Investment Q&A

Q: Are preferred shares suitable for the retail investor?
I admit to not fully understand them but it seems to me that:
- value is primarily impacted by interest rates, so constitutes an interest rate speculation
- the positive or negative effect of an interest rate change will vary depending upon the particular issue
- even on a reset date, an issue will not necessarily trade at par
- the characteristics of individual issues varies a lot, complicating comparisons
- thinner market for individual issues, making for bigger spreads
- trading prices are not transparent
- a pref share ETF may be a better choice
Comments?

Q: I would like to understand better why preferred shares, as represented by CPD, plummeted in 2007-2008 and again in 2013-2016. They dropped about 35% in the first (recession) episode and about 36% in the second one. Most recently, between September 1, 2018 and now, they have dropped about 13%. How vulnerable would CPD be to another huge drop if the economy continues to weaken through 2019?

Q: I have accounts with Wood Gundy and Investors Edge, so consequently had a mishmash of preferred share holdings. In an effort to build a better yielding, laddered, preferred share portion of my portfolio, I sold all current preferred positions and am planning a ladder with the above noted shares in a non-registered account. These will constitute about 20% of my total portfolio. Do you have any concerns with the choices, or rate resets in general ? I rate resets have not performed well, but the yields are quite attractive.

Q: Good Morning: I asked this question a couple of days ago but perhaps it got lost somehow. I hold two different PPL preferred shares and rec'd a few days ago an invitation re both of these to vote on whether or not I am in favour of the decision to sell more shares in each. I have to assume the purpose is to raise more capital even though the original no. of shares was probably capped. I confess that I have no idea whether as a current holder this is a positive, negative or neutral prospect. I'm hoping you can shed some light on what's at stake here for me and how I should therefore vote. The prefs in question are ppl. pr. c and ppl. pr.e. Thanks, Don

Q: Good afternoon 5I.

When I bought CPD I thought it would hold its value better then it has. I did feel better when I looked at your income portfolio I see its down 20% and you still hold it.
What will it take to make CPD change direction?
Do you still feel like its a good position to have in a income account?

Thanks

Q: Greetings,

i am trying to clean up my US 401K _ i own both of these for income - do i need both and will they act the same?

Thanks

Q: What do you think of this as a stable short term (matures 11/28/19) income security?

Q: I currently hold both.

Re ECN.PR.A
1. Reset Dec. 5 , 2021
2. Rate cannot be less than 6.5%
3. Protection against rising rates, but with rates neutral and/or falling there is an increase likelihood of redemption at $25.
4. Price of Pref. Has trended along with ECN. Cibc has a target of $5.00
5. Reset at 5 yr Canada plus 5.44 (1.523 + 5.44 = 6.963). My book value is $23.57 for a yield of 6.9%
6. Relative to ZPR the price has dropped.
7. I’ve been unable to see the trend on volume.
Question is to make sense of all this, Sell hold or sell half position and keep the cash for other opportunities.

Q: Hi, I can obtain 7ish% yields on various preferred share issues of INE, TA, NPI, CPX, ALA, BPO, Could you please rank these purely in terms of relative security of divided payments? Thanks.

Q: We’ve owned six rate-reset preferreds for close to 10 years. What an experience! One (RBC) was just recalled. Here’s our present status:
Book Market
BNS..PR.Z $238k $228k $10k
BMO.PR.Q $123k $114k $ 9k
TA.PR.J $125k $91k $34k
BAM.PR.R $121k $76k $45k
ENB.PF.E $112k $75k $37k
I worry less now about our preferreds as our IA predicts most of ours will get recalled. Your thoughts please? I 'think' there's a place in our portfolio for some blue-chip preferreds even if not recalled. Having said that, I still don’t grasp preferreds nearly as much as I should, eg what the principal amounts will be if not recalled. Your thoughts please? The huge gap for three of our five also causes me to worry a bit about what’s happening to retail holders like us. Thanks.

Q: The yield on the issue was 5% ($1.25/share). The reset guarantee minimum is 5%. The trades are now trading at $21. This means the if I buy the shares at this price my guarantee floor is 5.9% ($1.25/$21).
If I am looking for income not dividend growth are some of these discounted prefs a reasonable option?

Thank you,

Q: In regards to the member looking for USD stocks and preferred shares. CIBC publishes a report on Canadian prefs each quarter(I've linked one for example page 27). The only issuers are Altagas and Enbridge

https://www.cibcwg.com/c/document_library/get_file?uuid=56632e8f-3032-4033-9dbb-38354e4253a9&groupId=82580&version=1.0

Q: Is there a publicly-available list of Canadian stocks (including preferred shares) trading on the TMX in US dollars?
Thanks!

Q: Hi, over the last few quarters AT has been generating FCF and using it to pay down debt and buy back shares. What are your thoughts on buying their prefs for income? Thanks,

Q: Hi 5i,
Just some additional comments following on Scott’s question about the latest issue of EIF debentures. EIF is a serial issuer of convertible debentures. This issue will likely trade as EIF.DB.K when it hits the exchange and the timing of the issue suggests that its purpose is to fund the redemption of the EIF.DB.G debentures, for which EIF will soon be issuing a redemption notice. The series G debentures have had a 6% coupon and have been trading in the money (share price above $31.70) for a good chunk of the past couple of years. The new issue technically extends this portion of EIF’s debt financing out to the new issue’s maturity date, March 31, 2026. However, anyone considering holding EIF debentures should be aware that they routinely ‘hard call’ their debentures, for an early redemption at par, typically about two years before maturity. For example, the actual maturity date on the series G debentures isn’t until March 31, 2021. To obtain the existing premium, current holders of the series G debentures will need to convert them into common shares at $31.70 or else sell them into the market before the redemption date. Cheers!

Q: Hi- can you comment on this new Conv Deb issue- the rate
seems high at 5.75%- when is the issue considered high
yield and/or junk? Any concerns on the solvency of this company

Q: Preferreds have slowly recovered however the ones from Brookfield infrastructure seem to be stalled out. Is there something in the set up of these ones that i am missing.

thanks as always

Q: Further to the question on Brookfield prefs, the 5i response likely refers to BIK.PR.A (the Investment corp). I hold BIP.PR.C (Series 3) in a registered account because as can be seen from the link:
https://bip.brookfield.com/~/media/Files/B/Brookfield-BIP-IR-V2/2018-tax/2018%20Canadian%20Taxable%20Income%20Calculation%20Preferred%20-%20Series%203.pdf
the majority of income is foreign. All BIP.PRs are the same and I believe BEP also.

Q: Hi,

What do you make of EIF's latest bought deal ? The market does not seem to appreciate.

Thanks

Q: I intend to start a position in ECN in the near future and would appreciate your advice as to whether to buy the common shares or the preferred, of which there appear to be 2 choices available A or C . What criteria should I be looking at to make this decision ?
Keep up the good work. John