Q: My question is about the Enbridge preferred share ENB.PF.V. I received notice that I have the option to convert my cumulative redeemable preference shares, series 5 to series 6. The series 6 annual dividend rate is 6.7%. If I do not exercise this option then the preferred shares will remain as series 5. The letter I received does not state the consequence of not exercising my option. I’m guessing that if I keep my series 5 preferred shares then the annual dividend rate will remain at 5.4%. Is that correct? Thanks … Cal
5i Research Answer:
Series 5, if not converted, will get a new dividend rate of 6.683% commencing March 31. The series 5 will remain outstanding UNLESS enough shareholders convert so there is less than 1,000,000 shares left. If this is the case then conversion will be automatic. Series 6 will pay 8.1% initially, but they are floating rate preferreds, and the rate is to be reset every quarter. With interest rates likely to come down over the next five years, we think investors are better off sticking with Series 5.