Q: Hello 5i Team
BCE Series R preferred share (BCE.PR.R) resets December 01, 2020.
BCE has issued a notice on their website (https://www.bce.ca/investors/preferred-shares/2020-conversion-notice-series-r.pdf) which states the dividend will be published on November 13, 2020 and
“will be based on a fixed rate equal to the product of: (a) the yield to maturity compounded semi-annually (the “Government of Canada Yield”), computed on November 10, 2020 by two investment dealers appointed by BCE Inc., that would be carried by a non-callable Government of Canada bond with a 5-year maturity, multiplied by (b) the “Selected Percentage Rate”. The “Selected Percentage Rate” determined by BCE Inc. is 600%.”
I have reviewed the prospectus available on-line and cannot determine how the “Selected Percentage Rate” is determined.
1 – Can you provide any more information on how the “Selected Percentage Rate” is determined?
2 – The five year GOC bond rate is 0.40 % as of October 30. Therefore the new reset yield would be (600 % x 0.40 % = 2.400%), which would make the reset yield equal to (2.400 % x $25.00 / $11.71 = 5.124 %) as of October 31 closing price. Is this calculation correct?
Thanks
BCE Series R preferred share (BCE.PR.R) resets December 01, 2020.
BCE has issued a notice on their website (https://www.bce.ca/investors/preferred-shares/2020-conversion-notice-series-r.pdf) which states the dividend will be published on November 13, 2020 and
“will be based on a fixed rate equal to the product of: (a) the yield to maturity compounded semi-annually (the “Government of Canada Yield”), computed on November 10, 2020 by two investment dealers appointed by BCE Inc., that would be carried by a non-callable Government of Canada bond with a 5-year maturity, multiplied by (b) the “Selected Percentage Rate”. The “Selected Percentage Rate” determined by BCE Inc. is 600%.”
I have reviewed the prospectus available on-line and cannot determine how the “Selected Percentage Rate” is determined.
1 – Can you provide any more information on how the “Selected Percentage Rate” is determined?
2 – The five year GOC bond rate is 0.40 % as of October 30. Therefore the new reset yield would be (600 % x 0.40 % = 2.400%), which would make the reset yield equal to (2.400 % x $25.00 / $11.71 = 5.124 %) as of October 31 closing price. Is this calculation correct?
Thanks
Q: Do you think this would be an okay preferred for some income and possible upside down the road? I wasn't sure what the "cumulative" part meant? Thank you and stay safe :-)
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Algonquin Power & Utilities Corp. cumulative rate reset preferred shares Series D (AQN.PR.D)
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BCE Inc. Cumulative Redeemable First Preferred Shares Series R (BCE.PR.R)
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Royal Bank of Canada Non-Cumulative 5-Year Rate Reset First Preferred Shares Series AZ (RY.PR.Z)
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TC Energy Corporation cumulative redeemable first preferred shares series 9 (TRP.PR.E)
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TC Energy Corporation cumulative redeemable minimum rate reset first pref shares Series 15 (TRP.PR.K)
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Emera Incorporated Cumulative Rate Reset First Preferred Shares Series C (EMA.PR.C)
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Enbridge Inc. cumulative redeemable preference shares series 7 (ENB.PR.J)
Q: I have provided a sampling of the Preferred Shares I have in my holdings where most of them have rate renewals out into 2023/24. With prospect of a recession and lower interest rates I have locked in returns for the short-term, would you be able to provide some insight into why their market valuation has dropped 25-30% in most cases? Are investors doubting Royal Bank, Bell, Algonquin Power, etc of being able to meet their debt obligations?