# Enbridge Preferred Shares Series D (ENB.PR.D)



## SixesAndSevens (Dec 4, 2009)

i wasn't sure if preferred shares should have a separate thread or post on the main Enbridge thread, but posting as a separate thread.

I hold Enbridge Series D preferred shares.
this is a straightforward rate reset pref.
the salient features are:


Rated Pfd-2 by DBRS
5 year rate reset linked to BOC 5 yr. bond + 2.37%
redeemable after 1st March, 2018 at $25/share every 5 years
in March of this year, the dividend was reset to 2.09% + 2.37% = 4.46% (based on par value)

so to me it seems like any other 5 year rate reset pref.
i can't understand why it is going down so much.

Bank of Canada raised rates 2 times this year after the rate was reset...that is supposed to be good for rate reset prefs.
if they do not hike any more for next 4.5 years, this will keep paying 4.46% until 2023.
if they do hike more in 2019 & beyond, the dividend will increase even more when reset in 2023.

but this share keeps dropping precipitously for last few months.
currently at $16.75
at this price, yield is 6.65%.

this is crazy...why has this dropped so much in price?
the redemption price is fixed at $25 and dividend cannot be cut by Enbridge without first eliminating the dividend on common shares...

what am i missing?
or is this a screaming buy?
should i load up the truck?
help me understand....


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## fireseeker (Jul 24, 2017)

The Enbridge prefs face two big headwinds:
1) The company's high debt, thanks to the Spectra deal
2) Softening expectations for future interest rate increases, which seems to be spooking retail investors away from reset prefs generally.

Also, are you sure the DBRS rating is still current? James Hymas now considers them "scraps" in terms of credit worthiness.
http://prefblog.com/?p=36445
http://prefblog.com/?p=36169

Commentary from G&M (paywall) on the recent drop in prefs generally:
https://www.theglobeandmail.com/investing/education/article-why-prefs-plunged-and-the-acbs-of-the-loblaw-deal/


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## Mike-RetireEarly (Feb 28, 2016)

The Enbridge preferred shares were downgraded in 2015 to PFD-3 (high). The preferred reset shares are all down 10% or more since late October.

Here is a search on enbridge DBRS ratings on Prefblog.com: http://prefblog.com/?s=Enbridge+DBRS


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## like_to_retire (Oct 9, 2016)

I agree with CMF member fireseeker with respect to credit quality. Personally, I don't really like ENB prefs, and feel you can do better.

Anyway, there are more factors involved with the price of Rate Resets than stars in the sky. They appear simple, but they're not. Remember it's a retail product and most don't understand how they work.

ENB Rate Resets would generally be considered medium spread resets, so it's always harder to analyze them. 

Low spreads are more perpetual like and expected to reset forever, while high spreads are considered five year money. 

Medium spreads suffer from rising interest rates blurring their characterization as either low or high spread. This can alter how the market reacts to interest rate changes, combined with a changing volatility related to the time to reset (if I own a low spread reset, its price will closely follow interest rates as it approaches the reset date, and not so much when there's a full five years to go to reset). ENB.PR.D has a long time to reset, so no one knows what will happen to interest rates over that time, combined with the question whether it will reset or be called considering its mid-spread.

ltr


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## doctrine (Sep 30, 2011)

The 5 year Canadian bond rate has been dropping. Therefore, all prefs linked to it will also drop. This pref was just reset in March, so it will be more volatile than most. The market doesn't really believe BoC will raise rates given the economic headwinds in Canada, i.e. low oil prices, higher taxes, low foreign and domestic investment rates.


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## SixesAndSevens (Dec 4, 2009)

thanks everyone.
i see that the DBRS rating was changed, but it was back in 2015.

what is happening to this pref is more recent...look at the chart.
the big drop started mid Oct. early Oct it was still around $19.80.
on 10/18 there was a drop of about 50c., another big drop between 10/25 and 10/30, and then a very large drop between 11/13 - 11/22.

i can't find anything going on during these date ranges....

it is true that the GOC 5 yr. rate has dropped from 2.46% in Oct to about 2.28% right now.
is that 20 basis pts. (8%) drop in GOC yields equal to almost 18% drop in the share price of this pref?

@like_to_retire...you said we can do better.
do you have any suggestions?
I am looking for 4.5% - 5% yield on my prefs with no capital loss over a 10 - 15 year period.
I am fine with no capital gains on the par value...

I don't need the 6.65% yield that this pref is offering if that means constant capital loss like this...

does anyone truly believe Enbridge will suspend dividends on their pref shares?
it is a regulated utility.
they have business all over US & Canada.
they have been divesting assets to reduce debt & cover the spectra energy purchase.

if I have a time frame of 15 years, is this pref worth holding on to?
or buy even more at these prices?

that is what i am trying to figure out...


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## Jimmy (May 19, 2017)

fireseeker said:


> Commentary from G&M (paywall) on the recent drop in prefs generally:
> https://www.theglobeandmail.com/investing/education/article-why-prefs-plunged-and-the-acbs-of-the-loblaw-deal/


Reading that article, I think I now understand why overall PS have dropped. The 5 yr yield fell from 2.47% to 2.29%. That is a drop of 7.3%. The price will change based on the yield and demand of course so a price drop of 9% now doesn't' seem so puzzling.

And as James Hymas notes a lot of this is tax loss selling too but as dividends will be raised on the next reset , yields (and prices) will rise back again. These should be good over the next year at least as they are still raising rates.


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## fireseeker (Jul 24, 2017)

SixesAndSevens said:


> i can't find anything going on during these date ranges....


S&S, take a look at the three-month chart for ZPR for October-November. All prefs are being battered. At a glance, it looks like Enbridge is merely matching the market.
https://web.tmxmoney.com/quote.php?qm_symbol=zpr

And here you can read some additional commentary from James Hymas about what he sees as the role of retail sellers in all this:
http://prefblog.com/?p=37596

I don't know enough to advise on Enbridge specifically. 
If interest rates remain relatively stable, prefs are probably a decent buy right now. But if interest rates slump back down, look out below ...


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