Investment Q&A

Q: Hello Team Portfolio question for conservative income investor. In a longer term horizon can an argument be made for increasing the proportion of rate reset preferreds while decreasing bond holdings by a similar amount. Like many investors I have previously been burned by preferreds so I confess I am a bit gun-shy and with bond funds I ilke the income (meager) but fear the long term capital loss in a future rising interest rate environment. This strategy seems to make some sense. Thank you for your opinion. gary

Q: Preferred shares fit into the income part of a portfolio and also can be a fixed income substitute if one can tolerate the extra volatility (especially now given bond yields and potential for rising interest rates). In the past 5i has suggested CPD over DIVS for etf exposure citing the fee differential. Two questions (1) what is your medium term outlook for Canadian preferred shares and (2) given complexity of different preferred share issues and an inefficient market, is there an advantage to the active approach? (Please explain why or why not - thanks).

Q: I hold 500 shares of a preferred stock in a RRIF but am confused about the best course of action. The MANULIFE FIN 4.2%-1 S3 PF were purchased at average cost of $24.10 but have not traded above $20 since January 2015, and have been under $15 since December 2018, but recently are trending up. Every 5 years (coming in June 2021) MFC could redeem at $25 or provide option to convert to another series. With income of about $272 annually on shares now worth only about $7,775 that works out to a return of about 3.5%. So if I sold at current prices I'd need to replace with something with same yield. Your thoughts?

Q: Hi 5i,

Do you know who the inside sellers were with the recent DND financing?

Can you provide information on the new debenture? Interest rate and conversion price would be nice.

Thanks
John

Q: Do you know the reason mfc.pr.l is up over 2 points today,very strange for a pfd share.Thanks Phil.?

Q: Hello. Could you please provide a brief explanation of convertible bonds. Is icvt or fcvt a fund that should be in a portfolio? What is the risk-reward on owning convertibles?
Thanks, Michael

Q: I was reading that CF may be redeeming these convertible debentures starting April 1, 2021. Is that true? Could you provide the details please? What would you recommend that I do as I own this convertible debenture? Thank you.

Q: NPI.PR.A has a decent yield and the price is down from its highs, would this be a decent and safe longer term hold for a retiree. Thank You.

Q: How does no generally get information on convertible debentures? For Chemtrade Logistics I looked at their website but when you click on the link you go to another website ,but the detailed information (Not sure if I should can it the prospecus?!) is still not listed. Do I have to contact Investor Relations of Chemtrade and ask for the prospectus? Is there a general rule of thumb on when interest on a debenture is paid or does it depend on each individual issue? I am interested in looking for some higher yielding debit instruments, is that a good option? If not, where should one look to get ideas? (Please discount as many questions frommy allotment that you think is warranted.)

Q: Regarding the preferred share offer. The option of 0.66 of BPYY is based on a par value of US$25 x 0.66 =$16.50. BPYY is currently trading at US$24.59 and has a 6.61%dividend. This effectively values BPY at US$16.23. So you have the choice of getting $16.23 for something worth $16.87 (all US) Please tell me if this calculation is correct.

Q: Hi
Not overly familiar with preferred shares but could explain the upside and downside of exchanging my BPY.UN shares for the preferred shares. You can trade one BPY unit for 0.66 of BPY Class A Cumulative Redeemable Perpetual Preferred Units.
It looks like there are 3 kinds of Class A prefs.
1. BPYPP 6.5%
2. BPYPU 6.375%
3. BPYPN 5.75%

So with your explanation could you tell me which of the 3 is in the offer. Given the trade is only .66 shares would the actual real return be .66 of the stated return on the prefs

Thanks
Jeff

Q: We have a number of bpo preferred stocks. The current events of bpy buy out is positive. Would the bpo preferred come to par in rating with the Bam preferred if the deal is approved? Or is any provisions for a payout of the preferred debt in case of takeover?
Thank you and Happy new year.

Q: with regards to the proposed takeover of BPY by BAM does this increase the credit quality of this preferred...ie..is it a direct obligation of BAM once completed....and does it increase the likelihood of redemption at par later this year...many thanks...Cheers

Q: Are you aware of any etf,s that are composed of just rate-reset preferred shares?

Q: Could I get your thoughts re timing. Would you recommend to wait for a pull back ?

Thx.

Q: Do you know how preferred shares performed at the time of high inflation in the 1980's? If we see high inflation in the years ahead, can you estimate the impact it might have on etfs like CPD?

Q: Good morning,
I am a retired investor with a 50/50 asset mix and an equity focus on solid dividend payers with some growth prospects. As a bond matures in my RRIF, reinvestment opportunities in fixed income are unattractive. With projections saying low rates will continue for some time, I'm wondering if it would be a good time to buy a rate reset preferred stock ETF for income, and as a hedge against future rate increases. I would appreciate your thoughts, and if you support it, which ETF would you suggest?
Thank you.
Edward

Q: Peter and Team:
Further to my previous question on specific preferreds. Under what circumstances might the price rise from 13.50 to let's say 20.00. When the supply of money tightens, and it will, companies in any specific sector will just issue new shares with a better format and that will further depress the old issues. They are under no obligation to increase the +plus amount or to redeem the shares.
perhaps they might decrease it. I am referring here to rate reset shares. They already have their $ 25.00. Just like when the banks came out with minimum resets. If a holder wants out they must sell on the market and move on. Then there is also equity risk when the market falls. Could be a big price to pay for a little extra interest. What about the people who paid $ 25.00 and they are now $ 12.00 or lower. It appears that is why you don't follow them very closely.
It seems to be a deck loaded in favour of the issuer. Please refute. Thanks for your help.
Ben.

Q: Hello Peter & team,

Listened to Money Talks this morn. They discussed preferred shares and the higher dividends they can provide while protecting capital. Have to be honest in saying I am not well versed with this investment vehicle and would like to be more educated as a viable option for an income investor. I understand there are 3 types of structures for Preferred Shares - Perpetual Preferred Shares, the slightly more risky Rate Reset Preferred Shares, and the Floating Rate Preferred Share with coupons that renew every quarter. With Bond rates so low and the inevitable inflation we should expect in coming years my question is...

Am I right in thinking the Floating Rate Preferred Shares should be the most attractive over the coming years for income related investors based on rates eventually increasing? Does the Dividend tax credit still apply to the Floating? And which Preferred Shares would you recommend for an investor seeking income and $200,000 to invest?

Thanks for all you do

gm

Q: Peter and Team:
I realize that preferred shares are not high on your agenda, however,
I would appreciate whatever you could offer as an explanation. The CWB pr.d trades near or above the issue price while the others trade
at a steep discount. I realize it is a minimum rate reset, but there
must be other factors which influence such a disparity in price. Thanks,
Ben.