<prompt> Human: A while ago I went from bank-managed mutual funds just via BMO regularly over to the self-directed investment portal from the same bank BMO Investorline.As part of my self-directed investing, I naturally started looking into stocks, low-fee ETFs and funds... that sort of thing. iShares ETFs... buying the SP 500, that sort of thing.While doing my research looking for divident paying stocks... I came across the Financial 15 Split Corp TSE:FTN... a company that also trades on the NYSE i believe... but I own it in Canada.Anyway... this stock was trading around 9.95 when I bought it... and it really hasnt moved a whole hell of a lot... currently 10.40... but what caught my eye was the dividend payouts.Most dividend paying funds are paying out in the range of 5 per year... either via monthly of quarterly dividends. This stock, FTN... trading at 10... is paying out 0.125 MONTHLY... or 1.50 per year.Yes... paying out Dividends at around 15 per year. WTF?!?!?So I bought it and have been in it for a couple of months... appreciated slightly, taken 3 months worth of dividends... but I have to ask myself... how they hell are they paying out 15?Am I going to wake up one morning to read about arrests in the headlines and log in to see that trading the stock has been halted? Anyone with more financialstock knowledge want to help me out?Assistant: It appears that this company is just a holding company that invests money in financial institutions it sounds like a managed mutual fund but as a stock.If you compare their historical performance with the performance of the financial sector, you will see that they are not just printing money. They had to stop paying out dividends from mid-2011 until the beginning of 2013 and they will only be able to pay out dividends as long as their investments continue to perform well.If you carefully read the prospectus you can see that they charge pretty high expenses, seems like over 1 annually if you add them up.So, its a high expense mutual fund that has been performing very well as the market has performed very well.Human: How does a stock charge expenses? The price is set by people trading the shares... so the only way I can think is that they will take a part of the monthly dividend. But if theyre paying 15 per year in dividends... do I really care about that 1?Another question... if the financial stocks they hold pay an average of 3-6 annually in dividends... how can FTN pay out 15? Are they buying and selling around dividend dates, or something else?Assistant: It appears to operate a lot more like a mutual fund than an actual company.Warning: the following is not a technical explanation and is more educated speculation about how the operateThey take the capital that is invested in the company and use it to buy and sell shares of stocks based on their expertise in trading stocks. In order to pay out dividends, they take some money from the dividends of the stocks they own but also sell shares of stocks and use the cash proceeds. This is the same way they pay expenses... by simply removing capital.The price of the shares go up and down based on the perceived value of their investment holdings and the expectations of future dividend payouts.Go look at the historical movement of the stock. Nothing is guaranteed.Human: Yeah... 2012 was a write off, as was a part of 2008... but that massive drop from pre-2007 was due to a split, so is not as bad as it looks, right?As far as holding this goes... Im making 1.50share on an asset that I purchased for an average value of 10.10share. If I hold this for two years and the dividends are constant, it could even drop to 8.00share and Id have been paid 3.00 in dividends... still netting 1 or 10, right?Another question...As most dividend paying financial stocks pay out around 5 per year... do you see the value of this stock appreciating until it, too, reaches a yield of 5? At 0.1257month or 1.5084year... a 5year yield would mean the stock was trading at 30share...?Assistant: but that massive drop from pre-2007 was due to a split, so is not as bad as it looks, right?No, the chart auto-adjusts the price as if the split never happened but puts a notice in there that it did happen.As far as holding this goes... Im making 1.50share on an asset that I purchased for an average value of 10.10share. If I hold this for two years and the dividends are constant, it could even drop to 8.00share and Id have been paid 3.00 in dividends... still netting 1 or 10, right?Sure, but, again, the 1.50 IS NOT GUARANTEED. You have to understand that piece of it. They can stop paying the dividend whenever they want.As most dividend paying financial stocks pay out around 5 per year... do you see the value of this stock appreciating until it, too, reaches a yield of 5? At 0.1257month or 1.5084year... a 5year yield would mean the stock was trading at 30share...?The more I read about this, the more confused I get. It actually is structured kind of like a bond, in that they have a target price per share of 10 and try to do what they can to hold it around there. I think the more likely scenario is that the dividends will vary as the stock price stays relatively constant.Human: The more I read about this, the more confused I get. It actually is structured kind of like a bond, in that they have a target price per share of 10 and try to do what they can to hold it around there. I think the more likely scenario is that the dividends will vary as the stock price stays relatively constant.I know, right? Particularly when they say they are targeting a buy-back of shares around 2020 at the 10 level... so if this thing is acting like a bond... shouldnt the market and savvier investors than me set the price at 10, PLUS the sum of the remaining dividends between now and 2020?Meaning, if we start with Jan 1 2015... 5 years at 1.50year... shouldnt the stock be 17.50 on Jan 1 2015 and decline by 0.1257 every month until the closes at the 10 target in 2020?Assistant: You are failing to consider the possibility that they could lose all of the money and not be able to buy back the stock in 2020.I can only reiterate so many times... this is not a guarantee and is actually a bit of an underperformer compared to the industry.Human: No... I am not forgetting that there is risk in this, as in any other investment, and that the whole thing can go tits up at the drop of a hat. Im also not advocating putting my entire RRSP or 401k into the thing.However... would this be a decent option to replace the static income generating bond-type instruments in a portfolio? Rather than buy a bond ETF as the fixed income portion of my portfolio... would it be better to drop that 20 into this and just watch it like a hawk?  <response>: would this be a decent option to replace the static income generating bond-type instruments in a portfolio? Rather than buy a bond ETF as the fixed income portion of my portfolioNo. Because this is not even close to the same. It bears far more risk than a bond fund and is highly correlated to the equity portion of your portfolio, unlike a bond fund. 