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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: You are right when you say preferred shares are not bonds, they fall fast in a bad market.

Would it be wise to add a modest amount of ZPR or CPD during this period and take the dividend for a while? This would be in an RRSP
Read Answer Asked by Richard on March 04, 2020
Q: I'm looking for ways to hedge exposure to the perpetual preferred market?
I own a large portfolio of Canadian bank, insurance and utility perpetual prefs. All of which I have profits on. This weeks carnage bled into the pref market. I don't try selling because the spread between the bid and the ask is too wide. Not to mention triggering capitoI gains tax.
I was able to place shorts on CPD, ZPR and HPR the day they went ex dividend and that has worked somewhat but to little to late. I don't like using shorts simply because short gains are considered income to the CRA. Plus the duration of the short trade is small as to not payout someone elses dividend!!
There must be a better way to solve this issue? I'm unable to find an ETF that is the polar opposite of CPD. I'm open to all suggestions....options, inverse ETF suggestions, TLT maybe??
Help...
Read Answer Asked by nicholas on March 03, 2020
Q: Hi,
Prediction : PWF preferred series I and G will be redeemed. POW put aside 350MM to redeem preferred shares in the latest reorg. These 2 perpetual issues are down significantly since mid-Dec, have the highest coupons and total about 350MM …POW has also perpetuals with high rates but they seem pretty stable. Your guess? Could they be redeemed as soon as this quarter? Thanks.
Read Answer Asked by Denise on February 19, 2020
Q: perpetual preferred shares - I am trying to understand the risks in purchasing perpetual preferreds as part of my fixed income allocation. i am going into retirement so steady income is more important to me than the day to day fluctuations in the face value of these. I understand the risks with rate reset but wondering what i am missing with Perpetuals. I hold a number of them in my US investment account and they have generally been significantly less volatile than the market in general and continue to pay me a nice steady stream of income. Am i missing something here!
Read Answer Asked by kelly on February 14, 2020
Q: I've clipped the following out of the original debenture offer:
"The Debentures will be subordinated, unsecured obligations of goeasy and will bear interest at a rate of 5.75% per annum, payable semi-annually in arrears on July 31 and January 31 of each year, commencing January 31, 2018. The Debentures will be convertible at any time at the option of the holders into common shares at a conversion price of $44.00 per share. The Debentures will mature on July 31, 2022.

The Debentures will not be redeemable prior to July 31, 2020. On and after July 31, 2020 and prior to July 31, 2021, the Debentures may be redeemed by the Company, in whole or in part from time to time, on not more than 60 days and not less than 30 days prior notice at a redemption price equal to their principal amount plus accrued and unpaid interest, if any, up to but excluding the date set for redemption, provided that the weighted average trading price of the common shares on the TSX for the 20 consecutive trading days ending five trading days prior to the date on which notice of redemption is provided is at least 125% of the conversion price. On or after July 31, 2021 and prior to the maturity date, the Company may, at its option, redeem the Debentures, in whole or in part, from time to time at a redemption price equal to their principal amount plus accrued and unpaid interest. "
Would I be correct in interpreting this to mean that the company can't redeem the debentures until after the July 31, 2020 date and then only with a minimum of 30 days' notice? I also note the bit about the average trading price having to be 125% of the conversion price and am not sure I understand this wording. If you could help to clarify that I would appreciate it. I am thinking that it is better for me to hold a bit longer, as the 5.75% interest beats what I would receive as a dividend once converted to shares, but doing the math otherwise it seems to come out about even. When is a good time to convert? I assume prior to the date(s) the company can do so for me - but there seems to be two time frames in which the company is able to convert - after July 31, 2020 and after July 31, 2021, with the latter being something you would want to avoid. Am I understanding this correctly? Any additional thoughts you can offer would be appreciated - as always!
Thanks for all your good work!
Dawn
Read Answer Asked by Dawn on January 14, 2020
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