Investment Q&A

Q: I am a senior and am an income investor. I am interested in purchasing some minimum rate reset pref. Shares in quality companies. Your thoughts on this strategy as I am looking for a steady income stream. Would you recommend 3 or 4 with a minimum reset rate of at least 5% dividend rate that would qualify for the Canadian dividend tax credit as they would be purchased in a non registered account. I am also considering a purchase of ING-N shares in US funds in an RSP account. Your thoughts on the quality of this investment and the safety of the dividend and if there is any withholding tax,as this is a dividend play the fact that stock price can vary somewhat is not as relevant however capital preservation is always a consideration. In all of the above I would only start with buying a half position. Thank you, Brian

Q: What would you expect will be the key drivers of CPD's price in the marketplace? Eg would it likely follow equities down/up (because of reliance on credit of issuers) or moreso bonds ("safe" haven for yield when equities are volatile)? How do interest rates impact it? What would it do in a recession? I'm not looking for a prediction of the future, but a simplified model on how to think about this kind of security. Thanks.

Q: I hold some Just Energy Convertible Debentures (JE.DB.C) as part of my fixed income allocation. With the recent setback they have fallen from about $95 to $80. If the company restructures I assume they will go to zero, but if the company survives or gets bought out they should return close to par. What would you recommend at this point and are there any signals to look for that would scream get out now no matter what the loss?

Q: Should there be concerns that JE will not be able to meet its financial obligations on this convertible debtenture?

Q: XMF.PR.B is a preferred split share fund from Quadravest. It invests solely in shares of Manulife . The fund sells at about $5.10 and pays a 7.3% dividend monthly. My understanding is that it has never missed paying the dividend in over 10 years. The fund guarantees to buy back your share at $5.00 on the anniversary date, which is December 1st 2024. It would appear to have bond like characteristics with a high payout. Your input would be appreciated.

Q: Hello. I have a large portion of my fixed asset side invested in Pref Shares of solid Canadian companies and this asset class has been suffering. I just received a solicitation from BPRF, which aims to invest in high quality US Prefs and claims the US returns are much better than Canada. The fund looks tiny and expensive and the yield is well below the 5% promise. Neverthelesss, should I be looking to move from Canadian prefs into US holdings and if so, how best to achieve that? Thanks

Q: Why is CPD taking such a hit right now?

Q: Kinder Morgan's minimum reset preferred has a credit rating of 3H trades at a discount, pays 5.25% minimum dividend and if interest rates do a moon shot on reset day will pay 3.51% plus govn canada 5yr bond, why wouldn't this make a good income investment?
Do you know of a site for preferred info?

Q: Looks like the trend is lower for rates going forward even with the recent drop. If we were to assume rates were going lower wouldn't owning Pref ETF's like the CPD, HPR etc be a bad idea?
Wouldn't rates need to go higher for these to really be a buy right now?

Q: What is the likelihood that GSY.DB will be redeemed before maturity assuming that the price of the shares continue to trade above the conversion price? What is the earliest date that the company ca redeem the shares?

Q: Hello I notice that Brookfield office properties prefs have been rallying. Does 5i know why? Could it be due to Artis reit etfs recently being called at $21? Also, does bpo have a common stock listing?

Q: Good afternoon,

Looking for your opinion on today's issuance of a 5.5%, Sept 20/24 cv debenture for income/ growth ?
Thank you,
Brad

Q: I previously asked why ZPR has decreased lately with the trend for interest rates declining. ZHP the identical fund of US preferred shares is increasing with an increased trend of lower interest rates. Decreasing interest rate trends should increase bond and preferred shares yet the CDN version has not acted liked the US version. I can see no logical reason for these different trends?

Q: Which of the above funds are reset preferred? When do they reset and what would the dividend look like at that time? What is their present dividend. Could you also tell me about the ones that are not reset preferred? What are they and what is their dividend? Need information as not sure whether to sell with interest rates decreasing. Would I do better holding the common shares? Thanks for providing this service.

Q: Own 500 units of this as well as CPD, XPF and XTR in TFSA. Income is okay but volume is thin. Preferred space is out of favour today, worst bond alternative ever it has been said, I get that.

So what to do? Consider them stranded assets and notionally eliminate from portfolio allocation and hang on until better times arrive? Problem is they take up brain time thinking about alternative use of funds now invested in them. But with interest rates declining and rate-set preferreds having further room to fall is the best one can do is hope and collect the distributions? Taking losses in a TFSA is emotionally hard to do.

Q: I have received notice that my TD.PF.B preferred shares are being reset & I have the option to convert these series 3 preferred shares to series 4 preferred shares. From my understanding of the TD.PF.B series 3 prospectus the series 3 interest rate will be fixed for the next 5 years based on the present Canadian Government 5 year bond rate plus 2.27%. While the series 4 next 5 years interest rate will be calculated every 3 months based on the Canadian Government 3 month Treasury Bill plus 2.27%. My question is, which would you choose, 1) series 3 which will have an approximate 3.8% interest rate for the next 5 years OR 2) series 4 which have the possibility of having a greater or maybe less interest rate over the next 5 years OR 3) sell the shares & purchase shares that have a better chance of future growth. I bought the preferred shares when issued at $25 per shares & am presently underwater by 10% when the 5 years of dividends received are added to today’s market prices. I do not need the dividend as income & the shares are in a registered account. Thanks … Cal

Q: I own convertible debentures shares and many of them have been redeemed before their maturity date in the past few years . The most recent case is DII.DB.U which is being redeemed 5 months before maturity. Why do companies do this? Are they saving that much that is in their best interests not to pay the outstanding interest amount for the remainder of the period to maturity?

Q: Preferred shares are on the upswing today. Can you explain this activity?
Thanks, Joe

Q: 5i Team
I currently own PHN Bond Fund (RBF1110), PHN High Yield Bond Fund (RBF1280) and GICs in my RRSP for the fixed income portion of my portfolio
Would adding a convertible debenture ETF complement the PHN High Yield Bond Fund (RBF1280) or would it be a duplication? The convertible debentures would not exceed 5 % of the total fixed income in the RRSP.
Are there any other Canadian convertible debenture ETFs other than CVD and CXF. Of the two ETFs mentioned, which is your preference?
Is it better to use an ETF for convertible debentures or should I purchase individual company debentures.
Where can I obtain the credit ratings (Moodys/S&P/DBRS) for individual company's convertible debentures.

Thank you for great service.

Q: I am presently holding the first 3 preferred in a non registered account.
BMO is held in a registered account.
Can you kindly analyze the above preferred. Some have decreased in value in the last couple of months. Any idea why this is happening.
Is it time to sell?