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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: Peter

I am working with a friend to restructure her portfolio It is criminal that the broker of a large bank investment division put all her accounts in high fee mutual funds The TFSA had 89 % in one mutual fund

My question is what is your opinion on holding short term ETF bond funds as opposed to holding interest sensitive stocks I do not see any reason to be in a bond fund

Could you recommend half a dozen Canadian stocks that would serve aws bond proxies

Could you also recommend some of the new rate reset preferreds with a floor on the rate reset

Thanks for your response and great service

Paul
Read Answer Asked by Paul on July 13, 2016
Q: I AM RE-SENDING. SOMEHOW MY QUESTIONS WAS NOT SENT. IF YOU DID RECEIVE THE ORIGINAL MY APOLOGIES.

Hello Peter and team,

I am considering adding to non-reg. acct. these preferred issues: BEP.PR.I; PPL.PR.M; TRP.PR.J; NA.PR.X for a steady predictable income for 5+ years. It is my understanding that these all have a minimum rate reset except NA which GOC yield + 4.90%. First could you rate these in terms of credit risk with the understanding that they all face the same interest rate risks going forward). Second, BEP.PR.I is a limited partnership issue and its distributions will be a mix of ordinary income, Canadian dividends and return of capital so would this be better held in a RRSP or are there any other complications here? Third, can you advise if these preferred stocks qualify as low credit risk overall, or are there others you would choose that would qualify as better credit risk while providing similar yields with a fixed rate reset feature and downward protection. If so could you suggest 4 or 5 better alternatives and advise why you feel they would be viewed as superior. Finally, am I correct in assuming that the minimum rate reset feature provides more downward protection should interest rates in fact rise 4 to 5 years from now.

Thanks for your great advice.

Joseph
Read Answer Asked by Joseph on July 13, 2016
Q: Good Morning: I have been reading some of the recent questions related to bond etfs. I have been avoiding bonds and using preferred shares instead for fixed income in my portfolio, slightly better yield although also struggling through 2015. I notice that the yield for the two bond etfs mentioned is roughly 3.2 (CBO) and 3.1 (XCB). (Taken from BMO Investorline trailing 12 months average payout.) In your opinion, what can I expect in terms of yield from these instruments going forward -- roughly the same, a little more, or a little less? Also, I notice (not surprisingly) that the share price for CBO is near its 5 year low, whereas for XCB it is slightly up over the same period. What would your opinion be in terms of share price direction for each over the next 2 to 3 years as well. Many thanks. Don
Read Answer Asked by Donald on July 12, 2016
Q: Alqonquin, Capial Power, and Altagas have rate reset preferred shares selling at a significant discount with reset dates in 2018. With a 5 year Government rate of .55 to .7 they have issues that will still offer a very attractive rate of return. For a conservative investor would you rate these issuing companies as an acceptable TFSA investment?. How would you rank them?

Thanks Team
Read Answer Asked by Warren on July 12, 2016
Q: My question regarding BCE.PR.S. After a number of years of owing this preferred, is it worth holding any longer. It has lost a lot of value since my purchase, I believe it has a floating rate dividend.
Thanks for your opinion. I was thinking of switching to BCE common share.

Shirley
Read Answer Asked by Shirley on July 11, 2016
Q: Sorry for resubmitting the same question again. It seems that I am doing something wrong. Just realized that the name of the Company didn't appear on my last submission, so I am putting the company name and the symbol in the text, (Capstone Mining CSE.PR.A). My original question was sent two days ago, and probably did the same mistake.

I am in dilemma in choosing between the offer to convert series A to a fixed reset for five years at 3.271%, to convert to the floating rate preferred, initial quarterly rate 3.204% or to just take my losses and sell. What would you suggest, how safe is the dividends on this prefered now it is in the hands of the new company that bought Capstone and considering that the rate of return of over 6% based on current price? What would be a good replacement if income requirement isn't important and would rather have some growth and less dividend?

Thanks.
Read Answer Asked by Saad on July 11, 2016
Q: Hi there

I wanted some feedback about putting about 5% of my portfolio into Preferred shares for income purposes for over a 5 year hold. I know I could buy the preferred ETF CPD but have been hurt before in ETF bond funds so feel better buying two or three individual issues where I know up front what I will be getting in return for at least the first few years. Would it be possible to provide three preferred issues that you would recommend for income?

Thanks so much
Read Answer Asked by Stuart on July 07, 2016
Q: Good Afternoon,
I hold a BCE preferred share specifically Series AG ticker symbol BCE.pf.G, currently trading around $13.40 with par value of $25. Any idea why this has dropped so much? I understand there was recently an option to convert into a floating rate preferred but I chose to keep my fixed rate preferred. Any thoughts? Is there a reset or something coming up and there is concern a lower coupon is coming? Thank-you
Read Answer Asked by Chris on June 30, 2016
Q: I am struggling to understand the relationship between dividends from common shares versus preferreds. I understand the the preferred shares will be paid before the common shares. However preferred shares do not participate in any future dividend growth rates. As an example National Bank common shares (trading at $44.09)are offering annual dividend of $2.20 (yield of 4.99%) .The recent issue of national bank preferred NA.PR.A issue price of $25 offer dividend of $1.35 (yield of 5.4%). If the div on common were to grow by a modest 3% over the next 5 years the dividend would be $2.55 or 5.78% surpassing the preferred shares by almost .4%. Historically the div growth rate had been 10.5% which would make the case to own the common shares more compelling.
The argument that can be made for preferreds is when the company becomes distressed the dividends on the preferreds would be paid first. However is the protections really of values as both the share price of the common and preferred will most likely fall when the company is in distress.

My question is how do you calculate the breakeven between common versus preferred shares when looking at the dividends.

Regards...Antoine
Read Answer Asked by Antoine on June 30, 2016
Q: There have been 2 preferred issues that I know of recently
that have minimum resets that are very attractive for
a taxable acct. PPl.pr.m and trp.pr.j receting at 5.75 and 5.5% respectively. Do you know of any others ? and apart
from credit risk what is the downside with these ?
Thank you Ian
Read Answer Asked by ian on June 15, 2016
Q: BPO.PR.H Called their pref today and am sitting on 8% cash what would you suggest I move into ,
Regards Stan
Read Answer Asked by Stan on May 25, 2016
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