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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: Sorry for resubmitting the same question again. It seems that I am doing something wrong. Just realized that the name of the Company didn't appear on my last submission, so I am putting the company name and the symbol in the text, (Capstone Mining CSE.PR.A). My original question was sent two days ago, and probably did the same mistake.

I am in dilemma in choosing between the offer to convert series A to a fixed reset for five years at 3.271%, to convert to the floating rate preferred, initial quarterly rate 3.204% or to just take my losses and sell. What would you suggest, how safe is the dividends on this prefered now it is in the hands of the new company that bought Capstone and considering that the rate of return of over 6% based on current price? What would be a good replacement if income requirement isn't important and would rather have some growth and less dividend?

Thanks.
Read Answer Asked by Saad on July 11, 2016
Q: Hi there

I wanted some feedback about putting about 5% of my portfolio into Preferred shares for income purposes for over a 5 year hold. I know I could buy the preferred ETF CPD but have been hurt before in ETF bond funds so feel better buying two or three individual issues where I know up front what I will be getting in return for at least the first few years. Would it be possible to provide three preferred issues that you would recommend for income?

Thanks so much
Read Answer Asked by Stuart on July 07, 2016
Q: Good Afternoon,
I hold a BCE preferred share specifically Series AG ticker symbol BCE.pf.G, currently trading around $13.40 with par value of $25. Any idea why this has dropped so much? I understand there was recently an option to convert into a floating rate preferred but I chose to keep my fixed rate preferred. Any thoughts? Is there a reset or something coming up and there is concern a lower coupon is coming? Thank-you
Read Answer Asked by Chris on June 30, 2016
Q: I am struggling to understand the relationship between dividends from common shares versus preferreds. I understand the the preferred shares will be paid before the common shares. However preferred shares do not participate in any future dividend growth rates. As an example National Bank common shares (trading at $44.09)are offering annual dividend of $2.20 (yield of 4.99%) .The recent issue of national bank preferred NA.PR.A issue price of $25 offer dividend of $1.35 (yield of 5.4%). If the div on common were to grow by a modest 3% over the next 5 years the dividend would be $2.55 or 5.78% surpassing the preferred shares by almost .4%. Historically the div growth rate had been 10.5% which would make the case to own the common shares more compelling.
The argument that can be made for preferreds is when the company becomes distressed the dividends on the preferreds would be paid first. However is the protections really of values as both the share price of the common and preferred will most likely fall when the company is in distress.

My question is how do you calculate the breakeven between common versus preferred shares when looking at the dividends.

Regards...Antoine
Read Answer Asked by Antoine on June 30, 2016
Q: There have been 2 preferred issues that I know of recently
that have minimum resets that are very attractive for
a taxable acct. PPl.pr.m and trp.pr.j receting at 5.75 and 5.5% respectively. Do you know of any others ? and apart
from credit risk what is the downside with these ?
Thank you Ian
Read Answer Asked by ian on June 15, 2016
Q: BPO.PR.H Called their pref today and am sitting on 8% cash what would you suggest I move into ,
Regards Stan
Read Answer Asked by Stan on May 25, 2016
Q: I hold 'IBG.DB' debentures maturing 2019 June 30 in my TFSA.

If the shares appreciate above the conversion price, then the debentures become a kind of option on the shares, with interest income while you wait. In this case, it seems to make the most sense to sell or convert just prior to maturity (as holding to maturity would mean receiving back only face-value.)

On the other hand, IBI might at some point call the debenture away at face value, in which case the option value disappears. How do I make a judgement on the likelihood of the latter event? Am I missing something as concerns incentives not to hold to maturity?
Read Answer Asked by John on May 24, 2016
Q: I have unfortunately owned these pref shares since first issued as EPP.PR.B. They then became CZP.PR.B and are now as noted and related to Atlantic Power. I don't really understand the corporate relationship. However they are a fixed reset and were reset in 2014 and now yield about 10% on their current price of $13.85 or about 5.6% on their issued price of $25.
Please provide your thoughts on this security. Is it worth a continued hold? Do you ever see the market price ever approaching the issue price? Do you consider the pref share dividend to be sustainable? They are unfortunately held in a registered account so no capital loss if sold.
Thanks
Read Answer Asked by angus on May 20, 2016
Q: I would like to know if the new debenture issue being offered is safe for capital preservation and if there is anything about this offer such as the conversion of the debentures to equity and its other terms such as early redemption rights after the first 3 years, that would have a major impact on the debentures value and liquidity for a 5 year hold. What would these debenture rate as? Is there a fair possibility of future capital gains based on the conversion price of $44.75 per Share. I presently own 100 shares of EIF and am thinking of buying these debentures for an RRSP and or TFSA for a minimum 5 years or longer. Are there better and safer fixed income opportunities at the present time, that pay a 5.25% dividend that one could invest in?

Thank you for your answer.

Joseph
Read Answer Asked by Joseph on May 17, 2016
Q: Hi 5i,
I have some Exchange Income series G debentures, which were purchased at a discount to par and are now trading above par. Also, the EIF share price has just nudged up through the debentures’ conversion price. The issue does not mature until 2021 and the 6% coupon is still yielding over 5.5% at the debentures’ recent trading price, a better yield than any fixed income alternatives I have in mind right now. I purchased the debentures primarily to increase my overall fixed income yield and secondarily because I thought they also had some capital appreciation upside. They are held within my RSP so, whatever I do with them, there would be no immediate tax consequence. What I am looking for is a little help with the thought process on whether the unrealized capital gain and the move up through the conversion price suggests that I ought to be taking any action, or whether I should just continue to hold them for their bond qualities. Are there any rules of thumb in these circumstances with this kind of investment vehicle? The increase in value of the debentures is not enough to have substantially altered the balance between fixed income and equities within the RSP. So I wouldn’t need to trim them based on rebalancing the fixed income/equities mix alone. My overall investment time horizon extends well beyond their maturity date. Thanks for any thoughts.
Read Answer Asked by Lance on May 16, 2016
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