HURRY! Get a 20% Dividend Yield NOW with SPLIT Share Funds LBS & DFN | Top Canadian Dividend Stocks!

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A couple of months ago, I released 2 videos on Split Share Corporation Funds. The first one on how they work and the second goes through my 5 favorite Split Share funds. I won’t do a deep dive on how they work in this video. If you have no idea what a Split Share fund is or how they work, I suggest you check out those two videos. I will give you a quick now, however I want to focus on showing you the DFN and LBS funds in detail and how you can get a 20% dividend yield if you invest right now.

So Split share fund is essentially a fund, like an ETF that invests in a basket of Dividend Paying stocks. It’s called a SPLIT because there are 2 classes of shares which have different stock symbols, so they are split in 2 separate stocks.

You have the Preferred shares, which in my opinion are not very enticing… and then you have the Capital Shares, also called Class A shares. That's where the money is.

So the preferred shares work like preferred shares in general, they are considered fixed income securities like Government or Corporate Bonds and tend to have a dividend Yield of 5%, nothing more.

The Class A shares on the other hand capture all the ups and downs of the stocks within the fund. And more so that other funds because it uses Leverage. Leverage is cheap borrowed money the fund manager uses to buy more shares of the stocks within the fund, thus increasing the dividend yield. In addition they use the covered call strategy to boost the dividend yield even more. So combine the dividends the stocks provide, as well as the leverage and covered calls and you have a huge dividend yield.

Now even though you're investing in really high quality dividend stocks, which we'll see in just a moment.. there is an important risk to consider before investing in this type of fund. I want to be clear about that.

The risk is that the dividend might not always be paid out for the Class A shares. The class A shares have what i like to call a “UNIT NAV Threshold”. From all the Split funds i've analyzed this threshold is usually the same : 15$.

So the UNIT NAV, is the value of 1 Preferred share and 1 Class A share combined. If that number is under 15$, there will not be a monthly dividend for the Class A shares. Preferred shares will get the dividend no matter but like I said, it’s a small one, usually 5% a year.

Now I'm not trying to scare anybody with this, it’s simply how these funds work. So in short, when there are huge stock market downturns like in 2008 or of course in 2020, there is a strong chance you will miss some dividend payments until the value of the UNIT NAV goes back above 15$.

so there you have it guys. I am extremely confident that both LBS and DFN will re-enable their monthly dividends this month thanks to the huge boost the Financial sector got recently due to the 2 Vaccine announcement from Pfizer last week and the one from Moderna today. These announcements are making the stock market finally see past covid -19 driving up financial stocks hard.

So if you're still scared to invest in higher risk funds like these 2, one thing I suggest you do is analyse the stocks in the actual fund. That remains the most important thing with any fund and as we saw they are made up of the best dividend stocks in Canada, mostly the top financial companies which have been around for a really long time and are really the backbone of the Canadian stock market.

Don’t forget that these funds have a set dividend of 1.20/ year or 10 cents a month. So as long as that UNIT NAV is over 15$ you will keep getting the dividend. Missing some dividends payments once and a while is well worth it if you ask me. Like me saw earlier dividend misses are pretty rare and only happen during steep market declines which are always temporary.

Look at it this way, with 20% interest a year all you need to do is get 5 years worth of dividends, which is 60 dividends to make all your money back. Anything you make after that is pure profit.

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Видео HURRY! Get a 20% Dividend Yield NOW with SPLIT Share Funds LBS & DFN | Top Canadian Dividend Stocks! канала Passive Income Investing