For a description of Portfolio Goals and Process, see this post. For a description of the initial portfolio, see this post.
The markets at close on Friday, December 28, 2018:
| Market | Value | Change | 2017 Close | 52 wk High | Off 52 Wk H | Change % | Market |
| S&P TSX Composite | 14,222.00 | 286.56 | 16,209.13 | 16,586.46 | -2364.46 | -14.26% | Correction |
| S&P/TSX Venture | 552.09 | 21.89 | 850.72 | 939.66 | -387.57 | -41.25% | Bear |
| Dow Jones Industrial | 23,075.49 | 630.12 | 24,719.22 | 26,951.81 | -3876.32 | -14.38% | Correction |
| NASDAQ | 6,584.52 | 251.53 | 6,903.39 | 8,133.30 | -1548.78 | -19.04% | Correction |
| Standard & Poors 500 | 2,485.38 | 68.75 | 2,673.61 | 2,940.91 | -455.53 | -15.49% | Correction |
This is the first week in the month of December to show some green. While the TSXV is still in a bear market, the NASDAQ has risen slightly out of the bear and into serious correction.
Split shares were also sporting some green this week as 15 were up and seven were down. While it may seem odd that there would be any that are further down this week, those that are down are primarily those that are not and have not made any distributions with the exceptions of FSC.UN and TXT.UN.
In the case of FCS.UN (which has moved from the TSX to the NEO exchange) its NAV has dropped below $4, and while it has not yet missed a distribution, it will need some strong gains in the new year to maintain them.
In the case of TXT.UN, its NAV has fallen to $1.77 so the price is following it down. The unit NAV is $14.47 and the minimum NAV is $12.50, so it will continue to maintain the distribution.
FTN made the biggest gain followed by LBS. FTN tends to maintain the largest premium. This is likely in part due to the fact that it pays the largest distribution. It will not pay in January, however, so why it has surged above $5 is not clear. Perhaps there is a large number of speculators who expect it to return to its $10+ price at some point in 2019.
The gainers/losers for the week ending December 28:
| Symbol | Price | Change | Change % |
| TSE:FTN | $5.39 | $1.79 | 33.21% |
| TSE:LBS | $6.44 | $1.17 | 18.17% |
| DFN | $7.57 | $0.94 | 12.42% |
| FFN | $4.21 | $0.91 | 21.62% |
| OSP | $2.02 | $0.91 | 45.05% |
| SBC | $11.46 | $0.80 | 6.98% |
| TSE:BK | $9.70 | $0.72 | 7.42% |
| TSE:DGS | $3.53 | $0.57 | 16.15% |
| TSE:DF | $3.29 | $0.54 | 16.41% |
| LCS | $2.51 | $0.29 | 11.55% |
| XTD | $5.55 | $0.26 | 4.68% |
| TSE:PRM | $12.21 | $0.21 | 1.72% |
| LFE | $2.01 | $0.19 | 9.45% |
| PIC.A | $6.22 | $0.07 | 1.13% |
| TSE:GDV | $8.45 | $0.05 | 0.59% |
| TSE:ENS | $10.80 | $0.00 | 0.00% |
| TSE:XMF.A | $0.13 | $0.00 | 0.00% |
| FTU | $0.46 | -$0.01 | -2.17% |
| TXT.UN | $2.57 | -$0.03 | -1.17% |
| WFS | $2.07 | -$0.06 | -2.90% |
| PDV | $5.87 | -$0.07 | -1.19% |
| TSE:BSD.UN | $0.25 | -$0.10 | -40.00% |
| SBN | $4.81 | -$0.14 | -2.91% |
| YCM | $0.86 | -$0.14 | -16.28% |
| FCS.UN | $3.10 | -$0.90 | -29.03% |
CSSI Index
The CSSI (Canadian Split Shares Index) is the total of what it would cost to buy one share of each Capital share currently on the market. It had its largest move up this week since August 3.
| Value | Change | Since 8/3/18 | Up | Down |
| $121.48 | $7.97 | -$59.50 | 15 | 7 |
| CSSI Index | CSSI Index Change | ||
| Max | $183.09 | Max | $7.97 |
| Min | $113.51 | Min | -$14.92 |
- The value of $121.48 is what it would cost to buy one share of each Capital share which is up $7.97 from last week, the largest weekly increase since August 3.
- The CSSI is down -$59.50 or 37.28% since August 3, 2018 when Middlefield listed ENS on the TSX
- Fifteen split shares closed up from last week, while 7 were down
- The high since August 3, 2018 is $183.09 on August 24, 2018 the low is $113.51
- The largest weekly increase is $7.97 for the week ended December 28
- The largest weekly drop is -$14.92 for the week ended December 21, with -$13.87 on October 12 and -$11.21 on October 26 as close followers
| Week | CSSI | Weekly | Weekly | Trailing 5 Weeks | Since 8/3/18 | Since 8/3/18 | |
| Ended | Value | Change | % Change | Change | % Change | Total | % Change |
| 11/30/18 | $144.94 | $1.98 | 1.39% | -$1.43 | -19.91% | -$36.04 | -19.91% |
| 12/07/18 | $138.11 | -6.83 | -4.71% | -9.02 | -6.13% | -42.87 | -23.69% |
| 12/14/18 | $128.43 | -9.68 | -7.01% | -23.22 | -15.31% | -52.55 | -29.04% |
| 12/21/18 | $113.51 | -14.92 | -11.62% | -34.53 | -23.32% | -67.47 | -37.28% |
| 12/28/18 | $121.48 | 7.97 | 7.02% | -21.48 | -15.03% | -59.5 | -32.88% |
This Week's Prices and % off the Low
| Name | Symbol | Price | Yield | 52 wk low | % off low | Volume |
| Top 10 Split Trust | TXT.UN | $2.57 | 13.10% | $2.57 | 0.00% | 4,520 |
| Faircourt Split Trust | FCS.UN | $3.10 | 23.23% | $3.01 | 2.99% | 1,470 |
| E Split Corp Class A | TSE:ENS | $10.80 | 11.11% | $10.45 | 3.35% | 920 |
| Big Pharma Split Class A | TSE:PRM | $12.21 | 10.12% | $11.60 | 5.26% | 2,900 |
| Premium Income Class A | PIC.A | $6.22 | 13.05% | $5.75 | 8.17% | 33,769 |
| TDb Split Corp | XTD | $5.55 | 10.81% | $5.10 | 8.82% | 10,540 |
| Brompton Split Banc Corp. | SBC | $11.46 | 10.47% | $10.37 | 10.51% | 22,140 |
| Prime Dividend Corp. Class A | PDV | $5.87 | 13.49% | $5.19 | 13.10% | 100 |
| Canadian Banc Corp | TSE:BK | $9.70 | 14.23% | $8.40 | 15.48% | 14,572 |
| Global Dividend Growth Split Corp | TSE:GDV | $8.45 | 14.20% | $7.11 | 18.85% | 5,900 |
| Dividend 15 Split Corp. | DFN | $7.57 | 15.85% | $6.17 | 22.69% | 188,274 |
| Life & Banc Split Corp. | TSE:LBS | $6.44 | 18.63% | $4.93 | 30.63% | 235,784 |
Previously eliminated from consideration are: BSD.UN, DF, DGS, FFN, FTN, FTU, LCS, LFE, OSP, SBN, WFS, XMF.A and YCM. All have currently suspended distributions or have never made them. Since the focus of this portfolio is on income, when the portfolio can sustain itself certain suspended issues may be considered.
This Week's Buy
Due to overweight positions in TXT.UN, FCS.UN and ENS, this week's buy is PRM, a product of Harvest Portfolios. The Portfolio of PRM will be comprised primarily of the largest (as determined by market capitalization calculated in US$) Pharmaceutical Issuers in the Investable Universe.
For further background on PRM, see the PRM Profile.
The NAV coverage for PRM is standard among most split shares with a $15 threshold. The application of the $15 threshold varies, as some will pay if the NAV is $15 or greater and others will not pay if after doing so the NAV would be less than $15. PRM is the latter, i.e. no payment will be made if after such payment the NAV would be less than $15.
The NAV coverage is the highest among split share companies. It has varied within a fairly small range of 0.43 and at last NAV report was a quite healthy 2.74.
This week's buy will be 100 shares, or one board lot. This week's purchase will be made using $11.90 of new capital, with the cost of the portfolio rising to $54,692.
Due to overweight positions in TXT.UN, FCS.UN and ENS, this week's buy is PRM, a product of Harvest Portfolios. The Portfolio of PRM will be comprised primarily of the largest (as determined by market capitalization calculated in US$) Pharmaceutical Issuers in the Investable Universe.
For further background on PRM, see the PRM Profile.
Metrics on PRM as of December 28, 2018
| NAV | Price | Discount | Distribution | Yield | NAV Covrg |
| $13.70 | $12.21 | 10.89% | $0.10310 | 10.13% | 2.74 |
| Avg Price | $13.13 | Avg Yld | 9.44% | ||
| $A/B Avg | -$0.92 | Price @ Avg | $13.10 | ||
| PBAP | -6.99% | PAAY | 0.69% |
- At December 28, the discount was 10.89%. This is one of the few split shares that consistently maintains a discount to NAV
- $A/B Avg Above/Below Average. The price of $12.21 is $0.92 below the 2018 average price
- PBAP Percent Below Average Price. $12.21 is -6.99% below the average price. The more negative this number is, the better a buying opportunity it is, so -6.99% below the average suggests an entry point
- PAAY Percent Above Average Yield. The larger this number is, the better a buying opportunity it is. The current value of 0.69% suggests an entry point
| Price, NAV & Discount/Premium Range | |||
| 2018 | Low | High | Range |
| NAV | $13.01 | $15.15 | $2.14 |
| Price | $11.90 | $14.12 | $2.22 |
| Disc/Prem | -13.15% | -4.16% | 8.99% |
| NAV Covrg | 2.60 | 3.03 | 0.43 |
The NAV coverage for PRM is standard among most split shares with a $15 threshold. The application of the $15 threshold varies, as some will pay if the NAV is $15 or greater and others will not pay if after doing so the NAV would be less than $15. PRM is the latter, i.e. no payment will be made if after such payment the NAV would be less than $15.
The NAV coverage is the highest among split share companies. It has varied within a fairly small range of 0.43 and at last NAV report was a quite healthy 2.74.
This week's buy will be 100 shares, or one board lot. This week's purchase will be made using $11.90 of new capital, with the cost of the portfolio rising to $54,692.
- It will bring the cost basis on PRM down from $14.15 to $13.03
- The yield on capital will rise slightly from 8.39% to 8.44%
- $10.30 monthly will be added to the income stream, an increase of 2.89%
- The average monthly potential income will rise to $525.98
- The current monthly income will rise from $356.37 to $366.67
- The average current monthly income of $366.67 is 30.81% of this week's purchase
- The initial goal is for the monthly income to cover at least one monthly purchase
This week marks a milestone for the portfolio as one round has been completed. A round is completed when at least one purchase is made of each holding in the portfolio. The target income was $240 annually per security. It has taken 26 weeks to complete this round, as PRM either was too low on the list or other holdings were coming up with better bargains due either to Offerings being made or the recent volatility in the markets.
The portfolio is now composed of 83% of companies currently making distributions and 17% of those suspended. The next round will continue to add only to those positions that are making distributions and have what is considered to be a safe NAV coverage.
For Round Three, the goal is now $360 annually per security. Only four purchases will be required to complete this round with a total cost at today's prices of $3,924.49. The positions to potentially be increased are DFN, PDV, PRM and SBC.
| After this week's buy: | |||
| Capital Invested | $52,164.38 | Holdings | 22 |
| Dist Reinvested | $2,558.62 | Share Count | 7,500 |
| Cost Basis | $54,723.00 | Full Positions | 15 |
| Cash on Hand | $0.00 | to Comp Rnd | $108.25 |
| Total | $54,723.00 | Suspended | 13 |
| Market Price | $38,913.00 | Cap Gain | 0 |
| Cash on Hand | $0.00 | Cap Gain+Dist | 0 |
| Portfolio Value | $38,913.00 | Cash Return | $2,558.62 |
| Potential Income | $525.98 | Cash Return % | 4.68% |
| Current Income | $366.67 | Cap Gain | -$15,810.00 |
| Income Increase | 2.89% | Cap Gain % | -28.89% |
| Yield on Capital | 8.43% | Total Return | -$13,251.38 |
| Yield on Cost | 8.04% | Total Return % | -24.22% |
| Yield at Market | 11.31% | This Week | $1,488.00 |
- Full positions is the number of positions at the target income for the current round. This round is now complete
- The value of $108.25 beside the label, "To Comp Rnd" is the dollar value required to complete this round of purchasing a full position of all current holdings such that the income from each would be roughly equal. This value includes non paying splits so the round will conclude without reducing this value to zero. The new dollar value to complete this round is $3,924.49
- Suspended is the number of Class A shares that are currently not paying, or have never paid, currently composed of BSD.UN, DF, DGS, FFN, FTN, FTU, LCS, LFE, OSP, SBN, WFS, XMF and YCM
- Cap Gain is the number of holdings that have a capital gain. Last week 0, this week 0, and the portfolio gained $1,488.00 this week. This is the largest weekly increase since tracking began
- Cap Gain + Dist is the number of holdings that are above the cost basis when adding capital gains and distributions. Last week 0, this week 0. Distributions have not been sufficient to compensate for the loss in share price.
- Even with $159.32 of the income currently suspended, $366.67 monthly on a cost basis of $54,723 equates to a yield of 8.43%.
- For dividend growth investors who target 5%, on a cost of $54,723 that equates to $228.01 monthly which makes this Income Factory's cash output 60% higher
There are a few approaches one could take when split share prices are down as they are now:
- Take it as a sale and go shopping. The yields are great. When the market recovers, one will recover their investment quickly with the high yields
- Give up on high yield and sell. When this approach is taken, those who do so often conclude high yield just isn't worth it. This may be so, and is why this blog will continue to monitor split shares to see if one can profit by holding and adding at the dips
- Take it as an opportunity for a quick capital gain. The variable here is the time frame. Will it be quick, or could prices hover at this level for several more months?
- Looking back, LCS, SBN, and DGS could have only been purchased once the monthly income was higher, as once a position suspends distributions it becomes a one step forward two steps back process. This can be remedied by only buying those split shares with much higher NAV coverage so that the income is more stable.
This will be the last purchase for 2018. Despite the red in the markets, and the heavy losses in the Split Share portfolio, the Income Factory continues to crank out more cash than investing in the underlying stocks directly.
The next question this blog will seek an answer to is, "Will the income continue to rise despite the suspensions of distributions?" and "Will this portfolio be sustainable despite the capital losses?" At this point it looks like it will, but the exercise will continue to see how it unfolds.
