Investment Q&A

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?

Q: Hi Peter and Team:
There are now a number of perpetual preferred floating rate shares. Do they present an opportunity. EX: TRP series 3. TRP.B-T. Coupon for first 5 years 4%. Will reset at 2.25%, butpurchase price now 14.90. This works out to just under 4%.
As rates go up it will float up. It is preferred as to what?
Would you please point out all the risks with these. There
must also be some pros. They never mature so if the rate rose too much I imagine they would be redeemed. Thanks very much.

Q: Further to Helen's June 18th question on CPX.Pr.A, based on todays 5 yr GOC yield of 0.96% and an indicated reset spread of 2.17%, if you bought the stock at today's close price of $14.12 I believe you would obtain a yield of about 5.54% at reset (Dec 31, 2015) for the next 5 years. In the interim you obtain a yield of 8.27% to reset. I assume at reset the company just resets the rate and the price of the stock would remain at about the same level and your yield would drop from 8.27% to 5.54%. Do I generally have all this right or am I missing something? It seems quite appealing for a decent credit. Thanks.

Q: I am down 32% on these preferred shares. The yield is now over 8%. Does it make sense to buy more so that my yield is better? Is this preferred stock going to go up if interest rates rise?

Q: Hi Peter and the 5i Team,

I presently hold 1000 shares of CVD in my RRIF and it's down about 5% (excluding the dividends, so it's down only marginally). I saw an ad in today's Globe describing Fiera's "Canadian Preferred Share Trust", where you can exchange shares in CVD for this new fund. Do you see any advantage in doing this? The Fiera offering is actively managed, but since it's essentially a closed-end mutual fund (am I correct?) wouldn't the fees be higher than CVD's? I know you like Fiera as an investment, but would this translate to liking this product? (Don't buy mutual funds; buy shares in mutual fund companies?) As always, I appreciate your advice and recommendations.

Q: Please explain "rate reset preferreds" (not necessarily just ENB/ENF) and how to invest in them.

Thanks much.

Q: I bought this preferred just recently for a price of $25 and it has gone down steadily since then -- it now has a bid of $24.35. It has a yield of 6.5% and I bought it for income but if I lose in capital what I am gaining in income it doesn't make me happy (grin). What do you think the future holds for this preferred?

Q: Some investors assess a company's share prospects by looking at the company's debt. Since Argex announced its offering (on June 1), it has lost more than half its market cap, yet its debentures are getting a $66 bid. I agree that $66 on $100 face isn't exactly a vote of confidence, but given the 'failed' offering, wouldn't we expect the debenture to follow the share price down? Or does the relative stability of the debenture serve to recommend the shares?

Q: Would you classify bonds, preferred shares, preferred share ETF's and cash all as income?

Thanks
Dolores

Q: Hello,

I owned ENB.pr.b and I'm down 24%. It took a dive last dec. Should I sell?

Q: I am looking to invest in fixed income for my RRSP. What do you think of Dorel Convertible Debenture? I can get a yield in excess of 5.5% for a bond maturing in less than 5 years.

Q: Can you please give me your thoughts on this, at $25:

Loblaw Companies Ltd Perpetual Preferred Shares Series B

Issue:
Cumulative Perpetual Second Preferred Shares, Series B - 5.30%

Thanks!

Q: My portfolio of rate reset preferred shares (ENB, FTS, MFC, TD) is underwater by 5%. It's average dividend rate is 4% & all rate reset dates occur in 2019. I have two questions. 1) Why are rate reset preferred shares doing so poorly? 2) Is there any hope that their share price will improve in the future? Thanks ... Cal

Q: Hi There
What are your thoughts on this for a small part of an income portfolio.
Resets seem trickier to evaluate that was first apparent.

Thanks
David

Q: You seem to like BTO as a gold pick, yet I notice that as of the end of April, BTO has one of the largest short positions on the TSX. Why do you think this is the case?

Q: Just noticed GXI.DB and it yields over 10% to maturity. Would you recommend this convertible debenture for the bond side of one's portfolio?

Thanks