Saturday, November 15, 2014


Received notice in the mail today of special shareholder's meetings for CRF and CLM on December 8th to vote on a proposed one-for-four reverse stock split.  I can't say I'm surprised by the move, the share price had fallen so low that I expected such a move.  I don't expect to sell any shares and I've voted in favor of the move.  While I'm not expecting this to actually improve performance of the fund, I still think the underlying assets of the two funds are companies I like having investments in, so I'll keep my shares for now.  

Should the proposal be approved, the funds are not planning to issue fractional shares, so any excess of whole shares would be paid to shareholders in cash.  Which works to my advantage in a way.  I'd already diverted dividend income to purchase shares of DIA and SDY, so any cash added to my account from the reverse stock split will go towards the purchase of the new funds.

My biggest concern was the dividend yield.  However, should the dollar amount of dividends remain the same, then my current yield on dollars invested should remain the same.  In other words, if the dividend on 12 shares was $12 and a one-for-four reverse stock split reduced the number of shares to 3, as long as the dividend was $12 on the 3 new shares, your yield on dollars invested would remain the same.  Yield would drop dramatically for new investors, since share price has increased.  I'll have to see what happens to the dividend after this proposal is voted on.  Share price is not as relevant to my investment strategy as cash flow at the present time.  If the reverse stock split should negatively affect my monthly cash flow from dividend income, then it may precipitate a sale of my stake in the two funds.  For now I'm taking a wait and see approach.  I agree that the move was necessary and should have some benefits for the funds and shareholders.

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