Investment Q&A

Q: Can you please comment on FFH series C Pref. The last 2 dividend payments the Pref. paid out was less than the previous 20 dividend payments dating back to Dec. 2009. I did not see any news release stating the Board of Directors voted to reduce the dividend. If their was a news release would management have stated WHY they cut the dividend ? Would we have received something in the mail ? The share price closed at $19.40 today,down significantly from the $25 issue price. I thought the dividends on prefs are pretty much a safe thing.

Q: Since my buy in May, 2013 ZPR is down 23% and continues to get beaten down as interest rates fall. Assuming the Bank of Canada reverses direction in response to the expected rise in US interest rates, is this a good entry point for ZPR as a long term hold?

Q: WHat do you think of the preferred shares at this time?

Q: This convertible debenture's yield to maturity is over 34%. I realize that this is risky company to invest in, but do you think the reward may offset the risk considering the debentures will mature in 17 months on December 31, 2016?

Q: Here's what I just don't get. ZPR holds rate-reset preferreds. I DO understand why a lowering of the bank rate will cause reduction in ZPR's price, as the return on future 'resets' in the portfolio will be reduced. What I DON'T get is how, to date, a total of a mere 1/2 of 1% reduction in the bank rate could explain a reduction of more than 20% in ZPR. Even if an investor would therefore receive 1/2% percent less for five years on the reset shares, that equals roughly a total of 2.5% lost yield over five years. The drop of 20% seems wildly disproportionate to the actual bank rate reductions. Can you explain what I'm missing? And one more question: given that the Bank of Canada will presumably not go below zero, do you not think that this ETF, yielding now 5.1%, has a lot more potential to the upside than to the downside, at least in the longer term? That's the kind of investment I like. Thanks, James.

Q: I would like your opinion on the Dundee Preferred share which is retractable at 17.84 next June 2016. The current yield to maturity with the shares trading at 17.50 is 7% (5% dividend and 2% capital gain).
Are these shares an attractive investment opportunity?

Q: Bombardier preferred as well as other preferreds are going down in value like a rock. Its in the fixed income part of my portfolio and I was not expecting this kind of movement, sell or hold ?

Q: I'd like have some investments that pay a predictable distribution that I either hold forever or get to cash out at the same price I purchased at.

This looks interesting (4.9% and doesn't seem to be a reset-preferred), but I've been burned by preferreds before so I thought I'd ask what you think.

http://www.stockhouse.com/news/press-releases/2015/07/14/royal-bank-of-canada-announces-nvcc-preferred-share-issue

Q: Good Morning 5i team: I'm hoping you can enlighten me in regard to the way in which rate reset preferreds are priced at the time of reset. Specifically, the calculation of the 5 yr GOC bond rate (assuming that's the benchmark involved, which it is in all of my preferreds). An example may help. The prospectus for ala.pr.e says that at reset (12/18)the rate will be reset to "a rate equal to the sum of the then five-year Government of Canada bond yield plus 3.17%." So, my question is this: Is the GOC 5 yr bond yield a fixed number, or does it float with trading? Thanks for your help.

Q: Please comment on my logic ( or lack of ) on this. When and if interest rates ever start the up tick it would be a sound defensive position to have some funds in a preferred share ETF such as CPD that has a significant number of rate reset shares.

Any other preferred Share ETFs you would prefer? I am a middle aged investor building an income portfolio for retirement down the road.

Many thanks

Paul

Q: Hi Team,
I hold CPD, XPF & ZPR as part of my taxable fixed income portfolio. All of the pref share ETFs have been dropping of late. Is this a case of market sentiment and being oversold due to the anticipated interest rate hike or is there an fundamental problem with these securities? Thanks for your help.

Q: What is the outlook for this ETF? Will it recover with any future increase in interest rates or is it dead money? Should it be held longer term in an income account or sold? Please advise some replacement ideas if sold. Thank you, Barrie

Q: I had a bond get called in the fixed income part of the portfolio. I'm looking at Great Canadian Gaming July 2022 6.625% bond. The bond is callable in July 2017. Do you think the consent solicitation earlier this year is a sign they will call the bond early?
I know your not really into bonds, in your opinion would it be a better idea to consider giving up some yield to possibly get some capital gains in one of these 2 convertible bonds:
Element Financial Jun 2020, YTM is only 2.3%, but its convertible 22% higher than todays equity price.
DH Corporation Sep 2020, YTM is only 3.5%, but its convertible 30% higher than todays equity price.

Q: Hello
Your comments on TA have been unfavourable in the past. How about ta.pr.h? Is this a relatively risk free security to hold for income investors? Right now I am under water on this one. Should I sell, hold or average down?

Q: The Bombardier preferred shares BBD.PR.C have declined significantly over the past several months. Currently at $16.45 the yield is 9.50%. Is there too much risk associated with this company to own this preferred? Thanks.
Bryan

Q: Gentlemen,

Can I get your opinion on these preferred on a higher rate environment? Is it time to sell?

Regards

Q: I have traded a number of investment-grade preferred shares (fixed-resets and floating-resets) over the past 9 - 12 months, and have generally done quite well despite the BoC rate cut in January. One major exception however has been the ENB preferreds, where I have lost quite a bit of money.

When ENB announced their plans to drop down assets into Enbridge Income Fund and US entities, the credit agencies put ENB on negative review, leading to a big drop in ENB.PR prices (they trade now like Pf-3(high)/Pf-3 rated prefs).

This is very disheartening: I buy investment grade prefs in order to avoid such non-interest-rate-related losses.
In your view, what is the danger that other "utilities", such as TRP, FTS, etc., might also institute similar changes to their capital structure (and hence credit ratings), leading to precipitous drops in their pref shares?

Thanks!

Q: Good Morning
How do you think the following announcement by Brookfield Renewable Energy Partners will affect the price of their preferrd shares?
I am currently holding two issues:BRF.PR.B (rate reset) and BRF.PR.E.(perpetual). Although I am making some money on BRF.PR.E , BRF.PR.B is down from $20 to $17. Can Brookfield Renewable Energy Partners force a holder of BRF.PR.B to sell at $17??


Brookfield Renewable Energy Partners L.P., proud (indirect) issuer of BRF.PR.A, BRF.PR.B, BRF.PR.C, BRF.PR.E and BRF.PR.F, has announced:
that the Toronto Stock Exchange (the “TSX”) accepted notice of Brookfield Renewable Power Preferred Equity Inc.’s (“BRP Equity”) intention to commence a normal course issuer bid for its outstanding Class A Preference Shares (“Preferred Shares”). BRP Equity is a wholly-owned subsidiary of Brookfield Renewable. Brookfield Renewable believes that in the event that the Preferred Shares trade in a price range that does not fully reflect their value, the acquisition of Preferred Shares may represent an attractive use of available funds. There are currently five series of Preferred Shares outstanding.

Q: Here's a syndrome I'll bet a lot of investors who were sold preferred shares can relate to. You become overly comfortable as it seems to be relatively immune to ups and downs for many years. Then one day you wake up and see it has recently tanked and you have lost as much as all the income you've ever gotten from it... and more. Any comments or advice about dealing with this syndrome in general (or in particular as regards ALA.PR.A)? Thanks.

Q: On Friday Enbridge said it has reached a long anticipated deal to transfer some of its Canadian pipeline and renewable energy assets to Enbridge Income Fund. This move is to allow ENB to boost its dividend and accelerate growth.

While ENB common was up significantly its preferred shares (including ENB.PR.A (B, H, N, etc.) where all down.

Are the preferred shares riskier now than they were before the announcement? Do the preferred represent good value? If so, is there any series that you would favour?