Investment Q&A

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!!

Q: Can you go over your thoughts (other than sector differences) between these 2 types of products. I know they both use covered calls to generate additional income and that one is a split share.

Would a product like umax typically keep its payments at some level more consistently (as there is no preferred share to protect)? Is the upside (downside) potential higher on the split?

That is what I am thinking are the main differences but wondering if there are any other differences in how you see them.

If one was lookig at a swap from FTN to umax to keep a similar yield and lower leverage risk is that a reasonable view?

Q: Can you provide an 'idiot's guide' answer to what FTN is and how it works.

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

Q: I have a question about FTN.A (and other split shares) and exactly what happens on the 5 year termination date.

I gather that the preferred could be redeemed or rolled over at whatever the new rate is (not 100% sure on the redeemed part) but on the class A are they redeemed and reissued (so your value stays the same over a different #of shares) or do they just truck along?

I'm guessing the latter as they need to match with the preferred. Can they be tendered if the price is lower than the windup amount (which is rarely the case I know but this is just about understanding the mechanics)?

And lastly are they ever wound up in practice?

Q: I'm having trouble understanding why FTN keeps having these unexplained price drops!!Last time it happened I bought a lot of it and sold it for a hefty profit a few days later,which I then invested in FTN.PR which just raised its dividend to 9.25%.Now FTN is back down to where I bought it a few weeks ago!!!The yield is 22% and as long as the NAV remains above $15 it will pay the dividend,NAV is $16.82 as of Sept 15.I know you're not a fan of split shares or short term investing,but would FTN not seem like a screaming buy here???

Q: Regarding Scott’s question of 7 Sept on FTN. The NAV as of end Aug is $16.50 and the company announced its regular monthly dividend for Sept. Your answer doesn’t match the above information from the company’s website. Do you know why the share price has declined so dramatically over the past week? Thank you

Kenn

Q: Hi 5i!

Love your insights provided across your site. Keep it up!

I know you’re not fans of split corps, but I have to ask (as an observer of this stock), what is happening the past week to FTN?

Q: Please comment on these high dividend payers. Are they returning capital to achieve these lofty rates? How secure are the dividends?

Q: With the recent drop in prices, are any of the above attractive for dividends and price appreciation?

Q: I know that 5i has not generally recommended these split corp funds but I would like your take in this scenario. We know they bottom when asset value drops below an acceptable number and this has occurred. I recall years ago the same thing happened and yields disappeared and values plummeted. When the market bounced back however each roughly doubled and paid lucrative dividends until of course the next major downturn. My question given that we all expect new highs some day, is whether these would not be nice tuck ins today that will eventually appreciate if not double and begin paying great dividends?

Q: What are your thoughts on this fund now that a lot of the bleak scenarios you referenced in past questions are now upon us? Also, how does Quadravest rate in your opinion of fund managers? Thank-you.

Q: Could you please advise on the status of this stock - is the dividend being paid - you would buy, sell or hold FTN?

Q: I recently purchased FTN .to (Financial Split Shares Corp) as the NAV dropped below $15.00, the dividend was cancelled, and the share price dropped to $3.50 The NAV was $14.45 at Dec 31. Since Jan 2 the US and Canadian bank stocks have started a bit of a recovery and it seems like it wont take too much to regain the $15.00 NAV and dividend reinstatement.
What is your outlook for Canadian and US banks for the coming year and am I treading on thin ice here?? I know you aren't a particular fan of split shares, but it seems like there would be some nice capital gains and dividend if the NAV does go back over $15.
Thank you so much for your valued opinion.

Q: What is your opinion on recent decline and reversal on this company. Is it a buy ?

Q: About ALA, FTN, PIC-A, how safe are those dividends ? For income would you buy any ? If so in which order. If none are buyable which other high dividends payers would you recommend ?
Already own over 20 dividend payers but mostly are under 5% except BYP, KWH, BEP, NWH.
Thanks for your help.

Q: How liquid do you think this would be if I had 1000 shares to divest if and when shares strength started to wane?

Q: Recently I read an article in my local paper written by Peter and he warned about Split corps and inferred that people are "sucked by the high dividend and went on to say how much better slow steady growing dividend payers are. What I have found about these investments are that they get no love in the investment community but are growing in number and every over night offering is fully filled, and have (if purchased in the right context to your individual needs) preform well. For me a 3% weighting in ftn, 2500 shares, purchased in Feb of 2015 at $8.90 has a cost base of $22250, current price is $10.50 ish =2500 x 10.50= $26250 ( a $4000 gain) BUT the sole purpose for holding this was to add to my living income in retirement. At 2500 x .1258 I am receiving $ 315 a month that I either reinvest in growth stocks or use to spoil my grand kids. I went into this eyes wide open knowing they can suspend payouts as CAN any dividend paying company (ie energy) You say they do not grow dividend well a 4% paying company is probably never going to give me the same payout in my lifetime left. In short I certainly see the pro and cons of these but do not consider myself a sucker for being in one.

Q: I like the dividend from ftn but don't really understand what I'm holding if I was to buy it. Could you give simple explanation how it works and if it's good for holding long term. By long term I mean Warren Buffet style, "for ever".

Q: A comment rather than a question. What explains the 15% yield? Roughly a quarter of the payout for 2016 consists of a "capital gains dividend," rather than an eligible dividend. The portfolio itself produces dividends of which only a portion is used to cover the dividends of the preferred shares. The class A shares do not pay a dividend if the NAV of the total portfolio falls below $15, which happened in the recent past. However, over 2016 the Canadian and US financial holdings did very wel. The covered call options must have done very well also, but because of that the NAV seriously underperformed straightforward asset growth - compare FTN with ZEB and ZUB over the last year. So FTN's asset growth underperforms under bullish conditions. BTW, at the moment there seems to be a 30% premium on the NAV of FTN.

Q: How is it that Quadravest is able to keep generating a 15% annual return on this product. I know they use options to juice the dividend yield they get from the underlying companies. For 18 months from mid 2011 to end 2012 they did not pay a distribution on FTN so there is that risk. It just seems to me that this is one of those situations where it is to good to be true? Am I right to be wary of the product as I don't understand how they can maintain the high yield.

Thanks Kenn