Q: This and another preferred are going to be redeemed by CIBC. While I lose a nice dividend (and it was about to reset at a higher rate), I profited from the redemption. My holdings are about half they once were due to redemptions. So I am wondering if I should return to the preferred market (which has been nothing but erratic), or reinvest the funds back into Bonds and Stocks.
5i Research Answer:
We can't give personal answers, but certainly the preferred market can be frustrating. But for conservative investors we still think the sector is a decent alternative for secure income. As Canadian rates fall one might expect the sector to perform better going forward than it has in the past. Of course, in such an environment one needs to be careful on floating-rate issues. But we do not think income investors need to abandon the sector altogether.