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LFE.TO: Steady Dividends and Resilient Returns in a Volatile Market

Charles HayesWednesday, May 21, 2025 9:56 am ET

16min read

In an era of economic uncertainty, investors are increasingly drawn to assets offering both steady income and capital preservation. Canadian Life Companies Split Corp. (LFE.TO), a closed-ended fund focused on top-tier Canadian life insurers, presents a compelling opportunity. Over the past two decades, LFE.TO has maintained a reputation for dividend reliability, even through market turbulence. With its March/April 2025 distributions reaffirming this consistency, and a portfolio anchored in financially robust insurers, LFE.TO emerges as a prime candidate for investors seeking stability.

A Legacy of Dividend Resilience

Since its inception, LFE.TO has prioritized steady income for shareholders. Class A shares have delivered a $0.10 CAD monthly dividend for most of the past 20 years, except during brief adjustments tied to external shocks. The most notable deviation occurred in late 2020, when the dividend was temporarily cut to $0.0542 CAD amid pandemic-driven volatility. However, by early 2022, the fund rebounded, restoring the $0.10 CAD rate—a 46% increase from the reduced level.

Recent distributions in March and April 2025 underscore this reliability. Both maintained the $0.10 CAD monthly payout, with adjusted stock prices hovering around $5.72–$6.16 CAD. Over its lifetime, Class A shareholders have received $8.95 CAD per share, while preferred shareholders (LFE.PR.B) have pocketed $12.32 CAD per share, totaling $21.27 CAD per unit in combined distributions since 2005.

Portfolio Strength: Anchored in Canada’s Top Life Insurers

LFE.TO’s portfolio is concentrated in four leading Canadian life insurers: Great-West Lifeco, Industrial Alliance, Manulife, and Sun Life. These firms are pillars of the financial sector, benefiting from strong balance sheets, diversified product offerings, and long-term growth drivers like aging populations and rising demand for retirement solutions.

The life insurance sector’s resilience is evident in its performance during economic downturns. Unlike cyclical industries, insurers often thrive in low-growth environments, leveraging stable underwriting margins and asset management fees. With interest rates now stabilizing after recent hikes, the sector is well-positioned to capitalize on predictable income streams.

Risks on the Horizon: Navigating Closed-End Fund Dynamics

No investment is without risk. LFE.TO’s closed-ended structure means its shares trade based on investor sentiment rather than net asset value (NAV), creating potential liquidity challenges. Additionally, rising interest rates could pressure insurers’ fixed-income portfolios, though the current environment of moderate rate stability mitigates this risk.

Another factor is sector-specific competition. While Canada’s top insurers hold dominant market shares, new entrants or regulatory shifts could disrupt their dominance. However, LFE.TO’s diversified exposure to four major players reduces this risk, as does the fund’s focus on companies with proven longevity.

Total Return: Income and Appreciation in Tandem

Investors in LFE.TO benefit from both dividends and potential capital gains. Over the past five years, the fund’s stock price has fluctuated between $2.23 CAD (during the 2020 pandemic lows) and $7.00 CAD (2024 highs). As of May 2025, the price stands at $6.27 CAD, reflecting a 25% rebound from its 2020 trough.

When combined with dividends, the total return becomes compelling. A $15.00 CAD investment in Class A shares in May .020 would now yield:
- $2.27 CAD in capital appreciation (from $5.00 to $6.27 CAD closing price).
- $6.00 CAD in dividends (assuming 60 months of $0.10 CAD/month).
- Total return of ~48%, excluding compounding effects.

This outperformance, coupled with the current 18.78% forward dividend yield—one of the highest in the Canadian equity market—positions LFE.TO as a rare blend of income and growth.

Why Act Now?

LFE.TO offers three critical advantages for today’s investor:
1. Predictable Income: A $0.10 CAD/month dividend is now yielding nearly 20%, a standout figure in a low-interest-rate world.
2. Sector Resilience: Life insurers’ steady cash flows and aging demographics ensure demand for their products.
3. Valuation Stability: The fund’s focus on large-cap insurers reduces volatility compared to smaller financial peers.

While closed-ended structures require a long-term mindset, LFE.TO’s history and current fundamentals justify a multi-year hold. For income-focused portfolios, this is a rare chance to lock in high yields with minimal reinvestment risk.

Final Call: Secure Your Slice of Steady Returns

LFE.TO’s journey since 2005—from weathering recessions to rebounding post-pandemic—proves its mettle. With a dividend yield that dwarfs most alternatives and a portfolio anchored in financial giants, this fund is primed to deliver. For investors prioritizing income and capital preservation, the time to act is now.

Don’t let this opportunity slip. LFE.TO offers a rare blend of stability and upside—a cornerstone for any conservative yet growth-oriented portfolio.

Data as of May 21, 2025. Past performance does not guarantee future results. Always conduct your own research or consult a financial advisor.

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