Investment Q&A

Q: I recently bought some DFN.PR.A at $9.22 which pays a 5.5% dividend monthly. It "matures" on Dec 1, 2024 at which point my understanding I can redeem the shares at $10.. According to my calculations my return should be 9.81%. Is my return calculation correct and do you see much risk since it own the 15 biggest companies in Canada that pay high dividends?

Q: I've noticed that there are a lot of questions recently related to the various entities in the Brookfield empire. I initially thought it was overdone until I realized what a mess Brookfield has become in general. In my case I don't see my preferred X shares listed in my TD Waterhouse self directed account anymore. Have they been restructured? It's really hard to figure out what the heck they've done.

Q: I am looking at buying some preferred shares as part of my Income Portfolio. As interest rates rise the share prices fall. When would be the opportune time to buy them, when intrest rates peak? Since markets are forward looking, when would you start buying? What would be the signal(s) to start buying? I know this is a timing question and timing is seldom perfect. Any quidance/suggestions you can offer would be greatly appreciated.

Q: I am thinking of selling enb.pr.f ,i have a large loss on it and buying trp .I could use this for a tax loss also.What would you advise?

Q: Hi, I own a number of preferred shares from various Canadian issuers and came across a recent article from Seeking Alpha which is concerning, except below. What is the possibility delisting of preferred shares could occur in Canada as well for the reasons outlined? Thanks.

“Preferred stock can be a useful and important part of a diversified fixed-income portfolio, even with the decline in all segments of fixed income in 2022, however, recent events related to preferred stock delistings have put to the forefront a risk that needs to be taken into stronger consideration by investors. While the matter of delistings is certainly not new, these recent events have heightened our concerns on this risk, and we also call on the SEC to take up the issue to protect investors.

Earlier this month Höegh LNG Partners LP (HMLP) announced that it will delist its 8.75% Series A Cumulative Preferred Stock units (HMLP.PA), effective January 2, 2023, to save legal, audit, and other reporting costs associated with the preferred stock listing. While the company intends to continue to pay the distribution, the withdrawal and effective loss of liquidity for unitholders is a major negative event that led to a sharp 33% plunge in the price from the low $21 range to $14.25 as of this writing, as seen in the chart below.

HMLP-A Price Chart 2022

While some may find value in what is now a 15% current yield, the lack of liquidity creates massive uncertainty for unitholders going forward, and it's unclear what investors should do next. HMLP management has affirmed that it does not care about its preferred investors who handed over $176 million in cash to the company in good faith, expecting that the public listing of the preferred stock would remain stable and tradable as expected when initially issued. The proper action would have been to redeem the issue as the parent company Höegh LNG Holdings Ltd. did when it acquired HMLP and paid common shareholders in cash.

The action of delisting preferred issues and disrespecting preferred stock investors is not just a phenomenon of smaller and obscure issuers. The same thing is happening to the preferred issues of PS Business Parks (PSB) Series X, Y, and Z (PSB.PX) (PSB.PY) (PSB.PZ) totaling $755 million of combined face value. PSB has been reliably issuing, paying and redeeming preferred issues since 1999 when its Series A preferred was issued. Series X was issued in 2017 as a solid investment grade issue (rated Baa2) yielding 5.25% - presumably a perfect fit for a long-term, conservative income-focused investor. PSB-PY was also issued in 2017, and PSB-Z in 2019.”

Q: Hello 5i Team

Further to Larry's previous question on preferred shares.

Farstad Portfolio Management (Scotia Wealth Management) publishes every week as news the Scotia Wealth Management Daily Preferred Share Analysis which lists the reset date amongst other preferred share information.

https://farstadretirement.com/#news

Otherwise one is forced to download the prospectus for each individual preferred share issue to determine the reset dates (for all approximately 325 preferred shares issues on the TSX not including split shares).

Thanks

Q: Hi 5i,
I own BAM.PR.M preferred shares. Which company will be responsible for paying dividends on this preferred share after the upcoming split?

Will the ticker change? If so, to what?

Thanks for the help.
John

Q: Would now be a decent time to buy preferred shares since many are down . If so can you suggest a few that are safe with decent yields.

Q: it seems the fortunes of this company are at least stabilizing if not turning around. They are profitable and have negotiated a more favourable debt maturity structure. My main question is in regards to the short interest of around 18% - is this not a risky thing to do in light of the above? I read somewhere the short positions have actually been established as hedges by convertible bondholders - if the company tanks, the bonds sink but the short positions offset. If the company succeeds and share price increases, the convertible bonds can convert to equity at the lower conversion rate and close out their short position. Am I on the right track? I can't otherwise explain this huge short %

Q: Is this a safe investment for long term dividends. It is down a lot since it was pushed om me. Thx James

Q: I dipped my toe I the preferred share market at the offering of BROOKFIELD REN-A S-18 PFD in April. But being new to me I am hoping you can explain the ins and outs of what I purchased. I will be honest, I saw Brookfield renewable, 5.5% and the word preferred and hit the buy button. since that time it has steadily declined. the redeemable date is April 2027. Additional questions are: 1) on the redemption date will they be redeemed at my purchase price or market price? 2) the current yield based on current price is 7.31% would you buy more at current price? 3) for future reference when should an investor buy this type of share?
thanks for the great service. deduct as many credits as you feel is fair.
Todd

Q: I still have a lot of preferred shares in various Canadian companies, along with some in the CPD ETF. These were all legacy investments from a long-ago advisor. I am no fan of pref shares and now wonder if its' time to dump them all and go into true fixed income like laddered GIC's. I still fail to see a case for pref shares and also wonder whether I'm better to put the proceeds into relatively solid equities, like say ENB, SLF, T or the like. The dividends are roughly equal to my pref share positions and I know that equities can drop in share value. So do the pref shares, in my experience, but the prefs have such limited upside potential. Your thoughts please.

Q: this seems like it might be a hidden GEM. your thougths?

Q: As a follow up to Davids question today, re Fixed Floating Preferred Shares, can we trade these as stocks, without caring too much on rates. As was said in the question if one is buying 60 cents on a dollar, the price fluctuation is enough to compensate on the lower yield. It seems to be an attractive thing for fixed income of anyone's portfolio. I suppose the yield will be paid at the price the preferred share is sold.

Q: An interview with the Globe & Mail about ten days ago, David LePoidevin of Canaccord Genuity said "Our most exciting trade right now is the reset, fixed-floating preferred shares, which we’re buying at an average price of about 60 cents on the dollar. The dividends were reset about three years ago when rates were 0.5 per cent. The five-year is above 3.5 per cent, so the dividend increases are stunning. Not enough people are doing the math, but you can buy something that looks like it’s unattractive today, but in two years, you’re going to have a yield that might be approaching 9 or 10 per cent." Elsewhere he clarified that he is buying only non-bank preferreds.
What is your view on this? If you agree, what rate reset preferreds would suggest? Mr. LePoidevin mentioned BCE, TRP and ENB but no specific series. The tickers above are just my guesses.

Q: ECN.PR.C is currently at a 52 week low of $23.75 with a yield of 8.34%. Would you consider the dividend income to be relatively stable over the next 5 year period?

Q: Hi 5i Team

I'm trying to understand the timing of when a new benchmark 5 year Bank of Canada bond rate is set (and how it will affect fixed rate reset preferred shares) .

It looks like there is an auction for the 5 year roughly once a month. Do each of these auctions affect the benchmark or are only some designated for that purpose?

Thanks
Peter

Q: We own 10 preferred shares with BCE,BRF,BPO,NPI,PWF,ENB,CU. Overall we are down considerably on capital loss. But making a good return at these current prices. Question to you is, should we keep preferred shares for the current return or take a loss and sell them. Most are in registered accounts so no tax loss is available.

Q: Hi, Todd’s question about these preferred shares offered by Brookfield has piqued my interest. Appears to be a solid investment. What is the potential downside?
Thanks

Q: Peter, one of the worst 'safe' investments I have ever made has been ZPR. Looking for a somewhat enhanced yield and a bit more safety, my 2014 investment shockingly dropped by about 40% in a year! The explanation 5i offered at the time was the declining interest rates combined with ZPR's rate reset preferred share holdings. But now, interest rates are INCREASING and ZPR is again down - almost 20% in the past year, and 12% in just the last six months. I realize other factors can move prices, but I'm mystified how a supposedly more stable investment can decline so much, so quickly, both when prevailing interest rates go UP and when they go DOWN! Do you have any explanation that might make sense to a mere mortal?