skip to content
MENU
  1. Home
  2. >
  3. Investment Q&A
You can view 3 more answers this month. Sign up for a free trial for unlimited access.

Investment Q&A

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

Q: Hi Guys,

This is a follow up to Alayne question on BRF.pr.A.

Don’t forget, the 3.32% dividend is on the original $25. If you calculate it on the current price of $20.35 you get a return of 4.1% ($25x3.32%/$20.35). If it is held outside of an RRSP in will have an equivalent interest rate of approximately 5.3%. This is much better than current yields.

If you reset using the short term provision and if the T-Bill rate went up 1% next year your yield would probably jump to something over 5.25% (6.8% bond equivalent) at that time and you could eventually have a capital gain from the $20.35 to $25.

Not all that bad.

I’m in the same boat with GMP Capital, GM.PR.B. Any comments on this company?

Thanks
John
Read Answer Asked by John on March 29, 2015
Q: Good morning, could you please correct the symbol on Jacques question and what would be the yield on these after the reset? Would you expect the price to rise after the reset? Would these make a good investment since one presumes interest rates will rise in the next five years and the prices will correct to $25. Thank you
Read Answer Asked by Alayne on March 27, 2015
Q: Can you give me some info on this particular stock. It seems to be quite new and returns have not been great during the last year. The dividend is quite high and wandering if it is safe? Tnx.
Read Answer Asked by Jacques on March 26, 2015
Q: How would you rate the recent 7% Convertible Debenture issued by Terravest? Would you prefer it over the common shares? The company does has exposure to Alberta.

Thanks as always.
Read Answer Asked by Warren on March 26, 2015
Q: Are rate reset preferred shares an investment vehicle that should be avoided?
I am referring to the present practice of companies issuing rate resets by increasing the INTEREST RATE SPREAD (which is added to the 5 year Government bond) higher and higher each time they issue these shares.

For instance, yesterday Veresen issued VSN.PR.E with a spread of 4.27%. Prior to that the VSN.PR.C had a spread of 3.01% and VSN.PR.A had a spread of only 2.92%. Naturally, as soon as news got out of the higher spread of VSN.PR.E both VSN.PR.A and VSN.PR.C were hit hard.

My question therefore is should we stop buying the rate resets? I presume one will keep losing money because a company will keep raising the interest spread whenever they issue new preferreds. It is not only Veresen that is doing this but Husky has done it as well.
I currently own both VSN.PR.A and VSN.PR.C and both have been hit hard after the announcement of the new issue (VSN.PR.E). Should I sell them or is there a chance that they will recover in the future.
Read Answer Asked by Terry on March 24, 2015
Q: Hi Peter,

As I mentioned in a prior question I am a significant holder of Convertible Debentures, some in Registered and some in non registered accounts

In the past decade I've only had 1 default (Prizm)

However today I am holding 5 CV's that are substantially below par and I am concerned that they will be able to settle in whole upon maturity.

I will list them as follows:

PLT.DB
WEQ.DB
ZAR.DV
AET.DB
LRE.DB

Question to you is, which of those are so dangerous to hold, given the current state of energy, that you would recommend I sell because taking the current bid is probably better than zero?

Thanks
Read Answer Asked by Sheldon on March 17, 2015
Q: What are your thoughts with regards to holding First Asset 1-5 Year Laddered Gov't Strip Bond Index ETF (BXF) vs the Ishares Canadian Short term bond ETF (XSB) in a non registered account? Should a person sell XSB and replace it with BXF for a non registered account?
Read Answer Asked by James on March 16, 2015
Q: What are your thoughts on the quarterly results (they always seem somewhat messy with adjustments) and the outlook going forward? Recently a comment on BNN was made that its a "mini BAM (Brookfield)" in the making.
Thanks
Read Answer Asked by Husseinali on March 09, 2015
Q: I have recently been picking away at these preferred shares in the $14-15 range. This particular issue is a rate-reset which is going to reset on June 30th at Gov't 5yr + 1.28%, but there also is an opportunity to convert to a floating series prior to the reset date. So, the question is: Should I convert to the floating series in light of a market that seems to be indicating higher future rates? Canada should eventually follow the US in raising rates, correct? Thanks.
Read Answer Asked by Mike on March 08, 2015
Q: Does it make sense from a tax point of view to put Preferred shares - rate reset in a RRIF to get a higher yield. My brokerage cash account has common shares and no additional cash available.
Thanks to all
Read Answer Asked by Warren on March 04, 2015
Q: With the recent drop in the Bank of Canada interest rate, a lot of rate reset preferreds have dropped in price. Those with reset dates coming up soon have been hit particularly hard. One example which I hold already is Canaccord Genuity series A (CF.PR.A) which resets Sept 2016 (BoC + 3.21%). It currently trades at a steep discount ($16.14) for a current yield of 8.5%. In my opinion given the credit quality and price discount, the selling of this one and a lot of other rate reset preferreds (coming due for reset) has been overdone and all things considered offer very attractive yields even with the low reset rate. I have room for more preferreds in my fixed income allocation. Do you have any recommendations for similar rate reset preferreds from companies with good credit quality that have fallen well below the $25 issue price and now look attractive?
Read Answer Asked by Steven on March 04, 2015
Q: On the previous question regarding reset prefs, the 5 year BOC, from their website is 1.5% yet the reset used was .79%. I am confused. Is .79% the YTM? and should that be used to calculate the "new" yield till the next reset? Thank You
Read Answer Asked by Ronald on March 03, 2015
Q: Hi There

Fairfax has just announced the reset rate on the above at 2.91%.
My reading of the prospectus was that the reset rate was to be equal to 2.66% plus 5yr GOC rate(~0.79%) = 3.45%.
what am I missing here.
Thanks
David
Read Answer Asked by David on March 02, 2015
Q: what is your opinion of the Enbridge preferred shares A B D and F? How often do they pay the dividend and why are they at 52 week lows? thanks Chet
Read Answer Asked by chet on February 26, 2015
Q: The price dropped significantly yesterday. Should I hold it until maturity? Will I receive the issue price at maturity?
Read Answer Asked by Bruce on February 24, 2015
Q: Hi - in an answer to a question on Friday re BCE prefs - you referred to Benchmark 5 yr Gov bond yields of 1.75%. Here is what you said:

"The benchmark 5 year bond yield right now is 1.75% (from the BoC site), but yields are much lower now."

I read the latest benchmark 5 year yield as .80% - from the BOC website. Am I missing something. I am looking at rate reset prefs so would like to be clear on the benchmark for the reset.

Thanks
Read Answer Asked by Gary on February 23, 2015
Q: SJR.PR.A now trades at $17.50 or there abouts and it will be going to a floating rate next June 30, 2016 using the 5 year BOC +200 basis points. What do you think might happen to the price of this preferred when it goes to the floating rate?
Read Answer Asked by Derek on February 23, 2015
Q: Which vehicle do you prefer, CPD or ZPR, and why? Thanks!
Read Answer Asked by Paul W on February 22, 2015
Looking for more? Sign up for a FREE 14 day trial! No credit card required

We invite you to sign up for a 14 day free trial of 5i Research!
Experience all the benefits and tools we have to offer; stock research, model portfolios, Q&A with our experts, and so much more. Join a community of like-minded investors today!