Investment Q&A

Q: These preferred shares pay a dividend equal to $25 face value x prime rate. The issuers, BCE and BAM, are both blue-chip companies, so the dividends are presumable well-covered. However, the prices of these preferred shares have been hammered, falling in lock-step with interest rates. To me, the sell-off seems to be overdone, perhaps because they are so thinly traded. What is your view on these variable rate preferred shares as a buy and hold investment for a retiree living on investment income? What do you think prime rate will settle out at once the pandemic panic is over, say a year from now?

Q: Should I be concerned about this? It is down about half its value. Or should I ride it out?
TORONTO DOMINION BANK 4.75% NON CUM 5YR RT RST PFD SER 20 NVCC

Q: Close to retiring and have to live off my investments, which today is 100% equities. Bonds are not paying anything. Would it be a good idea to sell 50% of equities and buy Prefered shares, many having12% yield? Understanding if not recalled hold forever and pass on to my estate. How about !00% preferred for income.?
Thanks
Cec

Q: Do you like the Preffered space at this point. Would you be a buyer of any of CPD, ZPR or HPR? Thanks for your valuable advice. Rob

Q: I am a buy and hold investor with 5 to 10 years of time horizon
I have roughly 7.5% of my portfolio in a 8 different preferred shares. They are in the order of their weights: PWF.PR.F, EFN.PR.I, ENB.PF.I, TRP.PR.K, ALA.PR.K, GWO.PR.M, FFH.PR.M, ENB.PR.A. All except one (FFH.PR.M) are either Perpetual or Minimum rate reset preferred. Minimum divided rate at reset or the current rate for perpetual on the face value is from 4.76% to 5.8%. In the last few weeks, their prices have dropped considerably. I am using preferred as part of my Fixed income. Because they are perpetual or Minimum rate reset, I expected them to be much more stable or even appreciate with the cut in the the interest rate. What is your advise under the current circumstance. My guess is that their dividend is at risk and that’s why they have dropped? As you can see they all have dividend paying common shares. What is your advice? Should I sell some of them and if so which ones?

Q: Hi Everyone at 5i! I hope you and yours are all healthy and doing well! I am 38.17% down on my CPD holding. I now pays a hefty 7.11% and the share price is nice. Is now a good time to invest, collecting the dividend and waiting for the price to get better? This is for the conservative part of the Portfolio . Cheers, Tamara

Q: This preferred took a deep dive a couple of days ago although I do not think it is a reset. Can you explain what happened? I googled but didn't see anything.
Thanks,
Maria

Q: Hi Peter & 5i,
These are preferred minimum rate reset shares. Both have a minimum reset at 4.90%. Never to be reset at below this rate.
My questions:
1. If there is a minimum rate reset, investors are not concerned about falling rates (because falling rates don't affect these) but they are concerned about the ability of TC and PPL to pay the future dividends.
2. In your opinion should investors be concerned about the ability to pay the preferred share dividends? (There are lots of common share dividends that would be cut before the preferred share dividends).
Thank you for your answer and calmness during these unforseen times.

Q: Hi Peter and Staff

Do you have any concerns about the PR.C shares getting back to $25

I don’t think they can be redeemed for 4 plus years . Seems to me like a case of “getting paid well to wait”

Thanks for all you do
Dennis

Q: Hi 5i: I hold ENB.PR.Y; ENB.PR.H and FFH.PR.K in my RRSP all of which are down over 50 per cent but have provided some income. In total they represent about 2.5 percent of my portfolio.Given the fixed nature of this payout and my little interest in preferred shares, I am wondering whether it would make sense to sell these and top up some of my other blue chip dividend holdings which are down (e.g. BIP, Telus, Royal Bank, BNS, TD, FTS) and hold a better upside over the next couple of years? Appreciate your advice as always …now more than ever.

Q: I found the earlier question about PPL prefers interesting. So my thought is to sell my PPL common and get the tax loss and buy the PPL preferrred even though the up side on the prefers is only about 100%. In doing some research I found that I do not understand the dynamics of rate reset perfers. The A is reset in 2013 and is down 2.5% today. The S is reset in 2020 and is up 7%. Both are down about the same from the issue. I would have thought that the 2020 resets would be much less valuable as they are sure to be called at the current market price and reissued at low interest. What am I missing

Q: Which is a better buy for L.T. hold PPL.PR.A. or PPL.PR.E assuming they are not redeemed at the call date ?
ECN.PR.A-OK for Income for the next 5 years?
Happy St.Patrick's Day
Cec

Q: Could you suggest six high quality preferred shares to buy. Thanks

Q: Good Morning
The above noted preferred reset has fallen 30%.
Can you please provide your opinion as to the credit worthiness of Westcoast Transmission. I am thinking of averaging down at around $17-18.
Thank you for your insight.

Q: Do you think this would be an okay preferred for some income and possible upside down the road? I wasn't sure what the "cumulative" part meant? Thank you and stay safe :-)

Q: The payouts on preferreds have become astronomical, and I'm a retired person needing income. Is this the bargain of the century?

John

Q: These are min reset prefs good til Feb 23 paying 5.2% min
Now at the time Kinder credit rating was 1 notch higher at 3H than Pembinas
and now they are trading at $10. The ppl.pr a which are somewhat similar in payment are at $14. Buyers/sellers are concerned about what, Pembina will cut common div and then the pref div making them no bid.
Comments welcomed,, oh yeah, they are yielding 11%

Q: P/P $15, 1.5% position. Dropped sharply last 2 trading days($11.75 to current $9.05).Any reasons? Current yield 9.98% mainly due to drop in stock price.Reportedly rate is based on 5yr GOC plus 2.89% & resets on Mar 31/21.I think the 5yr GOC is currently 0.62% which indicates a much lower rate then.Please may I have your opinion.If it is advisable to sell,please give 2 to 3 replacemrents dividend stocks( not preferred) Txs for u usual great services & advices

Q: ..how do you think HFR and CVD will perform as interest rates skid along the bottom?

Q: I have provided a sampling of the Preferred Shares I have in my holdings where most of them have rate renewals out into 2023/24. With prospect of a recession and lower interest rates I have locked in returns for the short-term, would you be able to provide some insight into why their market valuation has dropped 25-30% in most cases? Are investors doubting Royal Bank, Bell, Algonquin Power, etc of being able to meet their debt obligations?