can kiss that 1% montly goodbye and take your 4.375% yearly... there are other, better preffereds out there at this yield.
In a rush!!!! G2G!