Q: Hello Peter
Thank you for the really excellent video on the Top 5 Investment Questions. First Class!
I have carefully reviewed your comments on Sherritt [S] especially your answers on January 20, 2014 (asked by Richard) and on November 22, 2013 (asked by Chris). Subsequently Sherritt did slash their dividend. I am unsure about Sherritt's level of secured and unsecured debt which may be quite large and pose a threat, and there may be "off balance sheet" issues too.
We hold a large position in Sherritt Senior Unsecured Notes due 11/15/2018 with an 8.00% coupon, making up 3% of our overall portfilio or 10% of our fixed income portfolio
You would think that the sale of the coal assets and the dividend cut would reduce risk on the Notes, and I realize that this may be a "cleanout quarter" for the company before the crucial May 6th meeting, but I would value your opinion on their stability. The current quote is $99.50 which would suggest they are not under undue stress.
If advisable I would gladly sell these notes and switch to something with more safety and a lower yield. I read your recent comment on CBO [iShares 1-5 Year Laddered Corporate Bond Index Fund Common Class] and the 4.25% dividend yield would be acceptable but I am unwilling to take on the capital risk in a security with no maturity date, in a possibly slowly rising interest rate environment. Gaining 4.24% income with a possible 3-5% capital loss in a year is pointless and I might as well just buy a cashable 1-year GIC at 1.6%.
We already own a large number of good dividend common shares [RY, CM, BNS, NA, LB, OLY, SLF, GWO, TRP, ENB, ENF, PPL, BTE, PKI, POT, T, EMA, FTS, BDT, S, LIQ, NWC, NWH.UN, CSW.A, RSI, CJR.B, G, FNV, SLW, CGL, SVR] so have some quite good dividend income.
The other 90% of our fixed income is in a mix of long provincial bonds maturing 2027-2032 yielding over 6% on their purchase prices, and an Algoma Central Corp Conv Unsec Subord Debs 03/31/18 6.00%, and a small position in FAP. We also have about 5% in cash equivalents, one modest employment pension and two OAPs and CPPs. On your advice (January 23, 2014 asked by george) and for which we thank you, we just sold our Perpetual Energy CV 7% 31DC15 [PMT] at $98.00 at a small profit because of extreme company debt and bought Telus [T] with the proceeds and are quite happy with that.
So we don't particularly "need" higher yields now but I am a little reluctant to go beyond our current 66% weighting in equities, however this may be the only realistic option. I would not be keen on preferreds, even rate reset preferreds at this time, as they have no maturity dates and I have sold all mine advantageously a year ago. I am also not a fan of REITs,and don't want ETFs much preferring to own individual securities, and there is not much point in buying 1-5 year government bonds at this time.
I am retired, investing for a 20 year horizon, and am mainly looking for secure income, modest growth [although more is better and must be balanced against risk], stability, steadily rising dividends, and the liklihood of relatively better performance in a major market correction which, like death and taxes, will come for sure some day and we must be prepared to ride out any downturn without undue worry.
If there is a major market correction in the next couple of years, Sherritt may fare quite badly and the notes would be very vulnerable. Maybe if we need to be concerned at all over the Sherritt Notes, and if we are going to worry over them, we should just buy some "dull" but stable equities with acceptably lower but rising dividends, lower payout ratios, and good growth, like CNR, ALC, KBL, BCE, THI, taking advantage of the dividend tax credit, and pushing our equities up to 70% of the overall portfolio? Is 70% getting too high? We don't seem to have any other choice.
My apologies for the long question. I would welcome your suggestions as to what to do with this security.
Many thanks........... Paul
Thank you for the really excellent video on the Top 5 Investment Questions. First Class!
I have carefully reviewed your comments on Sherritt [S] especially your answers on January 20, 2014 (asked by Richard) and on November 22, 2013 (asked by Chris). Subsequently Sherritt did slash their dividend. I am unsure about Sherritt's level of secured and unsecured debt which may be quite large and pose a threat, and there may be "off balance sheet" issues too.
We hold a large position in Sherritt Senior Unsecured Notes due 11/15/2018 with an 8.00% coupon, making up 3% of our overall portfilio or 10% of our fixed income portfolio
You would think that the sale of the coal assets and the dividend cut would reduce risk on the Notes, and I realize that this may be a "cleanout quarter" for the company before the crucial May 6th meeting, but I would value your opinion on their stability. The current quote is $99.50 which would suggest they are not under undue stress.
If advisable I would gladly sell these notes and switch to something with more safety and a lower yield. I read your recent comment on CBO [iShares 1-5 Year Laddered Corporate Bond Index Fund Common Class] and the 4.25% dividend yield would be acceptable but I am unwilling to take on the capital risk in a security with no maturity date, in a possibly slowly rising interest rate environment. Gaining 4.24% income with a possible 3-5% capital loss in a year is pointless and I might as well just buy a cashable 1-year GIC at 1.6%.
We already own a large number of good dividend common shares [RY, CM, BNS, NA, LB, OLY, SLF, GWO, TRP, ENB, ENF, PPL, BTE, PKI, POT, T, EMA, FTS, BDT, S, LIQ, NWC, NWH.UN, CSW.A, RSI, CJR.B, G, FNV, SLW, CGL, SVR] so have some quite good dividend income.
The other 90% of our fixed income is in a mix of long provincial bonds maturing 2027-2032 yielding over 6% on their purchase prices, and an Algoma Central Corp Conv Unsec Subord Debs 03/31/18 6.00%, and a small position in FAP. We also have about 5% in cash equivalents, one modest employment pension and two OAPs and CPPs. On your advice (January 23, 2014 asked by george) and for which we thank you, we just sold our Perpetual Energy CV 7% 31DC15 [PMT] at $98.00 at a small profit because of extreme company debt and bought Telus [T] with the proceeds and are quite happy with that.
So we don't particularly "need" higher yields now but I am a little reluctant to go beyond our current 66% weighting in equities, however this may be the only realistic option. I would not be keen on preferreds, even rate reset preferreds at this time, as they have no maturity dates and I have sold all mine advantageously a year ago. I am also not a fan of REITs,and don't want ETFs much preferring to own individual securities, and there is not much point in buying 1-5 year government bonds at this time.
I am retired, investing for a 20 year horizon, and am mainly looking for secure income, modest growth [although more is better and must be balanced against risk], stability, steadily rising dividends, and the liklihood of relatively better performance in a major market correction which, like death and taxes, will come for sure some day and we must be prepared to ride out any downturn without undue worry.
If there is a major market correction in the next couple of years, Sherritt may fare quite badly and the notes would be very vulnerable. Maybe if we need to be concerned at all over the Sherritt Notes, and if we are going to worry over them, we should just buy some "dull" but stable equities with acceptably lower but rising dividends, lower payout ratios, and good growth, like CNR, ALC, KBL, BCE, THI, taking advantage of the dividend tax credit, and pushing our equities up to 70% of the overall portfolio? Is 70% getting too high? We don't seem to have any other choice.
My apologies for the long question. I would welcome your suggestions as to what to do with this security.
Many thanks........... Paul
