# RY.PR.Q preferred shares?



## jargey3000 (Jan 25, 2011)

anyone own these, and/or any comments pro or con?
(Im thinking of dipping a toe in)


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## AltaRed (Jun 8, 2009)

I suggest you spend about 6 months following http://prefblog.com/ first and maybe even a one year subscription to http://www.prefletter.com/ before getting into Prefs, at least individual issues. James Hymas may be the best there is in this space. Prefs are complex beasts and can hand your head to you before you know what has happened.

There are a lot of variables and influences on same, e.g. fixed rate reset and the next date on which it will reset, spread, quality of issue, bond yield curve, interest trend sentiment, cumulative or non-cumulative, NVCC compliant or not, etc. Few issues have maturity dates and redemption is at the pleasure of the issuer, not the holder.

I don't recommend them to the average retail investor. If you really want to be in this space, it is likely done best via ETF such as ZPR by BMO.


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## jargey3000 (Jan 25, 2011)

thanks alta. appreciate thre input.
any thoughts on RPF Etf....or are they all about the same...?


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## Eder (Feb 16, 2011)

I own a whack of RY.PR.Z. It has been taking a bath lately but I'm hesitant to buy more bank preferreds . I bought more Fortis Inc Pref Share FTS.PR.H as it "seems" to me to be cheap.


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## OnlyMyOpinion (Sep 1, 2013)

I hath seen my head and it looketh thus:
:blue:
Schedule 3:
loss $43,000 (offset by gains of course)
and the following year 
loss $37,000 (also offset by gains)


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## jargey3000 (Jan 25, 2011)

ouch! I'm outta here! thanks all!


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## AltaRed (Jun 8, 2009)

These things can be a roller coaster depending on expectations for the yield of the GoC 5 year bond. Many of us got our heads handed to us in the ~2015-2016 time period when the expectation back in 2012-2014 was that 5 year bond yields 'just had to go up' because interest rates had to go up! So much for that!

That said, those that bought in after pref prices crashed in 2016 did well in 2017 and most of 2018 as interest rate hikes were starting to take effect and gosh darn, we were headed back to 2.5-3% yields for 5 year bonds, right?. I haven't looked lately at a ZPR chart but I suspect the last 3-6 months has not been kind for holders of fixed reset prefs yet again. C'est la vie.


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## l1quidfinance (Mar 17, 2017)

Pretty big drop on the GOC 5 year today. 

I've got a bit of interest in these and I have subscribed to Prefletter. I really did as more of a learning experience as much as anything. There does seem to be some high quality high yield available but it will not be a smooth ride. 

There are many issues out there that will still see their payout increase even if the GOC yield continues to drop. Of course there are many factors at play. 

Personally I would not touch a pref that is trading at above Par. That is unles you deem the yield until call is worth while. 

RY.PR.Q will reset in 05/24/21 at 4.53% above the BOC yr yield. This imo means the issue stands a high probability of being called. Locking on the capital loss of $1.04 based on the closing price today. 


If history is anything to go by then we can see Royal has recently called 2 of their issues. The spreads above the 5yr were significantly less than PR.Q which means a resonable assumption can be made that PR.Q will be called. 

Royal Bank of Canada 3.52%, Series AJ	AJ	RY.PR.I	Pfd-2H	** * * *25.05*	3.51%	0.88	Feb 24/May 24/Aug 24/Nov 24	24-Feb-19	1.58%	5YR GoC Yld +1.93%
Royal Bank of Canada 4.26%, Series AL	AL	RY.PR.L	Pfd-2H	** * * *25.12*	4.26%	1.07	Feb 24/May 24/Aug 24/Nov 24	24-Feb-19	1.67%	5YR GoC Yld +2.67%

In all reality I would consider that RY.PR.Q has an effective yield to call of 3.3% - On this basis I do not see it worthwhile to pay the premium for a 3.3% return.

Eder. 

FTS PRH does seem to offer much better value and at the current rate it stands to get a 22% divi hike at reset.. This issue could see the GOC 5yr drop to 1.07% before we risk a dividend cut although It would be a rocky ride in terms of the paper capital loss if you were not prepared to weather the storm or load up as they become cheaper.


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## agent99 (Sep 11, 2013)

Eder said:


> I own a whack of RY.PR.Z. It has been taking a bath lately but I'm hesitant to buy more bank preferreds . *I bought more Fortis Inc Pref Share FTS.PR.H as it "seems" to me to be cheap.*


I did too a year or more ago, and that hasn't worked out too well! Due to reset soon.


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## dubmac (Jan 9, 2011)

Rob Carrick in the Globe & Mail discusses preferreds in his Sat April 18th column pg B9. Good quote in there by the guru himself, Jamie Hymas, "Preferred shares are volatile beasts and you shouldn't buy them for (the) preservation of capital....they are all about preservation of income". Hymas has a good response to the article here.


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## Eder (Feb 16, 2011)

agent99 said:


> I did too, and that hasn't worked out too well! Due to reset soon.


I bought more last week.


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## agent99 (Sep 11, 2013)

Eder said:


> I bought more last week.


Interesting - I would be interested in your reasons. 

My thoughts on this: 
I paid $14.68 a ear or more ago. It will reset on June 1st at about 1.9% or less. I will end up stuck with yield of 3.23% on purchase price for 5 years and who knows what after that. Kind of stuck long term, because it makes no sense to sell and no upside, that I can see, on price.

If bought at current price of $9.87, yield at 1.9% would I believe be about 4.8% for 5 years. Not that bad, but not great either. 

Fortis G, K & M series have current yields of 7.67, 7.32, & 6.27% and reset in Sep 2023, Mar 2024 & Dec 2024 respectively. Spreads on reset are 213, 205 & 248. I think I would go with the M series IF I was buying a Fortis Reset now. Hard to guess where interest rates will be when these reset. 

I did buy Fortis J perpetual at $19.88 for a current yield of about 6%. Perpetuals are bouncing back in price (J was $21.29 at last close) - having trouble finding similar price/yield.


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## agent99 (Sep 11, 2013)

dubmac said:


> Rob Carrick in the Globe & Mail discusses preferreds in his Sat April 18th column pg B9. Good quote in there by the guru himself, Jamie Hymas, "Preferred shares are volatile beasts and you shouldn't buy them for (the) preservation of capital....they are all about preservation of income". Hymas has a good response to the article here.


Thanks Dubmac. Very timely.


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## Eder (Feb 16, 2011)

agent99 said:


> Interesting - I would be interested in your reasons.


I'm expecting capital gains, yield is for waiting. Fortis is less risky than others.
JMO...


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## Montycor (Dec 23, 2020)

Hello, I hold 3 prefs in my non reg acc and have held for a long while.I am ok with the dividend,but like others on this site am tired of trying to understand this type of holdings.I will list below and if someone could just suggest what I should do.I 
would be happy to take the money and put in MAW 104

George Weston 5.2% WN.PR.C ( I believe this is a perpetual )
Great West Life 5.2% 1st PFD-G (non cumulative)
Power 5.8% POW.PR.C ( also non cumulative)

Husky S-3 4.5% HSE.PR.C ( this one was sugg by my adviser and is down by abou 40 % ) I think this is the worst of the beasts that I own


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## fireseeker (Jul 24, 2017)

Montycor said:


> Hello, I hold 3 prefs in my non reg acc and have held for a long while.I am ok with the dividend,but like others on this site am tired of trying to understand this type of holdings.I will list below and if someone could just suggest what I should do.I
> would be happy to take the money and put in MAW 104
> 
> George Weston 5.2% WN.PR.C ( I believe this is a perpetual )
> ...


On the surface, you are asking about specific preferred shares. In reality, you are asking about portfolio construction.
Do you want to invest in mutual funds or individual securities? 
If the former, go with MAW104. If the latter, stay the course.

PS. The mention of an advisor is confusing, as is the unstated location of the HSE.PR.C. Perhaps you also need to consider whether you wish to use an advisor or go it alone?


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## Montycor (Dec 23, 2020)

fireseeker said:


> On the surface, you are asking about specific preferred shares. In reality, you are asking about portfolio construction.
> Do you want to invest in mutual funds or individual securities?
> If the former, go with MAW104. If the latter, stay the course.
> 
> PS. The mention of an advisor is confusing, as is the unstated location of the HSE.PR.C. Perhaps you also need to consider whether you wish to use an advisor or go it alone?


Thank you for your comment.

I will clarify.I had a advisor some time ago and now am taking care of my accounts thru TD direct investing.The Husky pref is held in my unregistered account also, I was advised a long time ago that the prefs were to help in a drastic downturn in the market, but they dont seem to.


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## Jimmy (May 19, 2017)

Montycor said:


> Hello, I hold 3 prefs in my non reg acc and have held for a long while.I am ok with the dividend,but like others on this site am tired of trying to understand this type of holdings.I will list below and if someone could just suggest what I should do.I
> would be happy to take the money and put in MAW 104
> 
> George Weston 5.2% WN.PR.C ( I believe this is a perpetual )
> ...


Here is a good site to learn about PS. Home - CanadianPreferredShares It has links to each company's PS w descriptions of each issue.

WN.PR.C is a perpetual. It is like a bond w no maturity. So as interest rates rise , as they are expected to do, the price will fall. I would sell this before that happens

Great West Life GWO-PR-G is a perpetual too. Cumulative just means you always get the dividend and the accumulate if not paid on time and paid later in full.

POW.PR.C is also a perpetual.

If you considered these as FI before you could get minimum rate reset preferreds which benefit on interest rate rises and have a minimum yield of 4-5% ( you get the better of the current BOC5yr + premium or the floor) . They are better than bonds ( a little riskier ) now where you are losing $ in real terms to hold them. Here is a list of min rate resets. List of Minimum Rate Reset Preferred Shares - CanadianPreferredShares

The Brookfield are good Get PFD2 rating

If you considered these as stocks than you could put the $ into MAW 104.


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## fireseeker (Jul 24, 2017)

Montycor said:


> I was advised a long time ago that the prefs were to help in a drastic downturn in the market, but they dont seem to.


That is frustratingly true. Many, many investors have picked up some prefs in the last five years expecting consistent payments and price stability. Instead, they got clobbered.

Now, being clobbered isn't in and of itself a reason to sell. Your prefs are still delivering steady, tax-advantaged quarterly payments. What happens to the underlying price in the future no one can say with certainty. 

My suggestion is you look at these holdings in the context of your whole portfolio. Do you want to simplify, perhaps with a single balanced fund or asset allocation ETF? Do you want to structure your holdings with a dividend bias for tax reasons? Do you now realize the prefs aren't a substitute for bonds and you want to make your holdings more conservative?

The answers to those questions will help you determine what should happen to your prefs.

Disclosure: I hold preferred issues from three of your names.


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## Ponderling (Mar 1, 2013)

Too much for me to sort at present. We went with HPR in Feb 2020 for about 10% of our overall portfolio holdings. 

With this etf we let someone else take piece of the yield to be the expert and hopefully make sense of the Canadian preferred marketplace. 

Preferreds do demand an iron gut to hold at times, but the money it spits each month is a constant.

I do understand that yields of current new issues as they replaced matured or called preferreds held in the etf basket today will over time cut the returns of this etf


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