Q: Hello 5i,
Is L.PR. B an interesting buy for the income with a rate of 6.50% or is it better to wait for it to continue sliding downwards for a while longer.
In the current interest rate environment, what rate of return could help halt its descent. There are preferreds that reach 7 or 8% yield, depending of course on their category, the credit quality of the company, the sector...
Any information is welcome.
Thank
Is L.PR. B an interesting buy for the income with a rate of 6.50% or is it better to wait for it to continue sliding downwards for a while longer.
In the current interest rate environment, what rate of return could help halt its descent. There are preferreds that reach 7 or 8% yield, depending of course on their category, the credit quality of the company, the sector...
Any information is welcome.
Thank
5i Research Answer:
The 'halt its descent' question is tricky, as sometimes a high rate just causes investors to worry more, rather than step in to buy. But, considering the stability of cash flow, the quality of the company and market share, and asset protection, we think 7%+ should attract interest. Many discounted preferreds will yield more, but many are in different sectors with much different risk profiles. L common stock has been weak with inflation concerns (and government controls, potentially) but the security on the preferreds really hasn't changed. Free cash flow is $3B annually at least and dividends are very well covered with cash flow.