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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: Thinking of selling CPD and averaging down on ECN.PR.A My reasoning indicates that the reset return on CPD portfolio will continue to fall as the yield flattens or inverts.
In the case of ECN.PR..A if 5 year yield is at 1.06 or lower the yield is still 6.25%. Basically I’m saying there is a floor under ECN.PR.A but not CPD. What is your opinion ?
Read Answer Asked by Roy on December 18, 2018
Q: I am a little curious about your answer to George regarding preferreds. Don't they move inversely to interest rates? So all else equal would you not expect a preferred share etf to fall in value as interest rates rise (just like bonds)? Not only that, would they not generally fall even further than bonds as preferreds never mature (preferreds therefor have a longer duration than bonds making them even more sensitive to interest rate changes). Thanks.
Read Answer Asked by William on December 07, 2018
Q: What to do with cpd and Ecn.pr.a .
I’ve held reset prefs before, saw it through through the downturn in interest rates and the upturn again, did well, because I had a long term objective.
I now no longer have this luxury. However I feel some comfort with the minimum rate reset preferred. Should I. I appreciate your unbiased recommendation on both securities.
Thank you.
P.s. will be asking for a complete portfolio evaluation in the new year. Paid of course.
Read Answer Asked by Roy on December 06, 2018
Q: Hi 5i, Seasons Greetings. I generally am a buy and hold type but could use some tax losses against earlier gains this year. The above mentioned stocks could be sold and repurchased in early January. Would that be prudent? Is there anything I should not repurchase? Thanks, Ted
Read Answer Asked by Ted on December 03, 2018
Q: In the preferred share space I own both cpd and Ecn.pr.a. I am down a fair amount on both. Does the market really affect prefs that much. I bought because of the reset feature . Assuming higher interest rates the reset rate would be higher. No indication yet of falling rates in which case I would sell CPD and take my losses. On the other hand minimum rate reset preferred guarantees a specific rate protection on falling interest rates while at the same time having a possible increase in the reset rate if interest rates rise. Looks to me the best of both worlds. My investment is for income. Final question , will price go back to par on reset date.
Can one expect the the closer to reset the closer the value will be to par.
Read Answer Asked by Roy on November 26, 2018
Q: Lots of questions to 5i on prefs lately. Some possible are explanations are in a recent article by John Heinzl: "Why preferred shares plunged."
https://www.theglobeandmail.com/investing/education/article-why-prefs-plunged-and-the-acbs-of-the-loblaw-deal/
You can add indiscriminate dumping of issues by CPD,ZPR, and HPR on high volume days as they struggle to keep up with net redemptions. The bid/ask spread on these ETFs is far less than most individual issues, so investors look to them for liquidity.
Read Answer Asked by Jeff on November 26, 2018
Q: Can you tell me why preferred shares are getting slammed? I notice that companies like Brookfield with attractive yields, protected by a floor in the 5% range, are down double digits. Also, ZPR is down 7% in the past month. Typically prefs don't get caught up in a correction. They didn't between February-March anyway. Your thoughts would be appreciated. I think there are a number of excellent buying opportunities. In particular BPO.I has a nearly 6% yield at these levels.
Read Answer Asked by Cory on November 23, 2018
Q: Good morning,
In your response to Marilyn on Friday you replied that you "have no concens seeing it (CPD) as part of an income allocation" and "one needs to decide how it fits in"
My recent experience is that any so-called fixed income that I purchase loses money even including distributions. My current cash allocation is therefor 20% earning nothing, with another 20% in CBO, CPD, XBB, XHY, and a few preferred issues. I can look for a DIS account but could you expand on "how it fits in" and perhaps suggest the ETFs we should currently be using in this environment and a possible allocation range for each. Thank you for the ongoing excellent service in a difficult environment.
Ted
Read Answer Asked by Ted on November 12, 2018
Q: I own CPD in an OPEN account. I am still trying to understand Preferred Shares, even after watching Ryan's very good presentation about it. I am still trying to figure out why the fluctuations in CPD, outside of bond yields, and interest rate fluctuations i.e. should I sell these now for Tax loss selling or keep and buy more perhaps. It might be helpful for me to understand how I can buy an individual preferred share in my TDInvestor account, then I could see the difference in share price to common? A few questions here....
Thanks
Marilyn
Read Answer Asked by Marilyn on November 09, 2018
Q: Hi All at 5i! I am working at establishing a more stable portion to my portfolio in the form of bond and preferred ETFs. I require four that pay me a dividend and have so far chosen CPD, XHY and CBO and would welcome a fourth ( or more) suggestion. Could you please help me with this. Cheers, Tamara
Read Answer Asked by Tamara on October 15, 2018
Q: Hi Guys.

I have a question about Rate Reset preferred shares. Where do you think the cutoff point is for a company not to extend their preferred share?

The call will affect my yield to maturity calculation.

As examples, TD Bank has a preferred share with a reset of GOC 5 year plus 1.68% (TD.PR.Y) and another at 4.66% (TD.PF.G). I would assume TD won’t call the 1.68% and will call the 4.66% at maturity.

I will ask the same question in the forums under “preferred shares” to get additional opinions from any member wanting to help another member.

Thanks for your insight.
John
Read Answer Asked by John on October 09, 2018
Q: I own the following in a non-registered account. (I own growth stocks in my TFSA, and US/international equities and Canadian bonds in my RRSP). The goal is to DRIP the following stocks in my non-registered account until I retire and then use the income only to cover some monthly expenses.
CPD; BNS; SLF; FTS; ENB; ALA; BCE; CHP.UN; NWH.UN; VET; NWC; and EIF.
Do you have any concerns with any of these companies long term?

Read Answer Asked by Pamela on October 04, 2018
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