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Opinions John Hood
Dividend Growth Split CorpDGS.TODON'T BUYJun 02, 2016
John HoodStock price when the opinion was issued
As of Jun 19, 2026. Market Open.
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Effectively a creation of a preferred share and a capital share. If the stock performed quite well, you are getting a leveraged investment effectively on the preferred share. EG, on a $60 stock, you could have a $30 preferred share and a $30 capital share. If the capital share goes from $60 to $66, you have now gone from $30 to $36 giving you a 10% improvement in terms of return. What people don’t realize is a) the leverage, but b) preferred shares in the structure have to be paid out first. Consequently, the way these are structured is that the dividend coming from the underlying portfolio, simply pays the dividend to the preferred share. If they are paying a dividend on the capital side, that is typically coming from expected price appreciation or option writing. If you are a higher risk investor, it is something you could consider.
A vehicle where they split out appreciating assets from the dividend. They pay the dividend stream of income to another holder, and you get a leveraged play on the dividend stocks without the dividend. Not a very good idea to own one of these in a down market. When you think markets are going to go the other way, it is not a bad way to get capital appreciation.
Split Corps. When he sees yields of 13-14% and predicated on covered calls and preferreds, he does not see consistent 13-14% yields in the stocks. He is leery of the yield.