Investment Q&A

Q: I own AFN.DB.A and CGX.DB.A convertible debentures, both of which reach a "hard call" date on Dec 31, 2017. How likely are they to be called? If called, are they likely to be redeemed with cash or with common shares?

Q: I own a preferred share, BAM.PR.Z which comes up for reset later this year which is currently trading around $24. I bought it for $25 at issue. I have several options available to me including the option to take the reset for another 5 years at a slightly lower interest rate which is still a decent return. I am concerned that, if interest rates rise, albeit probably slowly, that the value of the preferred would fall and my capital would be eroded. At the same time there is also the possibility that, if rates rise, BAM would call the preferred at some point and I would get the original $25 a share back. I could also sell the preferred in the market and accept a fairly small loss now. Can I have your opinion on which you feel is the best course of action.
With thanks, Lynda

Q: I'm stunned by this asset class I had not known about until seeing the link you provided in a recent answer. I had lost interest in preferreds after having them decline in share price upon reset to a low rate of yield.

These seem different. The reset is guaranteed to be a good amount of yield (e.g. 3.5%) no matter what. Which is more than good for me. It looks a lot like the safe bond that I wish existed but doesn't. (I am retired, don't need to touch my investments, just want them to grow a bit more than inflation, and NOT DECLINE, until such time as I need to start taking some income.

So what's the catch?
a) if interest rates rise, the value of the shares will go down? But that may not happen so much with these will it? Since the reset is also based on then-current interest rates plus the guaranteed amount. Plus most of the BNN experts say inflation seems to be the last thing that's going to happen anytime soon so rate increases won't be very rapid or substantial. And suppose they are wrong - as long as these are higher than bonds they wouldn't get sold off too much would they?
b) the company could get into trouble somehow and default. Let's say we pick a company that's stable and that won't happen.
c)..... what else do you think is important to consider.

Q: Hi Peter, Globe has suggested to buy BCE and RY min. rate resets for income and growth, how will they perform in a rate hike? please give me their trading symbols, perhaps your better choice . Also, would appreciate your choice of FB,SHOP,AAPL and or if you have a better one for growth. Many thanks, J.A.P.,Burlington

Q: Thinking about a higher risk investment: DC.PR.E currently pays 8% and is retractable June 2019, yielding another 6% in capital gains.

What are the chances DC can payout the pref? Can you please shed some light on their viability. Thanks.

Q: Hi Peter and team

I was thinking of starting a position in DR after the last Q report (and I wish I had) but I found something in the financials (from morningstar.ca) that gave me pause:

Earnings per share: $.46
Earnings per share (diluted): $.18

The diluted share count did grow by 8,000,000 (or roughly 25%) but that doesn't account for the difference in per share earnings. Was there a share offering? How should I interpret the bigger difference in per share earnings versus share count?

Thanks
Peter

Q: Convertible bonds are obviously not exactly the same as corporate bonds due to the possibility of converting them into common stock. I was wondering if they are treated exactly the same as the other bonds a company may have issued as long as they are still in the bond form? That is are they they still guaranteed to be paid as long as the company is solvent and are they at the same debt obligation level as other bonds issued? Thanks you.

Q: Currently I have CBO, CLF and XHY in my RRSP acct and they represent my entire fixed income investments. I am looking to add CPD to my Non-Registered Investment acct to add to the FI component of my portfolio. CPD provides a good yield which is tax advantaged. I will be adding to this overtime as I rebalance my portfolio. Basically taking from my growthier winners with lower yields. I am retired and looking to add yield and reduce risk to my portfolio.
Given the proliferation of ETFs would CPD still be your choice for Preferred Share ETF if designing your Income portfolio today.

Q: Please advise me if I am better holding my BCE.PR.A preferred shares which come up on Sept 1, 2017 as a fixed quarterly dividend or to convert them to cumulative redeemable floating monthly dividend.

Thank you

Q: Preferred Shares:
Can you explain the difference between Preferred and common shares ?
can they be considered "bond proxies"?
Is now a good time to add to "CPD"

Thanks, Peter

Q: Hello 5I, Am I right to assume that min rate-resets less vulnerable to future rate increases as regular ones? I am looking at ENC.pr.c, pays min 6.25 divs. redeemable at $25.00, trading at $23.45, new issue was underwritten by TD-BMO and RBC how safe is it, can they stop paying this div? I would appreciate your advise, perhaps suggesting a couple others.
Many thanks, J.A.P., Burlington

Q: In your answer to a question from Oscar about Hydro One buying Avista, you said “We would be fine with the debenture issue, with the conversion price discounted to $21.40 to entice investors.” My question is as follows: Will individual investors be able to buy these Hydro One debentures when they are issued?

Thanks in advance for your answer.

Q: Hydro One buying Avista for 6.6 billion dollar that is a big acquisition, and they are paying a 20% premium?
The company apparently is issuing a convertible bond at 4%
What is your opinion on this deal?

Q: bought 2500 shares at back in February at 15.75, the yield was 3.8% when i bought and currently have about 2700 in cap gain, should i sell or hold or add more, its only about 2% of my portfolio.

Q: Hi,

What convertible debenture with a yield of at least 5% would you recommend.

Thanks. Peter

Q: What is your opinion about the new acquisition by Rogers Sugar? They issuing stocks and convertible bond to finance the acquisition for an income oriented investor what would be better to participated on the stock deal or the debt deal?

Q: Hello Peter, Like most of us, are concern about the effect of the coming rate increases. How safe will the above preferred shares be, would you consider them as good choices for income and safety? Also, can you suggest equivalents in the Canadian market? Many thanks for your valued advise, J.A. P. Burlington

Q: Hi Peter and Team,

Could you please give me your thoughts on preferred shares in general given the current interest rate environment and the pending rate hike by BOC in about a week's time. Please also provide some names of ETFs of preferred stocks in both Canadian and US denominations.

Cheers,
Harry

Q: Hello Team
Can you provide your recommendations for the top 5 preferred dividend shares?
Thank you

Q: I own Series 2 Adjustable Rate Preferred Shares. The company has given notice that these shares can be converted on a one-for-one basis into Series3 Preferred Shares. Would it be more advantageous for me to keep the Series 2 Adjustable Rate Preferred Shares or convert them into the Series 3 Preferred Shares?