Q: This preferred share is currently yielding 11.3%.
No matter what happens to 5 year government interest rates you are guaranteed 6.25% per annum in the future.
With the dividend tax credit this yield of 11.3 % is approaching close to 15%.
Would you say this is a good buy? Or there are credit issues with the company issuing this preferred share ?
Thanks for your insight
No matter what happens to 5 year government interest rates you are guaranteed 6.25% per annum in the future.
With the dividend tax credit this yield of 11.3 % is approaching close to 15%.
Would you say this is a good buy? Or there are credit issues with the company issuing this preferred share ?
Thanks for your insight
5i Research Answer:
ECN is small, and its business is highly sensitive to interest rates and the economy. That being said, for higher risk income investors we would consider the preferreds interesting. Yesterday the company announced a joint venture which will bring in a lot of new cash, and thus add some protection to the preferred shares. It is also issuing some new preferreds to a partner (these will not be listed nor are transferable). The company has struggled in the past year but should do better as rate hikes ease. These prefs are not for conservative investors, but with a $185M capital injection from Skyline they do look significantly better today.