Would it have been a good investment over the last 3 years compared to an average dividend paying stock?
Would you recommend it as a good investment for the next 3 years given anticipatedmarket conditions? Thanks
FTN is a split share corporation. FTN are the class A shares. In a split share security, money is raised from the public and then the company issues two types of shares: preferred and class A. The company then invests the $$, in the case into a portfolio of 15 common equities in the financial sector. The Class A shares are leveraged, in that they get a much higher dividend than the preferred shares. BUT... and this is the big one.....the company must maintain a specified net asset value per share. If it does not, dividends on the Class A shares stop completely to protect the preferred shares. In FTN's history it has stopped Class A dividends multiple times, but to be fair these stoppages have been short-lived (9 months during Covid, one month in 2019, one month in 2018). Still, this is a risk to investors. Because of this, we typically dislike the Class A shares of a split corp. FTN lost 34% in 2018, 42% in 2020 and 6.7% in 2022. Its 3-year return is 6.4%, hardly at all impressive compared with straight equities in the sector. Here is a primer on split share corps.