Investment Q&A

Q: Generally one can find a yield of between 4% and 6% for preferred shares and junk bonds. I am leaning towards pref shares for the higher yielding portion of my portfolio. I realize bonds are higher in the order of liquidation but there seem to be a number of higher quality pref shares that yield close to junk bond yields.
1) Do you agree with my thesis?
2) What is the lowest credit rating would you would accept for bonds and pref shares?

Thank You

Paul

Q: Hello Peter, Ryan and crew.

I am retired and rely on investment income of about 4% dividends/interest. Because I no longer wish to take the time necessary to monitor 50 stocks and 10 bonds, I have been looking for some good income funds or ETFs to replace the individual stocks and bonds that I currently own. The ones I have found have distributions that meet my needs, but do not appear to have the underlying earnings yield to justify the distribution yield, so they appear to be paying me back some of my own money every month. Can you recommend some income funds or ETFs that pay out at least 4% and actually earn what they distribute? Like 5i, I am also sensitive to fees.

I have been a 5i member since the beginning and I continue to be impressed by your knowledge and insight as well as the continuous improvements in the service.

I wish everyone at 5i all the best in the New Year.

Thanks

Q: What do you think is best for monthly income/moderate principal protection? Could you explain your position on investing in dividend paying stocks vs bonds/preferds/other options? Thank you

Q: For a retired investor, what % of your total would you deem appropriate for preferred shares and would CPD be a good ETF for this?
Thanks

Q: Your opinions on these ETFs, please.

Q: PIC.A, CPD, HPR - is there a way of valuing these offerings either with respect to NAV or otherwise?

Q: Is it a cause for concern that the monthly dividend keeps slowly being reduced? We are at 6 cents a month now.

Q: Hello, I would like to put some money into an ETF or mutual fund. Would be in for the long term +5 years.
Would these three be acceptable for dividend, stability and small growth? I’am retired and need income, but not interested in U.S. tax filing.
Would you invest in all three? Or do you have a better suggestion with one or two ETF’s ?
Thanks

Q: Hi 5i, I am looking for a relatively safe environment in view of future interest rate increases. Please rate the above list, also can you tell me if there are any withdrawing charges in the Mawers. Perhaps suggesting other ones you prefer. I am 85 year young and like to have safety with some income. Like the new changes, many thanks for your help. J.A.P, Burlington

Q: From your answer to Milan :
A diversifed portfolio of bond issuers (corps, gov, prefs, high yield) will earn a better yield and is more appropriate from a higher income need aspect. Bonds can actually see capital appreciation if rates were to decline, or even hold steady. Cash/GICs would not benefit in this case. Overall, we remain on the side of diversification. Hold a bond portfolio with various issuer types and add in some GICs and/or cash. How you weight these reflects your views and tolerance.
Could you suggest a diversified bond portfolio with various issuer types that should produce more than the 2.75% offered by Tangerine?

Q: Follow up question: as a guideline, with a "rock solid" defined benefit pension, what percentage, overall, of a $200,000 RRSP portfolio should be allocated to fixed income? Of the 4 funds you suggested, as a guideline, what percentage of the overall allocation go into each fund? Retirement 2-3 years away.

Q: This morning I ask a question about fix income and recommended bshort duration bond ladders. You indicated that CLF or CBO would be your recommended choices. What is the difference?

Can you also recommend a short term bond ladder, corporate bond and preferred share ETF to hold USD in?

Thanks again!

DON

Q: Would CPD be classified as 'fixed income'? What would be a recommended short duration ladder bond fund that you would recommend for diversification?

Q: Preferred shares usually have an issue price of $25. Would it be correct to assume that in a rising interest rate environment CPD has a chance to climb towards the $25 range?

Dumb question?

Carl

Q: I note that CPD is included in your Income Portfolio (with a unit cost of $16.19). I purchased a significant holding of CPD in Nov. 2012 (at $17.30), and am understandably upset with the current market price of $14.09 (i.e., down 18.5% on the unit price basis). I have held on to this ETF for the monthly dividend flow (which has continuously shrunk), and with the hope that, when the tide turned in GOC 5-year rates, the unit price would recover. While individual preferred share issues that I hold have shown a marked price recovery in recent months, CPD not so much! I am curious to know why you include this ETF in your portfolio while I consider it to be the worst investment that I have ever made! Do you envision a day when the market price will recover to your purchase price level?

Q: I am 70 years old, been retired for 14 years, and can't risk losing capital. Thus my portfolio is currently 100% in fixed income.... 65% in laddered 1-5 year GIC's, 10% in bond ETF's (CBO, CLF, XBB), 5% in preferred shares, and 20% in cash. In the preferred share category, I currently hold CPD, HPR, and ZPR equally. Given a steadily increasing interest rate environment, would you recommend selling CPD and adding to HPR and ZPR, due to their leanings towards rate re-sets? Is a 5% total weighting for preferreds appropriate for this fixed income portfolio? What do you recommend for the remaining cash, given my mandate for "safe" investments? Should I stick with additional GIC's or expand the bond allocation? Thanks!

Q: Can you please recommend Canadian and US preferred share ETF's as fixed income part of my portfolio. Would rate reset preferreds perform better in a rising interest rate environment?

Q: I'm stunned by this asset class I had not known about until seeing the link you provided in a recent answer. I had lost interest in preferreds after having them decline in share price upon reset to a low rate of yield.

These seem different. The reset is guaranteed to be a good amount of yield (e.g. 3.5%) no matter what. Which is more than good for me. It looks a lot like the safe bond that I wish existed but doesn't. (I am retired, don't need to touch my investments, just want them to grow a bit more than inflation, and NOT DECLINE, until such time as I need to start taking some income.

So what's the catch?
a) if interest rates rise, the value of the shares will go down? But that may not happen so much with these will it? Since the reset is also based on then-current interest rates plus the guaranteed amount. Plus most of the BNN experts say inflation seems to be the last thing that's going to happen anytime soon so rate increases won't be very rapid or substantial. And suppose they are wrong - as long as these are higher than bonds they wouldn't get sold off too much would they?
b) the company could get into trouble somehow and default. Let's say we pick a company that's stable and that won't happen.
c)..... what else do you think is important to consider.

Q: Currently I have CBO, CLF and XHY in my RRSP acct and they represent my entire fixed income investments. I am looking to add CPD to my Non-Registered Investment acct to add to the FI component of my portfolio. CPD provides a good yield which is tax advantaged. I will be adding to this overtime as I rebalance my portfolio. Basically taking from my growthier winners with lower yields. I am retired and looking to add yield and reduce risk to my portfolio.
Given the proliferation of ETFs would CPD still be your choice for Preferred Share ETF if designing your Income portfolio today.

Q: Preferred Shares:
Can you explain the difference between Preferred and common shares ?
can they be considered "bond proxies"?
Is now a good time to add to "CPD"

Thanks, Peter