Split share corporation
What is a split share corporation?
It’s a business entity established for the specific purpose of transforming the dividends and capital gains of the shares it owns into streams of revenue for two different groups of investors. To strike the best balance, a split share corporation will usually issue both common and preferred stock to its investors.
Where have you heard about split share corporations?
The split share strategy isn't that well known, but the idea is that it allows you to boost your returns while still maintaining a high level of safety. Split shares are broken down into two components and then allocated differently for investors depending on their aversion to risk.
What you need to know about split share corporations.
A split share corporation will hold a portfolio of common shares based on a particular industry or sector. It then issues two classes of share – capital shares and preferred shares. Under this structure, the common shares can be divided into capital shares that have a higher level of risk than the underlying common shares, and preferred shares that are less riskier than the underlying common shares.
You can choose to either receive all the dividends or capital gains from the portfolio, but not both.