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Preferred shares
September 24, 2020
5:57 am
savemoresaveoften
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picassocat said
Well, if you like dividends, you might look into these preferred shares

Bombardier Inc Pref Share BBD.PR.C
Forward Div Yield 16.95%

Bombardier Inc Pref Share BBD.PR.B
Forward Div Yield 9.07%  

very bad recommendation. I will avoid that name.

October 1, 2020
11:26 am
maxb
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I sold a bit more of these... yes, you can wait to collect more dividends, but I believe they will continue to depreciate in value... The more I read on these, the more I believe that these instruments were created for gullable investors ( me included) !!!
Even at these prices, your paying to get appx 60c/year, but you will never get your principle back!!!
Companies at this point will simply buy on their shares on the open market if they wish, or wait till next year when they are worth even less...

November 19, 2020
7:35 am
Bud
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Generally Enbridge and TC Energy pfds seem to trade lower in teens is that due to design or is there some credit risk there?

November 19, 2020
2:11 pm
Norman1
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The preferred shares need to compete with the common shares of the same company.

Common shares of TC Energy trade around $55.46 with a $3.24 per year dividend. The yield is about 5.8% per annum.

With that, no-one is willing to bid the $25 par value for the company's rate-reset, GOC5 + 1.54%, Series 5 preferred shares (TRP.PR.C) that currently pay a $0.56575 per year dividend. Such a buyer would only receive 2.26% per annum for the preferred shares.

Not surprisingly, the Series 5 preferred shares now trade for around $9.60 to give any buyers a yield of 6% per annum.

November 29, 2020
8:50 pm
maxb
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I just sold all my mfc.pr.b... these were similar to ry.pr.w (which I sold a tr ago), but just a notch lower (ry is better than mfc). These preferred shares simply are not that stable ! Will never buy again!!! Buying the common shares is a better way to go since you know what your getting. Also, long duration prfds are really bad because they get discounted heavily if the environment changes and the company has no intention of reddening.

November 30, 2020
8:36 am
canadian.100
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maxb said
I just sold all my mfc.pr.b... these were similar to ry.pr.w (which I sold a tr ago), but just a notch lower (ry is better than mfc). These preferred shares simply are not that stable ! Will never buy again!!! Buying the common shares is a better way to go since you know what your getting. Also, long duration prfds are really bad because they get discounted heavily if the environment changes and the company has no intention of reddening.  

I also own MFC.B pref shares which I bought as a new issue in Feb 2005 @ $25 per share (including commission). The market value today is approx $24.60. They have paid me 4.65% dividend quarterly for 15 years. Yes, the market value did fluctate in the years when interest rates were "high" but since interest rates are very low now and likely to stay that way for at least a year or two - I am not in a big rush to sell them. As well, the present market value per share is $24.60. My question to you - you sold your MFC Preferreds - did you actually take the proceeds and buy MFC common shares?

November 30, 2020
1:41 pm
maxb
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canadian.100 said

I also own MFC.B pref shares which I bought as a new issue in Feb 2005 @ $25 per share (including commission). The market value today is approx $24.60. They have paid me 4.65% dividend quarterly for 15 years. Yes, the market value did fluctate in the years when interest rates were "high" but since interest rates are very low now and likely to stay that way for at least a year or two - I am not in a big rush to sell them. As well, the present market value per share is $24.60. My question to you - you sold your MFC Preferreds - did you actually take the proceeds and buy MFC common shares?  

Nope, went to cash for now.. may buy financials/index at later date.
I thought that I would only be exposed to interest rates and MFC risk when I bought at around $23 many years ago. But the performance of these "non-redeemable ( in general)" has been extremely volatile and mirror the shares of the common.
Every 18-24 months these shares drop 10-20% .. sorry, now longer in my portfolio!!!!

November 30, 2020
1:47 pm
maxb
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And luckily, MFc.pr.b are not the perpetual floating resets!!! These are awful. These essentially are valued at the price of the dividends in perpetuity, with no payback of principal ( yep just do the math adding up all the dividends for next 30yrs, but discount the future dividend because it's not paid today)....

Slowly getting out of these awful shares. No wonder they aren't being held by the pros!!

November 30, 2020
2:51 pm
canadian.100
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maxb said
And luckily, MFc.pr.b are not the perpetual floating resets!!! These are awful. These essentially are valued at the price of the dividends in perpetuity, with no payback of principal ( yep just do the math adding up all the dividends for next 30yrs, but discount the future dividend because it's not paid today)....

Slowly getting out of these awful shares. No wonder they aren't being held by the pros!!  

I noted there was a fair volume of Reset Preferreds traded in November - I guess people like you were dumping them and buyers were picking them up at "half price" from what they were issued at. Agree that Resets were a bad investment for those who paid the original price when they were issued.
I read somewhere that buyers now do include diversified Pension Funds and Mutual Funds - which would suit their long term focus. They can wait until interest rates start to rise which will increase the value of the Resets.

November 30, 2020
9:51 pm
maxb
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Where have you heard about Pension Funds and Mutual funds buying ? I've seen nothing.
You may claim "on sale", and Yes 1/2 from were they were issued. But I think one will see a 25% loss from here before a 25% gain. IMO, all the early rate resets (ie the ones currently trading at $9-$13) will never be redeemed at par in my lifetime.

To date, I believe there has been only one !! Rona, and that was a sweet gain.

But even with the Rona gain, I am sitting about even/slightly lower overall on the Rate Resets I have...
But I've held for a long time (ie I bought my first ones after they fell) ie about 5 years...
Overall, slight negative return after 5 years ! Yikes !!!

Luckily I've done well on other stuff, ie apprx 12% capital gain on MFC.pr.B twice (bought/sold/bought/sold), while collecting 5.2% dividend (my cost basis was not 25, but 22)....

December 1, 2020
6:47 am
savemoresaveoften
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maxb said

Nope, went to cash for now.. may buy financials/index at later date.
I thought that I would only be exposed to interest rates and MFC risk when I bought at around $23 many years ago. But the performance of these "non-redeemable ( in general)" has been extremely volatile and mirror the shares of the common.
Every 18-24 months these shares drop 10-20% .. sorry, now longer in my portfolio!!!!  

Preferred are illiquid so on top of exposure of IR and credit risk, you are exposed to "irrational seller dumping" risk. From time to time, they go so cheap and can be a stellar buy if you know what you are doing.

I own the ones that are min rate reset but those are hard to come by. Was a steal picking those up during the pandemic.

December 1, 2020
8:39 am
canadian.100
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savemoresaveoften said

From time to time, they go so cheap and can be a stellar buy if you know what you are doing.

I own the ones that are min rate reset but those are hard to come by. Was a steal picking those up during the pandemic.  

You are exactly correct. I get the Globe and Mail Investing Newsletter and Business Newsletter daily and there has been the odd article on that phenomenon - that they are a stellar buy as you correctly say "you know what you are doing."

I personally bought one of the Purpose Investments Income Funds that was picking up depressed Pref shares after the big drop in March. I paid $6.65 a unit for that Mutual Fund; today I see the unit value is $9.55. I agree this may not be for those here who are really only comfortable with HISAs and GICs.

December 1, 2020
9:51 am
maxb
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Yes, GIC and preferreds are very different products. They are not interchangeable !!

Note, one can get some info on the rate-resets on prefblog.com

December 4, 2020
6:02 am
canadian.100
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maxb said
Yes, GIC and preferreds are very different products. They are not interchangeable !!

Note, one can get some info on the rate-resets on prefblog.com  

Thanks for info re Prefblog.com, I note on Prefblog that BIP.PR.B is now resetting @ 5.50% for the next 5 years and BAM.PF.H to reset @ 5% for the next 5 years. I am content to have a small amount of these Preferred Reset issues - they give a bit of a kick to my 1.5%/2% GICs as interest rates continue to decline.

December 4, 2020
9:24 pm
maxb
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Just remember, the company will most likely not buy you out!! Its only what you can get on the open mkt... so yep, when you need to sell, there may be nobody buying...

I'm buying the common shares from now on. At least there I know where I stand, and can benefit from the growth...

December 5, 2020
4:56 am
canadian.100
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maxb said
Just remember, the company will most likely not buy you out!! Its only what you can get on the open mkt... so yep, when you need to sell, there may be nobody buying...

I'm buying the common shares from now on. At least there I know where I stand, and can benefit from the growth...  

Agree. I only buy Common Shares now.
I treat the Reset Preferreds which I already own like an annuity if they have dropped in value - the positive is that they keep paying those quarterly dividends (income stream) just like an annuity. Fortunately the Perpetuals I have are all above cost and appear easy to sell right now on the market if I choose to sell these. Once interest rates start to increase (2022? 2023?) the Resets will benefit and I will have sold the Perpetuals in late 2021. That is the plan.

December 15, 2020
5:49 am
maxb
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topgun said

topgun said

I purchased 17 1/2 and 18 1/2 year Ontario Hydro strip bonds called Cougars yielding 11.75% in early 1985 at Guaranty Trust. Not sure their name when I cashed the strip bonds in 1998.

I think you are correct about Victoria and Grey going to Scotiabank.

Many trust companies disappeared. Dominion Trust was bailed by CDIC. Interest stopped immediately on failure date. I received principle and interest to that time.

Cabot Trust failed.
I found some information about Cabot Trust Company on the internet. It was merged into Manulife Bank January 1, 1993. Huronia Trust Company and Regional Trust Company were also involved in merger. This matches some of my own records. Some assets went to Manulife Bank. Some assets went to Laurentian Bank. I think it depended on when my 5 yr GIC's matured.

  

But with those bonds, came very high inflation !!!! After tax, many interest bearing investments did not keep up with inflation just like now!!!

Some were fortunate to buy these right before inflation was tamed and made out well.

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