Investment Q&A

Q: hi experts; with a 6%+ yield would this be a good choice for a income seeker.thanks brian

Q: I own shares of BRF.PR.A. On April 30th, 2015 holders of these preferred shares will have the option to convert to floating shares or retain them as BRF.PR.A. The floating shares will start trading on May 1, 2015 under the symbol BRF.PR.B

My question is: Should I convert to floating shares or not?
A leading expert on preferred shares advised today the holders of BRF.PR.A should not convert. I am looking for a second opinion.
Thank you again for your valuable advice.

Q: Hi team, I have been watching ZPR for some time now at this level is it beginning to look interesting? I don't have any holding specifically in this area so I was looking for some diversification. Or would HPR be a better buy? Any thoughts would be appreciated, thanks again.

Q: I understand the general idea of convertible debentures, but specific cases are puzzling to me. For example, AXL.DB.B, maturing June 30, 2017, has a conversion price of $1.70/s, but the stock is currently trading at around $0.07/s.

The debentures are substantially discounted; at today's price, $10000 face value would cost only $4750. But given the conversion price of $1.70/s, the 5882 (10000/1.70) shares you would receive in 2017 would be worth only $412 (assuming the stock price remained the same.)

Yes, the loss of conversion value is somewhat offset by the yield; with its discounted price, AXL.DB.B currently shows a yield-to-maturity of around 50%. But this only nets the purchaser around $2375 ($4750 @50%); $412 plus $2375 is still well-below cost.

If just breaking-even requires a ~600% recovery in the stock price, what, then, could be the incentive to buy the debentures? Or is there an 'at-par' conversion option I'm missing here?

Q: Recently the unit price of subject ETF has been steadily eroding each trading day. Could you please give me your analysis of why you think this price erosion has been occurring. Is there a bottom to this thing?

Thanks

Q: Hi Peter
Vereseen has issued another Preferred series E Reset for proceeds of 200 million.I own the A series which yielded 4.4% at the park value issue price of 25.00
Unlike a bond they will never be redeemed at 25.00 by the company, the shares are down by about 22% which sure seems steep to me,so what are my chances of the shares getting back to 25.00 so I can recover my original investment.
Are these reset Preferreds just being flogged by the underwriters for commissions.
Is there a good chance that Vereseen might default and I loose all my money.
Finally would you recommend taking the 20 percent hair cut and dumping my shares.
thanks Gord

Q: Hi guys, for educational reasons only.
Why is CPD selling off. Is it the fear of higher interest rates.
It seems excessive to me. Thanks for all you do.

Q: Would you please provide commentary on the effect of the recent sale of assets on the strength of the balance sheet and the viability of the remaining business going forward.

What would be your risk assessment of the Conv. Debentures?

Thanks, Hugh

Q: Preferreds have had a rough ride with some pundits suggesting that the rate reset preferreds are driving the declines in an ETF like CPD. My understanding of the argument is that resets are occurring at "unexpectedly" lower rates and that future yields will be lower. The Globe had a pretty negative article the other day which seemed to suggest that rate resets are too complicated for retail investors to understand. I didn't really think the rate reset concept was all that complicated but perhaps I am daft and don't really understand them. My question for you is what happens when interest rates start going up? If issues start to reset at higher than "expected" yields would this have a positive impact and start supporting the price of an ETF like CPD?

Q: This is a Preferred Reset that has lost almost 50% of it's value. Is there any concern about picking this preferred at a price around $13, such as default. I believe the next reset isn't for another 5 years. Thanks

Q: Just noticing CPD is at its 52 week low, also ZPR close to its 52 week low. Are they a good investment for income and if so when is a good time to buy them? Thanks

Q: Please provide your opinion this US ADR: Barclays preferred share series D. Please comment on the risk of it being called and where you expect the yield to be over the next 12 months.

(I like this ADR because its has great yield; good for US income; and there is no US tax withholding on the dividends.)

Q: Hi Guys,

This is a follow up to Alayne question on BRF.pr.A.

Don’t forget, the 3.32% dividend is on the original $25. If you calculate it on the current price of $20.35 you get a return of 4.1% ($25x3.32%/$20.35). If it is held outside of an RRSP in will have an equivalent interest rate of approximately 5.3%. This is much better than current yields.

If you reset using the short term provision and if the T-Bill rate went up 1% next year your yield would probably jump to something over 5.25% (6.8% bond equivalent) at that time and you could eventually have a capital gain from the $20.35 to $25.

Not all that bad.

I’m in the same boat with GMP Capital, GM.PR.B. Any comments on this company?

Thanks
John

Q: Good morning, could you please correct the symbol on Jacques question and what would be the yield on these after the reset? Would you expect the price to rise after the reset? Would these make a good investment since one presumes interest rates will rise in the next five years and the prices will correct to $25. Thank you

Q: Can you give me some info on this particular stock. It seems to be quite new and returns have not been great during the last year. The dividend is quite high and wandering if it is safe? Tnx.

Q: How would you rate the recent 7% Convertible Debenture issued by Terravest? Would you prefer it over the common shares? The company does has exposure to Alberta.

Thanks as always.

Q: Are rate reset preferred shares an investment vehicle that should be avoided?
I am referring to the present practice of companies issuing rate resets by increasing the INTEREST RATE SPREAD (which is added to the 5 year Government bond) higher and higher each time they issue these shares.

For instance, yesterday Veresen issued VSN.PR.E with a spread of 4.27%. Prior to that the VSN.PR.C had a spread of 3.01% and VSN.PR.A had a spread of only 2.92%. Naturally, as soon as news got out of the higher spread of VSN.PR.E both VSN.PR.A and VSN.PR.C were hit hard.

My question therefore is should we stop buying the rate resets? I presume one will keep losing money because a company will keep raising the interest spread whenever they issue new preferreds. It is not only Veresen that is doing this but Husky has done it as well.
I currently own both VSN.PR.A and VSN.PR.C and both have been hit hard after the announcement of the new issue (VSN.PR.E). Should I sell them or is there a chance that they will recover in the future.

Q: Hi Peter,

As I mentioned in a prior question I am a significant holder of Convertible Debentures, some in Registered and some in non registered accounts

In the past decade I've only had 1 default (Prizm)

However today I am holding 5 CV's that are substantially below par and I am concerned that they will be able to settle in whole upon maturity.

I will list them as follows:

PLT.DB
WEQ.DB
ZAR.DV
AET.DB
LRE.DB

Question to you is, which of those are so dangerous to hold, given the current state of energy, that you would recommend I sell because taking the current bid is probably better than zero?

Thanks

Q: What are your thoughts with regards to holding First Asset 1-5 Year Laddered Gov't Strip Bond Index ETF (BXF) vs the Ishares Canadian Short term bond ETF (XSB) in a non registered account? Should a person sell XSB and replace it with BXF for a non registered account?

Q: What are your thoughts on the quarterly results (they always seem somewhat messy with adjustments) and the outlook going forward? Recently a comment on BNN was made that its a "mini BAM (Brookfield)" in the making.
Thanks