Tuesday, December 15, 2009

Canadian General Investments Announce Year-End Dividend

Another of the holdings in my DRiP portfolio has announced a good surprise for the end of the year. Canadian General Investments (Toronto: CGI) has announced a year-end capital gains dividend of $0.50 per share.

CGI is a peculiar beast called a "closed-ended fund". A closed-ended fund is a bit like a mutual fund or an ETF, except that is has a fixed number of shares. So people who want to buy in have to purchase their shares on the market. Compare that to a mutual fund, where the managing company will issue new "units" whenever someone adds money (thus diluting the purpose of the fund). Closed-ended funds are often traded at a discount to their net asset value. Which isn't so bad, since it allows one to purchase a dollar's worth of equities for less than a dollar.

CGI invests in Canadian publicly traded companies, with a long-term outlook. It pays out a small $0.06 quarterly dividend (treated as an eligible dividend for Canadian tax purposes), and usually pays a year-end capital gains dividend (which is treated has ordinary income). The year-end capital gains dividend is a way for the company to pass on to its owners the net capital gains realized throughout the year on the investments it hold.

Last year, CGI was unable to pay a year-end dividend because of the market turmoil (they had more capital loos than capital gains). Seems like this year things went better. :o)

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