Investment Q&A

Preferred shares can have many different characteristics which impact their yield and valuation. Series A is a 5.5% fixed rate dividend, and Series V is a reset, with the rate changing every five years to the US government bond rate plus 3.14%. Series V is also in US dollars. In a time of falling rates, reset preferreds can decline more than fixed rate preferreds, as investors anticipate potentially lower future dividends, and this can change valuation/yield. As a strategy for income, we think preferreds are fine. ENB and other utilities have very stable cash flow, and preferreds also rank higher. Common dividends can be suspended to protect the preferreds, and the company has a huge asset base as well. As noted, yields will fluctuate but in terms of credit quality we would have essentially no concerns.