Q: I generally like and follow your advice when making an investment decision and own the balanced portfolio,plus many stocks in the other portfolios.But I strongly disagree with you on class A split shares,especialy ftn.I've used them for years and have made a great deal of money on them,for example I purchased ftn at around 7.50 paying 20% dividend,it now sits at 10.15!!They are definitely not a buy and hold stock,but can produce a massive amt. of income at times.Dfn used to be a favourite,but went through some tough times and is slowly recouvering!!But not to worry,I still value your advice on most everything else!!
5i Research Answer:
This of course is what makes a market. Every single trade has an equal and opposing view. Our main concern with splits is that investors buy them for yield, and do not understand the NAV restriction. Unlike a regular corporation, dividends can just completely stop, rather than see a reduction. Even FTN has stopped dividends before, in 2018 (one month) and again in 2019 (eight months). It fell 40% in 2020, and for a conservative investor looking at yield that type of drawdown could be a disaster. But certainly they can do well at times, also. FTN is up 51% this year alone. Buy and hold, however, is not so robust. The stock, now $10.16, was $47 nearly 20 years ago (2007).