Investment Q&A

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.

Q: Years ago I thought it would be good to add some preferreds to my RSP so I bought HPR . It hasn't done well but has a dividend of 5%. I'm thinking of switching to AD.UN but it's already had a good run. but has a high dividend. What do you think.

Q: You continue to hold XHY and CPD in the income portfolio. My understanding when purchasing these was that they would perform well in a low interest rate environment. That has not been the case. I am about breakeven on them over the past 3 years with dividends included. What is the investment thesis for holding them now that interest rates are already so low. Is it time to move on?

Q: Wondering what the future holds in the way of capital appreciation for CPD? What will increase the value of CPD, like sentiment or change in economic cycle or something else?....Thanks....Tom

Q: Hi. Am I right to think that the option of switching to the floating rate series 45 is not a good deal since with the current pref there is the minimum yield and the possibility of a higher yield if rates rise in 5 years? Is it likely to be forced to convert to series 45 in your opinion? Thank you.

Q: Hi

These prefs are priced quite low- do you have any thoughts??


Thanks

Q: Hello, looking for emerging markets, ETFs you recommend ex China and ex India (as I already hold INDY and FXI). Also looking for non-Canadian REIT ETF recommendations (I hold XRE). Finally what are your thoughts on preferred share ETFs and which would you recommend (Canadian or not) outside of CPD.
Thanks!

Q: I am always looking for the contrarian angle
Preferred shares are being talked about.
Can I purchase an etf? Or do I need to purchase individual shares?
A couple choices would be appreciated.

Q: Hi To All at 5-i:
On Oct 30 CEC asked a question about the above. Would you be kind enough to explain his question, more specifically the figures. 0.9025( 6.95 ) Negative spread. please explain. I think he means 80% of 5 yr rate is equal to or less than 100% of what? at least
.29% ----? Then please explain the reset figures for the next 5 years. What is the rate today? I am thinking of adding some preferreds and am reviewing all questions carefully.
Thanks,
BEN.

Q: I asked about the pros and cons of this investment and it caused an error message.
I'm 68 and have little fixed income.
In an effort to be more clear this is a preferred and pays about 8%.
I'm adding a paragraph from a Baron's article hoping to clear up any confusion.

Newly issued preferred stock from Qurate Retail, the top home-shopping business controlled by media mogul John Malone, offers investors a lofty yield of more than 8%.

The preferred (ticker: QRTEP) has an 8% annual dividend and a maturity in 2031, and it finished Friday at $94.12, up $2.37. The preferred trades at a discount to its face value of $100. This results in a current yield of around 8.5% and a yield to maturity of about 8.75%.

Q: Hello 5i Team
BCE Series R preferred share (BCE.PR.R) resets December 01, 2020.
BCE has issued a notice on their website (https://www.bce.ca/investors/preferred-shares/2020-conversion-notice-series-r.pdf) which states the dividend will be published on November 13, 2020 and
“will be based on a fixed rate equal to the product of: (a) the yield to maturity compounded semi-annually (the “Government of Canada Yield”), computed on November 10, 2020 by two investment dealers appointed by BCE Inc., that would be carried by a non-callable Government of Canada bond with a 5-year maturity, multiplied by (b) the “Selected Percentage Rate”. The “Selected Percentage Rate” determined by BCE Inc. is 600%.”
I have reviewed the prospectus available on-line and cannot determine how the “Selected Percentage Rate” is determined.
1 – Can you provide any more information on how the “Selected Percentage Rate” is determined?
2 – The five year GOC bond rate is 0.40 % as of October 30. Therefore the new reset yield would be (600 % x 0.40 % = 2.400%), which would make the reset yield equal to (2.400 % x $25.00 / $11.71 = 5.124 %) as of October 31 closing price. Is this calculation correct?
Thanks