BEST PASSIVE INCOME YIELDS? | Everything you need to know about Split Share Corporations in Canada.
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- Опубліковано 19 чер 2024
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Split Share Corporations. Are these the best choice for high Passive Income?
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Intro (0:00)
Quick Overview (1:00)
Brompton Funds Proxy (4:00)
How much do these cost? (10:30)
Performance (13:43)
Look At Alternatives (20:25)
Investing vs Trading (22:44)
Major Considerations (26:00)
Drawbacks (28:15)
What Is Your Backup Plan? (37:20)
Outro (38:15)
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Are Split Share Corporations the BEST source of high yield in Canada? We'll answer that question in today's video.
Since the capital of split share goes down and income distribution is taxed favourably, the overall tax implication seem to be much less... Do you agree?
Great content. Can you make another similar video about Call Option ETFs like ZWC, HYLD and HDIV?
Best explanation of split share funds online hands down. Thank you Mark.
This is the style of content I'm here for; more like this from Marc please!
These are PERFECT for investors like myself who is a passive income investor. 👍Keep that cash flow coming in on diversified investment vehicles. Of course I don't have ALL my stocks in split corps. Adrian recommends no more than 20%. Sleep at night and think passive for part of your portfolio. 💯 LOVE Dfn and pdv...I am looking into RS now during this massive pullback and for a global income GDV. I learned a from experience as a passive investor and recently from Brandon and Marc's invited guest "Adrian" on Passive income investing youtube channel. We have Adam with Brandon and Marc and they have referenced Adrian as well. We are so fortunate as Canadians to have these 3 points of view. Its amazing! Its a gift that keeps on giving. I have subscribed to all 3 of your YT channels...great summary Marc!😀🇨🇦
such a nice informative episode by Marc. The quality of education here beats what you get from a university lecture. It certainly changed by my view and optimism around the split corp class A share.
Yes, the volatility allows you to still get paid from the income and buy more. The term date is only for the preferred shares and the managers say to not worry about any termination. The termination date is for legal industry reasons and due to the preferred shares. It so rarely happens and not to worry about it if the split corp has strong blue chip companies. Cover call strategy is like a hedge when there is volatility. Cover calls are most effective in a pull back market or a stable market environment. Still effective on up swing though. Keep up the great work Marc. Make sure that people pay attention to the quality of the holdings. Quality holdings are KEY to selecting a successful low risk split corp or income fund. Cheers!
Always appreciate your thoughtful comments. - Marc
@@beaviswealth Thank you Marc. I always look forward to your presentations. You have an effective delivery "on screen" and you make sense. I also enjoy how you welcome your audiences opinions respectfully. A wonderful learning and "listening" presentation, as per your usual.💯🙏🇨🇦
Such great learning. You spend much time, effort, energy and research in order to educate thoroughly. It is greatly appreciated.
Thank you, Anne. That's very nice of you. Thanks, as always, for your support of our channel. - Marc
Marc excellent video! I had been wondering about this type of fund and voila you had a video the next day. Really enjoy your videos and stock selections.
Thanks, Marc, for showing the pros and cons of these funds. I also like that you added a variety of strategies that could be implemented. A great instructional lesson.
Glad it was helpful Rob, and thanks for watching. - Marc
Very well explained!!! It changes my view in a good way!! Thanks
Thank you a lot to cover that subject. Good analysis.
Thank you Mark! Excellent video...I was very pleased with you honest and fair assessment....I love DFN and have the experience to trade and hold short term.
Lots of solid information that I hadn’t previously considered about splits. Thank you.
Excellent video. I am a recent retiree and am looking to enhance my dividend income. I have done some split corps and covered call investing such as ENS, DFN, ZWB, ZWK, etc. Most of my portfolio is in value stocks like the big 6 Canadian banks, BCE, Telus, etc. I am approaching the split corps with caution as you suggested and keeping a small % of my portfolio in them. Keep us the good work.
Thank you for sharing. I'm new this year to the investing. Started with WealthSimple Trade and have been following a few different channels to learn about this world. Some talk and promote heavily on Split Share funds for the sole purpose of dividend payouts. I am personally trying to build up my principal amount and trying to get dividend payouts for now until I'm close to retirement. I then will hopefully re-invest into more secure funds/stocks or something which has a low risk to last the golden years. I think i will be looking into the Investing Academy sooner rather than later.
Thank you for taking the time to educate us.
Wow thank you for this detail explanation Marc!
This video is a MUST fro all investors who want to know how split share corporations work.
Thank You! Brandon and Marc for including DFN in this vid... You guys ROCK!!!
You bet, Chris! Thanks for watching. - Marc
I'm thinking of adding covered call split shares in my portfolio, this video helped allot
Thanks for showing the trees from the forest. I will be watching these a bit closer now.
Was looking at these just this morning, timing couldn't be better. Thanks from Québec!
Bon investissement !
im so glad we have have a seasoned professional reviewing these funds, no hate to brandon, but im glad your dad reviewed these funds
Fantastic video and nice to see you explaining things so thoroughly. Subscribed and shared!
Deep dive on the pro’s and con’s of investing in split share investments. Great analysis!
Marc: Excellent video. It gave me far more information than I had when I invested in some split funds year ago. Another topic would be Covered Call ETFs as they do have some underlying characteristics similar to splits.
Thanks, Bill. I do plan to do up a covered call ETF video, hopefully before too long. - Marc
Wow what an eye opener.
Thanks Marc. can you please make another video about pros and cons of preferred shares as an alternative of holding cash, GIC or bonds?
Marc 👏 👏 👏 👏. This was absolutely a great video. I've been looking at split shares for the last 6 months, and i was so skeptical on those attractive high yield rates. Seemed too good to be true. Thank you for bringing a non partisan view on the matter. Your investment knowledge is outstanding.
Thanks for commenting. These work for some, not for others. Hope this video gave you some perspective as you go through your personal choices. - Marc
Great video very nicely explained. Thank u Marc
Excellent explanation. Thank you.
Very well done, I am a swing trader in some of these and have done very well.
Although I find this video perfect to try and explain to some I know as to why I don't hold these investments long term. Except of course the preferred shares, which I also own.
One thing I have never done is bought the split when first offered.
Great info,thanks. 👍👍👍
Thanks for your detailed Explanation Marc. For me split share funds do not meet my investing style or objectives. For me value investing on one hand and growth investing on the other serve my investing objectives along with a third dividend component. My three core styles that have served me well. Thank you. :)
Excellent informative video. Thanks Marc:)
Thanks for the good objective video. I will look at the investing academy...
Great video, Thank you for sharing
Thanks for the video, very enlightening. I own only 2 split share funds GDV and RS, any plans to purchase other split share funds are now nixed!
Great video. I am one of those who started investing during COVID and I've never heard about these investment instrument before. Could you make a similar video for instruments lie ZWC?
This was a superb video. There are a few vloggers that are really hyping these up. I’ve always been concerned of the risks that you have clearly explained. Thanks.
Glad it was helpful, TJ. And congrats for not just taking everything at face value... always look at both sides and then make your decision. Cheers - Marc
Marc- I've been looking at Split Shares as a possible investment and I really appreciate your measured approach. Thank you.
Glad you enjoyed the video. Always best to have a full picture to help make the best decision for yourself. Thanks for commenting - Marc
Awesome vid! Thanks! Btw recommend you double check the volume of your song intro for future vids.
Hey Jim... ya... sorry about that. I didn't hear that until the actual posting online occurred. My mistake! Thanks for watching. - Marc
@@beaviswealth all good! Loved the content!
Thankyou for doing some of the research for me. I just found out about these funds and got interested. I learned that they are not for me .
Really great video Mark! Thorough and well explained! I've been debating on whether to add split shares to my portfolio. Thank you for bringing forth the adherent risks vs. rewards.
You bet... hope this helps with your DD. - Marc
I like your videos and you have become my main source of information when it comes to the stock market for past couple of months. Thanks.
Can someone kindly explain how to know the spilt shares and which ones? some of them didn't offer the option while I quickly looked it on wealth simple trade for example while up watching the video?
PS. I am a newbie in this barely a month or so.
Very informative Mark ..
I always enjoy & retain your application to share your knowledge & research better than many. Although I have opened accounts months ago...still have yet to invest. Please Help....
Wow, super informative episode, as always! Thanks so much Marc!
Thanks, Julien. Appreciate your support. - Marc
Very useful!!! Best info! Would u explain crypto divided next time? Please and thank u
Great analysis. Can you please explain the self-cannibalization of the covered call funds. My understanding is that due to fund mandate, once the call is exercised, the manager has to buy the same shares at higher price now. This slowly leads to consistant decline in value. Look at zwu for example. Am I missing anything?
Liked 👍 Thanks
Great analysis on the real estate income property compared to split corp
House in ghetto location collecting higher rent income from tenants
Great channel 👏
Thank you as always for your educational videos. You and Brandon must be so proud of each other for all your success and for everything that you do for people. Just a quick question regarding your graphs that show the long term results for LBS and DFN since inception. Do those final total return numbers factor in the monthly compounding effect of the distributions ? Thank you.
This is the best explanation I've ever heard.
Thank you. - Marc
Thanks for the excellent analysis.
You bet, Larry. Thanks for watching. - Marc
How would split share corporations compare with EFT with modest leverage and covered call strategies like HCAL ?
Looking for more of these videos!!
Thanks... will keep working on them! - Marc
video looks great, what camera do you use?
Well explained thank u I have learned some new points. We have splits of FFN. Right now its performance is good since we bought A shares at low point. I am not looking for a increase of the price. For me the price must be stable. If stable then the high yield and the low share prize make any split a great investment in the long run. In my opinion FFN is such a candidate. 10 % Management fee is taff but is acceptable due to the high yield. It’s true u must watch the investment. The downside of splits such as LBS is the decrease of the share price why I didn’t buy LBS shares. Warren buffet noted do not buy any Investment if u know it will lose money. I stick with that so no LBS shares for me. One more point. CRA categories splits as mutual funds. So you can put the splits in your RRSP or TFSA. Then u do not have to pay tax on the gains. Bottom line splits are a good investment if the price is stable and u use a registried investment account.
As an "income investor" i usually put 25% into split share funds.
I think 20-25% is a great allocation to split corps, it doesn't have to be all or nothing!
Thank you Marc I have been trying to explain it to my friends for about a year but they never wanted to listen to me till I showed them your video, one thing I’ve learned is to not waste my time. You can lead a horse to water but you can’t make it drink
Thanks for your comment. Split Shares are very widely misunderstood, and as a result are purchased by some investors who don't understand what they are buying. They are a valid investment for those who feel they are suitable, once they understand the structure. The high yields are enticing, and people often buy them without doing proper due diligence. Hopefully this video will help a few understand so they can make an informed decision to ensure Splits are appropriate for them and in line with their objectives and purchase (or not) accordingly. Thanks for watching! - Marc
Great info, please make more video like this
Wish you all the best
Thanks, Tracey - Marc
So, big keys would be looking at an SSC's holdings, history and seeing where the current stock price sits. Sounds like this is a good time to take one like LBS seriously. Don't know if I'll get a crack at ENS, though. Though very close to NAV, chart makes it look a touch high, historically. Thanks for the great attention to detail. Never too much for making informed investment decisions.
Very good video....kudo!
with regards to the 344% return on LBS, how is that affected if the investor is using a DRIP? Reinvesting dividends monthly would surely increase that return?
Great in-depth look; an education in due diligence by the way information is presented referencing documents from an actual example. A suggestion for future in-depth look in the same theme of passive income yields would be devote an episode on covered call ETFs. Such ETF's gain high yield today by giving up future upside. What I have not seen is a side-by-side comparison of like-for-like portfolio - one with only equities and the other with the same equities plus covered call. For example what is the difference in total return over long-term, say, over a 10-year period. Thanks in advance for your consideration.
Thanks for your comment and suggestion. I will make a note of this and try to do up a comparison video at some point. I'm sure a lot of people would have the same idea. Thanks. - Marc
This was super helpful!
I'm glad you found this helpful, and thanks for your comment. - Marc
Thanks for th info on Split Share Corps. FYI - watch tapping/hitting the surface that the mic I on.
Thanks, Richard. - Marc
Awesome video!!
I held the preferred side of the split a few times in the past to preserve my capital while gaining a nice dividend. Riskier alternative to cash but lot more profitable than money market.
By risk, you mean the Corp will go bankrupt and you lose all the principal?
So would it be a good strategy to just buy the dip?
Absolutely another bang on episode Marc! 👍👍👍 I own some DFN myself,but you are very on point to explain the maybe not so great aspects of the split share corps. I can’t say that I’m disappointed with the income I’ve received from DFN (as an example) but it is only a small part of the income plan. Reinvesting distributions into a split fund is (in my opinion) folly. Splits are indeed ONE tool,but you are right to point out the larger picture. One of my Favourite episodes so far.👍
I think you are caving a little too much to Marc's negative opinion on split corps! I love DFN, only wish I bought more when it was under $5 a share.
@@paulsantori8920 nope,I’ve owned splits for a number of years. They’re fine tools for income but the risk is higher than other investments so I haven’t ever been overweight in them.nor should anyone be (in my opinion) but hey,you do you man! It’s all good.
Thanks, Derek. My goal was to point out both sides of this investment option, because generally you only hear about the upside. I think this video presents a balanced view. When I worked in the industry, these were 'sold', not 'bought', normally because of the attractive commissions paid at launch. With the ability today to disseminate information so quickly and widely, and with the amazingly attractive yields on these funds, I think too many people are buying them without understanding how they work. Hopefully, this video will help everyone do their own due diligence, and then make a decision for themselves, based on a broader picture. Always appreciate you watching and commenting, Derek. Cheers.
@@derekcox6531 I definitely agree, probably didn't explain myself properly. First of all I don't put more than 20-25% into split corps and I buy many split corps so that I won't be that dependent on anyone investment. Now I'm reinvesting most of my dividend income into other stocks and REITs!
@@paulsantori8920 I own some DFN as well, getting most of it under $5 a share. It has been a terrific investment so far. I have a small % of my portfolio in split corps and covered call etfs. I intend to keep the bulk of my investments in good value stocks like the big 6 Canadian banks. But the income enhancement from split corps and covered call etfs is excellent.
I have approximately 25% in split share...mainly SBC... I usually use the dividends to purchase other safer stocks and ETFs although I will add to SBC when it takes a dip
Thanks for sharing, David. Cheers. - Marc
It would be interesting to see the totals after you dripped your yields back into the fund and see what the long term outcomes were.
Split funds with a high unit NAV is great and these type of security are mainly for income investors so for me idc what the stock price is as long as I get my monthly payment I’m happy
Can you do an update on this video. Ens and what their latest offering has done to the share price and distribution?
Hi Marc, Thanks for the video. I own two Split funds SBC which I was lucky to get in at $10.02 and GDV which I just picked up last week. I’m using them plus a whole bunch of coward call ETF’s like ZWC and ZWG to name a few . Building a snowball effect buy getting high yield ETF’s and placing the income back into my investments.
Thanks for sharing, Rob. Thanks for watching. - Marc
What about the Preferred shared class of this example (LBS)? Did they miss dividends also? And, at the term of the mandate, did the people who invested in the prefered shares got their money back (redeemed)? Thanks man :)
Great explanation
Well explanation.
Isn't LBS good on tax point of view in regular treding account as lot of income coming as ROC compared to XFN as income is coming from eligible dividend ??
Thanks for video.
Great Video
Hey Marc Great Video. Two years ago I started Investing into a Dividend split FTN and it did not perform well during hard times. so I learned my lesson and invested into much more resilient and safer stocks. it wasn't a huge loss however it was a good learning experience . I had looked into Dfn and thought it was very tempting yearly dividend return. I am not sure about it
For the best, the price of the actual stock just keep going down.
One thing I was thinking was due to the greater yields, they can be used to cover expense on borrowed money and even pay the loan completely.. The risk of potentially losing your investment at wind up or dividend cuts may be to large though..
Hi, so.. Preferred share holders they can get the return at 'issued amount' $10 but Class A shareholders they might can not get the issued amount '$15 on Termination date(maturity date). right?
Thank you so much, you just prevented a big mistake on my part.
Hi Paula. Thanks for watching! - Marc
@@beaviswealth I am in the process of watching lots. New investor here (Nov 2021), I bought mainly 'safe' stocks with decent dividends because we need monthly income. The past week wasn't great but the portfolio didn't lose any capital so I count that as a win. I want to invest another $200k and I am thinking etf. I am watching your video on that now.
Awesome, Paula. Wishing you a good investing journey. - Marc
Thank you for the excellent detailed information. Fees are a big factor in my choice of investment, as they should be. I don’t think this is an investment for me. I was drawn to the high dividend.
I can't find official confirmation that they can be placed into a tfsa. Can you confirm this?
Thank you so much for all the information you shared with us Marc!! Really appreciate it!!
No worries! We always appreciate your support of our channel. - Marc
What about investing in the preferred portion of the split shares and treat it like a high yield bond to park cash -- yielding over 5% and with low volatility?
For sure, Ron. That's basically how the pref side of the structure works. Nice catch. - Marc
Good timing, as I am considering buying some for my parents who are retired as a substitute for bond funds for income purposes, I see bonds as high risk low return in today's ultra low rate environment.
great job but still love my splits as long as they are well into the black
Thanks for all the great information , I purchased a fraction of “Alphabet Inc (class A) . Is this the risk you are describing ?
Hi Joan. No, it's not. The major risk I was describing with split share corporations is the leverage feature, which will result in more volatility than if you held the same stocks without the leverage. Thanks for your question. - Marc
Thank you Mark, very good explanation and presentation. There some good covered call etf available from BMO like ZWC, ZWU. They seems good, same problem capital will not appreciate however will provide monthly income better option than GIC or bonds. Also there some good ones like QYLD. If possible provide your opinion on covered call ETF.
I think it's interesting how you talk about leverage.
Literally EVERY company out there use leverage and loans which can swing against them, at any time.
Difference is, a split share fund doesn't have loans and liabilities.
I would suggest that you do your research in regards to how many companies and banks lowered their dividend pay outs in the 08 crisis. A lot. Guess what good quality split funds did? They continued to pay the agreed %.
I don't disagree with you. The issue isn't the leverage, it's the knowledge that leverage is there, which inherently increases risk. This video was designed to help investors understand the structure of Split Corps, which is sorely lacking. Thanks for watching and commenting. Cheers. - Marc
@@beaviswealth Thx for clarifying. That's a point, the lack of knowledge of leverage that some ppl have in regards to split funds. You spinned it a bit too negativ though.
It does way more positive than negative in the stable split funds and is great for PPIs.
If you are already comfortable with the growth style (so unrealized gains or gains just on paper) then you have to look at the total return (including distributions, usually reinvested but in the case of slit-share I'm not sure about reinvesting) of these titles. That's something a lot investing channels are omitting to do. You need the whole picture to compare, otherwise, just comparing market values will certainly be very discouraging for any title using covered calls and/or leverage.
Good points, thanks for commenting. - Marc
High yield has higher risks
Liked 👍 Thanks 👍
These split share companies raise additional capital to pay their common dividends by issuing new shares every year. In 2021 DFN issued $150 million in new shares through three "overnight offerings" and some of that would go to paying dividends to commons. DFN does two or three overnight offerings every year.
Legalized Ponzi?
@@BTS-zq2vy Yeah, pretty much. In spite of the cash infusions the NAV (and the stock price) still deteriorates over time. DFN commons started at $15 now they are at $8. It collapsed to $3.55 during Covid when DFN stopped paying.
not really, that money went to buying more underlying assets not "paying dividends".
and DFN's price have literally held steady for years, and NAV does not deteriorate lol. quiet my dude and educate yourself.
I understood that for covered calls ETFs, the ROC is not really ROC. It's the premium generated from the premium that is used to rebalanced lost from previous years (which can be reported indefinitely) that is reclassified as ROC for tax purposes. It sounds like it's not the case for these slip-share by what you're saying. I still need confirmation about the ROC of covered calls ETFs. But in the end, it's the total return that matters (growth+reinvested dividends) and if you don't mind sacrificing 2%(ZEB vs ZWB for example) of total return because you prefer to have your profits right away without going through negative emotions coming with growth investing (will the market rise? I'm up, will the market go down and all those gains will be lost? When do I sell? I sold and made profit yeah! Oh no, if I had waited 6 more months I would have made so much more gain (regret)), then covered calls ETFs might be a good option. I'm still no convinced about slip share, but even in a passive income strategy, I would definitely keep my exposure to slip share to a maximum of 10 to 20%.
What a great explanation! - I thought I knew splits well, but.... If I follow correctly, DFN is trading at $8.26 (07 Feb 22). If it remains here (under $10.00) when the fund unwinds, Class-A holders would receive no return of capital?
If the common share's NAV dropped below $5, the shareholders would get no dividends for that period.
@@lastempire7302 What are the chances that they will decide to expire the fund? It seems like they renew every time based on their history. (Sorry if dumb question, new to this)
@@Natewu188 If the combined NAV is near or below $10, they will most likely terminate the fund as the Split Crop is now at risk of bankruptcy if they cannot repay the preferred shareholders with $10 face value after liquidate all of their positions.
@@lastempire7302 I see, thank you!
As a passive income oriented investor I have no real interest in the long term total return including unrealized gains as I am using the split funds for monthly income, the key is, don’t have all your eggs in one basket so I only hold about 10% of my portfolio in split shares. If you are never going to sell, what does it matter if the fund doesn’t grow in value? Also there are split share funds that have long histories with only a few missed monthly dividends.
Great comment, Leslie, and thanks for adding to the discussion. I would just note that although it's not common, you might not have the choice of whether to sell or not, because if the funds is wound down, you're along for the ride. Other than than, though, these type of funds provide great monthly income, and if you've got 10% of your portfolio in splits, I'd say that's a reasonable play. Thanks for watching. - Marc
@@beaviswealth if the split share Corp is shutting down (not likely, they make money staying in business) then everything else is down the toilet too
Every day we stray further out the risk curve.