Investment Q&A

Q: Preferred Shares - A & C
Which company will they be part of and will the capital structure change?
Will they adequately serviced?

Thanks

Q: I have rate reset preferred shares (bought at $25 / share) which are presently 25% in value underwater because of the Banks of Canada’s unexpected prime interest rate decrease. At the time of purchase their interest rate was 4 to 4.5% & they will be subject to a rate increase in 2019 & 2020. I your opinion what is the chance of their value returning to near $25 in the next 3 years? I am wondering if I should sell the preferred now or hope that their value will appreciate sometime before their rate reset date . Thanks … Cal

Q: For the past 8 years I have been trying to pick up yield by buying convertible debentures. My objective for the past few years was to get a yield to maturity of at least 5% on these debentures. Today Superior Plus is redeeming one of their convertible debentures (SPF.DB.F). I would like to buy another convertible debenture from the cash that I will be receiving. I am considering JE.DB or JE.DB.B. Both of them have yields to maturity in excess of 6%. What do you think of these two convertible debentures as a fixed income investment? Note that I am not concerned with conversion privilege. This is a proxy for exposure to a fixed income vehicle. I am only concerned about the yield and the company's ability to pay the principal at maturity.

Thank you

Q: For the past 8 years I have been trying to pick up yield by buying convertible debentures. My objective for the past few years was to get a yield to maturity of at least 5% on these debentures. Today Superior Plus is redeeming one of their convertible debentures (SPF.DB.F). I would like to buy another convertible debenture from the cash that I will be receiving. I am considering NWH.DB.B or NWH.DB.C. Both of them have yields to maturity in excess of 5%. What do you think of these two convertible debentures as a fixed income investment? Note that I am not concerned with conversion privilege. This is a proxy for exposure to a fixed income vehicle. I am only concerned about the yield and the company's ability to pay the principal at maturity.

Thank you

Q: Hi,

I know you like the following: PPL.PR.M and ALA.PR., TransCanada (series 13), Canadian Utilities (series FF) and Brookfield Asset (series 5). With these type of minimum reset preferreds, where would you expect the prices to be in 3 or 4 years under the following scenarios:
1. Current govt of Canada rates 0.5 point lower than today
2. Current govt of Canada rate same as today
3. Current govt of Canda rate 3 or 4 points higher than today

Regards,

Robert

Q: Can you please explain "rate reset preferreds" in simple language for us dummies. Having been burned in a preferred share ETF, that I thought was relatively safe, in the past, I'd like to know the risks and advantages.
Thanks, Len

Q: Hi Team, Canaccord's reset preferred has been reset at the following rates: fixed 5 year = 3.8850% the variable rate is at 3.722%. Given that the spread between the 5 year Gov't and the 3 month Tbill is narrow at .163% Is it logic at this point in time to take a chance and convert from the fixed rate preferred to the variable rate preferred? If interest rates do go up will the variable reset out perform the fixed rate preferred?
Cheers David

Q: I hold two rate-reset preferred stocks in my diversified portfolio - Pembina Pref and Brookfield Office Pref. When thinking about sector allocation, would you suggest I exclude these two stocks (as essentially fixed income), or should I include Pembina in my Utility sector weighting, and Brookfield Office in my Real Estate sector weighting? Thank you for your input. Edward

Q: Hello Folks:
Would you consider it a good move to transfer funds from GWO into BIP.PR.C (Brookfield Infrastructure 5.5% preferred).
Thanks again
brian

Q: I own a portfolio of preferreds...both reset and perpetual. Many of the Perpetual shares have returned to $25 and above. I want to role out of a few of these names and buy some other perpetual shares that have some upside potential. A name I came across is INE.PR.C. The investment currently yields 6.5%. DBRS rates it as PFD 4 high which is about as low a credit quality as you can get. Yet the market...as well as the comments on your service seem to like the common shares. Also the price in reflection to the yield seems very mispriced in the current preferred market. Is there something I'm missing??

Q: I have no fixed income in my portfolio. I'm 63 and have been retired five years. I'm still a fairly aggressive investor and need some appreciation from my holdings to fund my lifestyle. In this low-rate environment, I have little interest in bonds but would like your opinion on preferreds. The new issues seem to have addressed the reset problem. Is this true and can you provide some names with a nice return, reasonable safety and possibly trading below par. The last criteria is the least important.

Q: I bought some Zargon debentures as a speculation under $50 and they have had a good run with the news of an asset sale. Assuming the sale closes and net debt is down to $35 million do you think the debentures should be held to redemption next year or does the remaining risk favor cashing in now.
Also, does Toscana's sale of 6% of their production to reduce their debt by about 20% improve the prospects of that company's debentures enough to consider them?
Thanks, Jason

Q: Saw your suggestion for CPD, XHY, ZRE for dividend income and wondered what would drive each of these securities price performance given that their overall return will be a mixture of price appreciation/depreciation as well as yield and each has a significantly different price history. I'm not planning to blend as I think you should know what drives each investment. I also saw your two notes on CPD so what I think I need is an overview of the relevant price drivers please. Thank you

Q: I own the 5.5% Aecon 31 Dec 18 convertible debentures. They are trading at about $109, and I bought them in Dec 2014 at about par. Should I take my profit now? If I wait until maturity, I will lose the current premium. I suppose they are trading at a premium because of the embedded warrant value.

Q: I am a senior who needs dividends. Currently preferred shares are 20% of my taxable account(10% overall). I hold PPL.PR.M and ALA.PR.I. Could you recommend 2-3 other minimum rate resets?
I held and sold my Concordia shares the day before you took them out of the growth portfolio. Your advice has been great and very consistent. I wish 5i was around 50 years ago.

Thanks, Jim

Q: Can the terms of the recently announced debenture be seen to suggest good things are in store for this company? The deal has a conversion option that is 30% - 40% higher than the current stock price. Given that this stock has shown very little growth over the past five years and you have suggested previously that you feel it is primarily an income stock it seems like a high bar to reach to convert. Since this is a bought deal, I would assume that this means the underwriters think this conversion price is quite attractive. Why would the conversion have been set at such a price? Does this strongly suggest something is in the works from a growth/acquisition point of view? And is the interest rate being paid expensive/cheap?

On a secondary note, is the debt from the previous takeover declining at a reasonable rate?

As always, appreciate your insight. I would also like to add that the changes you instituted several months ago are really working well. I am a long time subscriber and I keep learning more and more every day, so thanks.

Paul F.

Q: Are dividends from XPF eligible for the dividend tax credit? Thanks. Joe

Q: Hi Peter What is your thinking on the DH coverts as a long term hold in my RIF.
Kind Regards
Stan

Q: I find this site not too bad for preferred share info
www.prefinfo.com this may be of interest to people asking questions on preferreds

Q: Hi Peter and team,
If US and Canadian stock market goes down say ~10%, how it may impact preferred etf such as ZPR, CPD, PGX (US) or split preferred (e.g. FFN.PR.A)?
Thanks