Investment Q&A

Q: Which of two would be best to hold (long term) for income, inside /outside RRSP
Thanks
Cec

Q: Good morning,

I do not understand how the bond market works and do not have any in my portfolio. In your income portfolio you have xhy. Is it necessary to have a fixed income stocks in a portfolio? Please explain me how the bond market works or do have sites in the internet that would explain it? Is the decrease in price in xhy all due to decrease of the Canadian dollar?

Thank you

Paul

Q: On the fixed income side I’ve focused on laddered GICs and increasing my exposure to prefs, lately tending to pair resets with perpetuals, as they seem to trade somewhat opposite to each other. I’ve stayed away from bonds only because I don’t want to pay above par only to take a capital loss at maturity. While one does receive a higher coupon to offset the higher price paid, taxes on the coupon are far higher than taxes saved on the capital loss. Unless I’m missing something, I can’t understand paying $103-4 to only get $100 back at maturity, and pay a higher tax rate on its higher coupon, only to receive a lower tax rate for the capital loss. Are people pulled in by the high coupon rate, not realizing that their net bottom line won’t be as attractive as the coupon rate paid?

As a retail investor, I find it difficult to find bonds at the par issue rate. Which leads me to my question, that being on Israel bonds. They seem to be issued at par, and on a 10-year basis, and pay 3.4% (with a 25k min). As part of a fixed income mix, do you see them as a good portfolio addition?

Also, if I’m missing something in the scenario I stated in reference to buying individual bonds in the secondary market, please let me know….maybe I’m wrong, maybe there’s something huge I’m missing and I should be doing it.

Thank you for all your help…

Q: I would like your suggestions for replacing the three interest income positions and the preferred shares position with dividend like equity positions. Thanks.......Tom

Q: Good Morning: I have held cpx.pr.a for some time and my cost is well below the 25.00 issue price. However, there seems to be unrelenting pressure on this pref. and I'm left wondering whether or not there is something here that I'm not aware of. Do investors/analysts wonder about the ability of Capital Power to stay in business? The current yield on the pref. in question is very high and yet it does not reset again until nearly 5 years from now. I would appreciate your comments about this pref. and whether or not you see it as a buy, sell or hold at this time. With thanks, Don

Q: I own a few rate reset preferreds that I should have sold a long time ago but didn't because I thought all the downside was already priced in and they are paying high yields. Hah! Was I wrong about the downside. Anyhow, I own BRF.PR.A , ENB.PR.N , and PPL.PR.E. These are now priced at 14.25, 13.91, and 16.85 and yield 6.3%, 7.5%, and 6.4% at the current prices. Their face values rose quite a bit in the market upswing on Friday so they seem to be affected by the overall market sentiment. What would be your advice on what to do with these now? Also, I own some CPD which is yielding 6.4% at 11.60. These were all supposed to be part of the fixed income part of my portfolio but have done worse that most of my equities.
Thanks!

Q: Does the dividend on this pref. look secure, for a hold, at ~11%?

Q: When CSE is taken out, what will happen to CSE.PR.A, will it be redeemed at PAR?
Thanks
Cec

Q: Husky has suspended the payment of dividends on their common shares.
What is the likelihood of suspending the payment of dividends on their preferred shares like hse.pr.e ?
Under what conditions a company can suspend the payment of dividends on preferred shares?
Would you advise selling hse.pr.e at this stage?
Thank you.

Q: I've noticed with the recent market mayhem the Yield to Maturity on a number of convertible debentures has been rising and they are starting to look quite attractive. Am I right in thinking dividends would be cut before any interest payments are missed? Specifically, what do you think of EIF.DB.G? How safe is it?

Q: My earlier question on ala.pr.u was not answered. Can you please advise?
I am resending the question:

ala.pr.u is a rate reset preferred share in US denomination. The rate will reset in 2017 at 3.58% plus the 5 year US Government bond.
While the steep decline of the Canadian Preferred rate reset shares is understandable because of declining Canadian interest rates, the decline of ala.pr.u from $25 a year ago to $17.30 today is puzzling.
Can you please provide some insight as to why this US dollar preferred share has lost 40% of its value if the reset rate will depend on the 5 year US Government bond which is 1.46% today vs .57% for the respective Canadian rate??
Thanks

Q: Good Afternoon
Would you consider the new PPL minimum rate reset selling at $1.00+ below issue a good TSA income investment, or are there previous utility issues selling at greater discounts without as favourable a reset more appropriate?
Thanks to all

Q: This interest-bearing preferred has fallen by nearly 50% in the past year and is now yielding 16%. How risky is this preferred, given that, if necessary, the substantial dividend on the corresponding common shares (M) could be eliminated if cash flow becomes too low?

Q: Supposing the BOC drops the overnight rate on Wednesday by 25 basis points. ZPR would go South. CBO and VSC go North. XBB goes North. Am I correct?

Thanks

Q: current price for this preferred stock is 9.75 with 5% dividend if fund winds down; the original issue price of 10.00 per unit will be paid to the share holder. is this correct or am i missing something. i have shares in dgs.pr , ftn.pr & dfn.pr how would you rate these funds as to saftey of dividend &repayment of orginal issue price

Q: You last commented on these prefs in Apr. Since then they have declined a lot further and now appear attractive for at least yield. Are you still comfortable with the credit rating of the company in today's environment?
Thanks

Q: I see that DFN is dropping like the rest of the market. Rob Carrick from The Globe and Mail is recommending preferreds in the form of CPD. Are preferreds in any form a good safe haven right now?

Vern

Q: I am finally looking at converting some of my RIF to bonds in order to get a stable income to add to pension. The funds will be divided equally between CBO,XBB,XHY. I have not invested in bond funds before and would really like to better understand what affects the price movement of these three particular funds. I have done a browse on Moneysaver past issues but can't find anything that really gives me the info I'm looking for. Could you give a quick explanation or maybe suggest some alternative resource ?
Many thanks

Q: Hi Peter & Co.,
I am considering taking a position in Sunlife perpetual preferred shares (series A,B,C or D). Current yield is about 5.8% vs. 4% on the common shares. It seems to me that gov't bond yields in Canada will be low for quite some time to come, and may even head lower should Mr. Poloz reduce the prime rate this year. These shares are already trading 10% or so below their call price, which should help if the company eventually calls them. What do you think of this issue as a long-term hold for income? Also, do you know what the rating is on these shares?
Thanks,
Brian

Q: I HAVE SOLD SOME OF MY PREFERRED AND HAVE 3 LEFT: IAG.PR.G, PWF.PR.S AND BCE.PR.K. DO YOU THINK THEY HAVE ANY UP VALUE OR SHOULD I GET RID OF THEM AND PICK UP THE NEW GENERATION PREFERRED SHARES WHICH HAS A RESET BASE. (EG ALA.PR.I) OR CONTINUE HOLDING THESE INVESTMENTS.