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Dividend Growth Split Corp T.DGS

Alternate Symbol(s):  DDWWF | T.DGS.PR.A

The Funds investment objectives are to provide holders of Preferred shares with fixed, cumulative, preferential, quarterly cash distributions and to return the original issue price of 10.00 per Preferred share to shareholders at maturity; and to provide holders of Class A shares with regular monthly cash distributions, targeted to be at least 0.10 per Class A share, and the opportunity for growth in Net Asset Value per Class A share. The Fund invests, on an approximately equally weighted basis, in a portfolio consisting primarily of equity securities of Canadian dividend growth companies. In addition, the Fund may hold up to 20% of the total assets of the portfolio in global dividend growth companies for diversification and improved return potential, at the Managers discretion.


TSX:DGS - Post by User

Post by AnEducatoron Apr 04, 2023 11:10am
237 Views
Post# 35378624

Bags

BagsYour 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.
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