FFN.PR.A 2019H1 Semi-Annual Report

North American Financial 15 Split Corp. has released its Semi-Annual Report to May 31, 2019.

Figures of interest are:

MER: 1.05% of the whole unit value “based on total expenses for the stated period and is expressed as an annualized percentage of average net asset value during the period.”

Average Net Assets: We need this to calculate portfolio yield. No change in Number of Units Outstanding, so just calculate as [298.4-million (NAV at beginning of period) + 279.6-million (NAV at end of period)] / 2 = 289.0-million.

Underlying Portfolio Yield: (4.784-million dividends + 0.096-million interest) times two because it’s only half a year divided by average net assets of 289.0-million is 3.38%

Income Coverage: Net Investment Income (excluding capital gains) of 3.068-million divided by Preferred Share Distributions of 5.163-million is 59%.

5 Responses to “FFN.PR.A 2019H1 Semi-Annual Report”

  1. RAV4guy says:

    I do not understand where the figure of 3.068 million comes from. I think the net investment income should be 4.784 + .096 = 4.880 million.

  2. jiHymas says:

    There are expenses (primarily management fees) totalling 1.813-million, so the net investment income is 3.068-million. It is this amount that is available to pay preferred share distributions.

  3. mbarbon says:

    Correct me if I’m wrong, but preferred share holders of these shares always get their dividend.. Just need to watch the NAV of the common share to make sure it doesn’t drop below $0. OSP (from Brompton) is one of those…

  4. jiHymas says:

    preferred share holders of these shares always get their dividend

    A suspension of a split share preferred dividend is rare, but not unknown:

    … but you are mostly right – split share preferreds will generally keep paying their dividend, even if it’s Return of Capital.

    Just need to watch the NAV of the common share to make sure it doesn’t drop below $0

    It’s a bit like qualifying for a mortgage … your debt-service ratio indicates the potential for you to get into trouble, while your Loan-to-Value ratio indicates the severity of trouble that might be expected.

    If a split-share corporation is paying more dividends than it receives, the difference is referred to as a cash drag. The larger the cash drag, the higher the sensitivity of credit quality to asset value is, since the corporation must sell portfolio shares to pay out cash … which reduces its Income Coverage further … which can spiral.

  5. mbarbon says:

    jiHymas, thanks for that list…

    Most of the split shares stay pretty close to face value and keep paying a dividend even as the common shares approach $0 (Yes, may be an erosion of capital, but its the capital of the common shares so your still getting cash)

    Note that OSP.pr.A is an example of “return of your own capital” where they are just paying out from their asset because the NAV of the common is $0. They are simplying paying it from its own assets (and thats be not a dividend at all).

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