Not quite as exciting as the General Motors (NYSE:GM) IPO but still, for anyone with interest in dividends, a dividend paying IPO is always interesting. I stumbled upon Dividend Select 15 Corp. (TSE:DS) while looking at the IPO offering from my discount broker. It can provide a nice steady dividend income from Canadian dividend aristocrats. It just went public this week. Let’s look at the details.
Dividend Select 15 Corp.
Dividend Select 15 Corp. is like a fund without being an ETF or a mutual fund. Its core holdings consist of 20 companies listed below. If you have been following the Canadian dividend market, these companies have a long history of paying dividends and consists of the best companies in their respective sector. At 5.83 cents per month, you can generate a yield of 7%.
|Bank of Montreal||Royal Bank of Canada|
|BCE Inc.||Shoppers Drug Mart Corporation|
|Canadian Imperial Bank of Commerce||Sun Life Financial Inc.|
|CI Financial Corp.||The Bank of Nova Scotia|
|Enbridge Inc.||The Toronto-Dominion Bank|
|EnCana Corporation||Thomson Reuters Corporation|
|Great-West Lifeco Inc.||TMX Group Inc.|
|Husky Energy Inc.||TransAlta Corporation|
|National Bank of Canada||TransCanada Corporation|
|Power Corporation of Canada||TELUS Corporation|
[Updated] Here is a snippet of the IPO information on the investment strategy.
The Company has been created to provide investors with an opportunity to invest in a portfolio of 15 high quality Canadian companies whose shares offer investors an attractive dividend yield, and which have shown solid earnings growth and have a history of capital appreciation. The Portfolio Companies will be selected from among 20 companies listed on the Toronto Stock Exchange set out below. Quadravest believes that the companies in the Portfolio Universe present opportunities for future capital appreciation, and thus represent an attractive long-term investment, but that there may be significant volatility in the market prices of those shares over the coming months or even years. Quadravest therefore believes that active covered call writing from time to time will permit the Company to capitalize on this volatility and increase cash flow available for distribution, and will further provide for downside protection and lower overall volatility of returns. Quadravest believes that this balanced approach is a superior investment strategy to simply holding a portfolio of equity securities of the Portfolio Companies, and one that should provide attractive risk adjusted returns in a variety of different market environments
[Updated] Such investment may sell underlying assets to provide dividends which will dilute the fund. I would consider it a risky investment.
Other Options For Dividend Income
Another set of investment from the same company are:
- Dividend 15 Split Corp. (TSE:DFN)
- Dividend 15 Split Corp. II (TSE:DF)
Some of those pay nearly 10% of dividends and they hold very similar companies as listed above. If you want to look further and reduce your risk slightly, they also provide preferred shares. I won’t go into details of what preferred shares are but the preferred shares always get paid before common shares and the same applies for dividend payment.
So far, these options do not fit my investment strategy. I am still in my mid-thirties and I am going to bank on my dividend growth and stock appreciation for now with some of these companies. I am not sure what I would do to reduce my risk when I near retirement.
As always, do your own research before you invest.
Full Disclosure: I do not own any of these.
Readers: Have you participated in IPOs before? What do you think of those dividend investments?