Can you please give me a “Preferred Shares for Dummies” overview and opinion on this series of preferred from Cenovus? What exactly can I expect for a return when investing in this, and over what period ? I think they are redeemable at $25 (?)
Thanks.
The prefs have a $0.161 dividend, quarterly, until March 31 2026 at which time the dividend will be set at the 5-year Canada rate plus 1.73%. Depending on what rates do, the dividend may be higher or lower at that time. It is redeemable at $25, but this is entirely at the company's discretion and it will only redeem if it is in its financial benefit to do so. This is unlikely at current prices/rates and not something to expect. The preferreds are cumulative, meaning if a dividend is missed it accumulates. The preferreds rank higher than common shares and common dividends cannot be paid if preferred dividends are in arrears. Preferreds get a better settlement (if any) than common shares if the company gets into financial trouble and has to recapitalize. The price of the preferred will fluctuate based on interest rates, the energy sector and how CVE itself performs.