Dividend Growth Split Corp T.DGS

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[AnEducator]

Your logic makes sense. However, it may prove to be optimistic to expect sustainable distributions for six months per year unless the portfolio manager does an exceptional job investing and rebalancing. The dividends being collected are nowhere near the amounts being paid to preferred shareholders, let alone those invested in the capital shares.

Every month, the manager has to sell portfolio holdings to generate enough cash to pay the distributions, and this reduces the portfolio size and impairs its ability to grow as quickly as it would otherwise. This is a serious problem when markets are depressed and holdings are sold at low valuations.

It is no wonder that most, if not all, split funds end up trading well below their IPO price after a few years.

[oldbrit34]

I have often thought about your last sentence. I have been following HMAX which offered an annual return of 13.93% when it came to the market about 2 months ago.It is using an at-the-money covered call strategy on 50% of the portfolio. As of today the nav of HMAX is $14.93 and the stock price is $14.85. You could say "so far so good" but this return is very ambitious for a fund only

[Bagobags]

Yes. Which is why I sold in October...I wonder if their offerings will be snapped up as quickly in a downturn as they were 6 months ago. I doubt it. question do these funds use proceeds from offerings to top up the distribution slush fund?