# Preferred - choosing



## agent99 (Sep 11, 2013)

I have been looking at a few preferreds and wondering what to buy. 
I looked at Algonquin A (@19.74) and D (@21.30) . Current yield 6.6% and 6% vs new BMO.PR.F (trading at $25.35) that will yield 5.1% at par. All have maturity in 4.5-5 years. 
Tried buying an FTS pfd that I already own as well as PVS and no volume on these so no trade.
AQN A and D reset at GOC+2.94 and 3.28 resp and BMO at GOC+3.51. 
Right now GOC is at 1.68, but it has been down at about 0.4 - A reason why rate reset got hit hard a while ago?


----------



## like_to_retire (Oct 9, 2016)

Trying to predict resets is as difficult and unadvised as predicting interest rates. It can't be done.

So your only avenue is to use the actual information you have today. Always evaluate resets with yield to worst. I know it's often tempting to look at a reset and say that you feel it will be called and that $25 will result in a really nice capital gain, but I would recommend a worst case evaluation is best. Sure, you can make an interest rate prediction and then say that the likely event will be a call, but consider the case that GOC5 rates could be near zero and with a reset you would not only suffer a dividend loss for the next five years, the share price would also tank and so you couldn't unload that dog without suffering a capital loss.

So your only evaluation should look at today's GOC5 rates and subsequent market evaluation of share price and use that as worst case.

OK, with a real quick, back of the napkin calculation of AQN.PR.A, here's what I would do. Hopefully the math isn't too bad.

AQN.PR.A reset last Dec 31 at 5.162% when the GOC5 was 2.222% and presently has a market price of $19.74, and its dividend of $1.292 results in a market yield of 6.55%. (1.292/19.74)

The present 5 year GOC rate today is about 1.59%, so a reset on the due date in 2023 would result in a new current yield of 4.54% (1.59% GOC5 + 2.95 SPREAD).

This would result in a new dividend of $1.135 ($25 x 4.54%), which would call for a new market price of $17.33 (1.135 new dividend / 6.55% present market evaluation).

This would result in a capital loss of $2.41 (19.74 - 17.33), or -12.2% loss on reset.

This is the scenario you should use to calculate your yield to worst, not the capital gain with a call at $25 you are tempted to go for, but for the more likely -12.2% you will lose if it resets at today's GOC5 rate, given the actual information you have to work with today.. 

You can decide if you think you can predict interest rates in five years, but it's a mugs game. Calculate with today's information. Others may disagree.

ltr


----------



## agent99 (Sep 11, 2013)

like_to_retire said:


> Trying to predict resets is as difficult and unadvised as predicting interest rates. It can't be done.
> 
> So your only avenue is to use the actual information you have today. Always evaluate resets with yield to worst. I know it's often tempting to look at a reset and say that you feel it will be called and that $25 will result in a really nice capital gain, but I would recommend a worst case evaluation is best. Sure, you can make an interest rate prediction and then say that the likely event will be a call, but consider the case that GOC5 rates could be near zero and with a reset you would not only suffer a dividend loss for the next five years, the share price would also tank and so you couldn't unload that dog without suffering a capital loss.
> 
> ...


Thanks. I recall that you went through this - no better way to learn! 

I have very few preferreds. Only rate-reset is FTS.PR.H and that was just dipping toe in water. I am happy that you have pointed out the pitfalls again. I was tempted by the relatively high yields. The AQN A series would yield 6 1/2 % for about 5 years. Sounds good, but as you pointed out, it might be worth less than $19.xx if interest rates drop again. Mind you, I see on Prefblog that the new BMO pfd has had record high volume, so obviously some people are not afraid of resets. Mind you, at 3.51%+GOC, not that bad even if GOC tanks.

I have two perpetual preferreds. Those I bought for long term with no intention to trade. Just collect the ~5% dividend stream and forget about them.

Otherwise, I have a number of split pfds. They are bond-like with good chance of getting total capital back if called or redeemed/retracted.

I could add to my splits or perpetuals or maybe look at that BMO issue even although prefblog says it is a bit overpriced at about $25.30. Cutting back on risky equities and wanting to add some 'pseudo' fixed income to taxable account.


----------



## like_to_retire (Oct 9, 2016)

agent99 said:


> I have very few preferreds. Only rate-reset is FTS.PR.H and that was just dipping toe in water. I am happy that you have pointed out the pitfalls again. I was tempted by the relatively high yields. The AQN A series would yield 6 1/2 % for about 5 years. Sounds good, but as you pointed out, it might be worth less than $19.xx if interest rates drop again. Mind you, I see on Prefblog that the new BMO pfd has had record high volume, so obviously some people are not afraid of resets. Mind you, at 3.51%+GOC, not that bad even if GOC tanks.
> ........................................... Cutting back on risky equities and wanting to add some 'pseudo' fixed income to taxable account.


At least with perpetuals you know where you stand. Either way, preferred shares are slaves to interest rates.

With equities like banks and utilities, I wonder how much more risky than their preferred share counterparts they really are? Think about FTS and BMO that you are talking about. Do you think in 5 years that the share price of those equities will have risen? Do you think that the dividends will have risen (consider that FTS dividend has risen every year for the last 45 years). Now ask if the share price or dividend of their preferred shares will have risen over that time? Which is more risky.

ltr


----------



## pacman (Sep 6, 2009)

agent99 said:


> I have been looking at a few preferreds and wondering what to buy.
> Tried buying an FTS pfd that I already own as well as PVS and no volume on these so no trade.


I really like the PVS split issues. I have owned most of the series over the past 10 years. PVS.PR.E and PVS.PR.F are both yielding right around 5% right now at current prices. Yes, the volume is very low, but just put in a bid you are happy with and wait it out. They are "guaranteed" the $25 at maturity.

Gary


----------



## agent99 (Sep 11, 2013)

like_to_retire said:


> At least with perpetuals you know where you stand. Either way, preferred shares are slaves to interest rates.
> 
> With equities like banks and utilities, I wonder how much more risky than their preferred share counterparts they really are? Think about FTS and BMO that you are talking about. ltr


I see where you are going. But perhaps I am there already. Already have a lot of bank and utility stocks. Probably too much in banks. Just looking at swapping some stocks that I think may have higher risk of dividend cuts with something more recession-proof and less risk of losing much in cash flow. For us, portfolio value is less important than maintaining cash flow.


----------



## like_to_retire (Oct 9, 2016)

agent99 said:


> For us, portfolio value is less important than maintaining cash flow.


Then wouldn't perpetuals be the better route than those pesky resets? Your cash flow could easily be cut with a reset combined with a share price that is too low to dump. The perpetual just keeps on giving - _perpetually_.

ltr


----------



## fireseeker (Jul 24, 2017)

agent99 said:


> I have been looking at a few preferreds and wondering what to buy.


LTR has good thoughts. 
I do quibble with the suggestion that YTW should be calculated with a _notional_ capital loss in five years at reset time. If you're buying for income, then the investment horizon is much longer.
Another thought: Why not buy ZPR? It is yielding 5% and is fully liquid. It also removes the difficulties of individual security analysis, which is breathtakingly complex with prefs.


----------



## gibor365 (Apr 1, 2011)

pacman said:


> I really like the PVS split issues. I have owned most of the series over the past 10 years. PVS.PR.E and PVS.PR.F are both yielding right around 5% right now at current prices. Yes, the volume is very low, but just put in a bid you are happy with and wait it out. They are "guaranteed" the $25 at maturity.
> 
> Gary


Just last month I bought PSV.PR.E this way.... just placed 25.81 bid and it got triggered.
Also hold DFN.PR.A , planning to buy FTN.PR.A ...missed it last week when it shortly went down to $10.61

I also hold US pref ETF PFXF , yielding around 5.6%


----------



## like_to_retire (Oct 9, 2016)

fireseeker said:


> I do quibble with the suggestion that YTW should be calculated with a _notional_ capital loss in five years at reset time. If you're buying for income, then the investment horizon is much longer.


I agree you should use a limit maturity date, but here the intent was to quickly look at call probability and what could happen in five years. There's a guarantee that something will happen, either a call or a reset, and I think before you buy a fixed reset you have to look at this scenario, because the outcome can be quite different depending on the way it goes. 

If you're looking at low spreads you are expecting the shares to act a bit more like a straight perpetual, and alternatively a high spread will be more bond like with a high probability of a call. It's that middle ground (which also moves with rate changes) that there isn't a clear bet what will happen at the reset date so it seems smart to make some calculations with that date in mind. Agent99 was talking about a 295 spread, so I might consider that middle ground?

I'm out of the pref game now, so maybe my knowledge is stale. I would think perpetuals would be a better way to go if guaranteed income was most important or Split-Shares as long as downside protection (asset coverage ratio) and income coverage ratio are in good shape.

ltr


----------



## agent99 (Sep 11, 2013)

fireseeker said:


> .
> Another thought: Why not buy ZPR? It is yielding 5% and is fully liquid. It also removes the difficulties of individual security analysis, which is breathtakingly complex with prefs.


I actually bought ZPR - 20 months ago. So far I have received about $800 in dividends while the value of our 1000 units has dropped by $1465. $665 loss so far 

Seems to me that ZPR has same concerns as those LTR has mentioned about individual rate-resets. For me, the question is - should I continue to hold ZPR, or sell it and cut my losses?


----------



## agent99 (Sep 11, 2013)

like_to_retire said:


> Then wouldn't perpetuals be the better route than those pesky resets? Your cash flow could easily be cut with a reset combined with a share price that is too low to dump. The perpetual just keeps on giving - _perpetually_.
> 
> ltr


Yes, after re-considering some of the rate-reset risks, I think so. Perpetual price will of course also be affected by interest rates. And probably negatively if we get out of this low interest environment. But if held long term, they will continue to churn out 5% or so cash flow on the original investment with low risk. Equity portfolios may have historical yields that are higher, but only over extended periods.


----------



## agent99 (Sep 11, 2013)

pacman said:


> I really like the PVS split issues. I have owned most of the series over the past 10 years.


I own and have owned PVS/BAM pfds for years. But because they are tied to just one company, I don't want to overdo it. I probably have enough at present.


----------



## like_to_retire (Oct 9, 2016)

agent99 said:


> Yes, after re-considering some of the rate-reset risks, I think so.


Yeah, smart choice. I remember when rate-resets were created, everyone without exception expected interest rates were about to rise. It was a done deal. This rise in interest rates meant straight perpetual share prices would drop, so what better way to protect yourself than to dive into the newly created rate reset preferred shares.

We forgot that issuers are smart. They do this for a living. And so of course, interest rates didn't rise, rather they dropped. What a bonus for the issuer. They simply reset the pref at the new lower rate and you're stuck with it for another five years along with a depressed share price so you can't dump it.

I think the golden rule has to be that every new addition to a prospectus favours the issuer.




agent99 said:


> Perpetual price will of course also be affected by interest rates. And probably negatively if we get out of this low interest environment. But if held long term, they will continue to churn out 5% or so cash flow on the original investment with low risk. Equity portfolios may have historical yields that are higher, but only over extended periods.


Yes, correct. Perpetuals are easy to manage. Interest rates rise and the share price will drop, but as you say, they will _continue to churn out 5% or so cash flow on the original investment with low risk._ That's a good thing, and many are looking for this exact scenario. And don't be so sure that interest rates will rise. There's a full court press to control inflation in a very narrow window. Those that buy rate resets are counting on this interest rate rise, and I'm thinking they might be disappointed.

ltr


----------



## fireseeker (Jul 24, 2017)

agent99 said:


> I actually bought ZPR - 20 months ago. So far I have received about $800 in dividends while the value of our 1000 units has dropped by $1465. $665 loss so far
> 
> Seems to me that ZPR has same concerns as those LTR has mentioned about individual rate-resets. For me, the question is - should I continue to hold ZPR, or sell it and cut my losses?


Yes, prefs have been a rough space for the last four years, rate resets foremost among them. 
But I would personally vote for rate resets right now rather than perpetuals -- although both classes (all preferred classes, for that matter) are attractively priced.
I agree with LTR that the future of interest rates is unknowable. But with the prices of rate resets badly hammered, an investor today is getting a much more desirable product than five years ago. 
Both investment grade rate resets and perpetuals have average YTWs of about 5.5%, according to James Hymas. On a balance of probabilities basis, I think higher rates are more likely than lower rates. And on a Black Swan basis, I think 8% interest rates are more likely than, say, -2% interest rates.
But who knows? If rates and inflation goes to zero, ZPR will still be spitting out a real return of 3%. What's wrong with that? 
You say you're investing for income. Your ZPR holding is spinning out 5%. Why should you care if the value is down?


----------



## fireseeker (Jul 24, 2017)

Agent, not sure if you saw this in November, but it strikes me as sound, simple advice:

James Hymas: "Shut up and clip your coupons.”


----------



## james4beach (Nov 15, 2012)

fireseeker said:


> And on a Black Swan basis, I think 8% interest rates are more likely than, say, -2% interest rates.


That's quite a prediction. If you survey the world, several countries have negative rates on their 10 year, but no developed country has rates anywhere near 8%.


----------



## agent99 (Sep 11, 2013)

fireseeker said:


> If rates and inflation goes to zero, ZPR will still be spitting out a real return of 3%. What's wrong with that?
> You say you're investing for income. Your ZPR holding is spinning out 5%. Why should you care if the value is down?


Actually my ZPR is yielding only 4.3% on purchase price. And on paper, a loss of $1445,

By comparison, I bought a perpetual about 2yrs ago.. CU.PR.H. It has yielded 5.3% on purchase price and has a capital loss of $81.95.

I think LTR clarified things - rate resets are a gamble. They will reset at a fixed number of points above the GOC rate. At that time, they could be a bargain and will be recalled at $25 (so upside is limited) But if rate is well below market, they could tank and you will be stuck with a low share price (downside not limited) and low interest rates for at least 5 years. ZPR spreads this affect out over a number of issues, but as can be seen by recent unit prices, it too is affected. There is nothing to say that the current dividends will be maintained. They could go up or down as shares reset. 

Instead of blindly holding on and collecting the dividends, I might find a better alternative to either of the above. I could sell the CU pfds and almost break even, but unless I am prepared to take a 16% loss, I am stuck with ZPR. Sure I can keep it and collect the dividends. But they are not that great. Actually, I would like to sell it 

Here is a chart of how ZPR unit prices have fared:










and cu.pr.h


----------



## agent99 (Sep 11, 2013)

In looking through the summary of pfds from Scotia, in the section on Perpetuals there are these columns under Redemption . Can anyone explain what those numbers under call mean?


----------



## fireseeker (Jul 24, 2017)

james4beach said:


> That's quite a prediction. If you survey the world, several countries have negative rates on their 10 year, but no developed country has rates anywhere near 8%.


James, you've caught me in an act of hyperbole!
But I (mostly) stand by it. Here's a fun chart of historical interest rates going back to the time of the pharaohs -- you'll notice exactly zero instances of -2% interest rates:







It comes from this article:
https://www.marketwatch.com/story/charting-the-lowest-interest-rates-in-5000-years-worst-commodity-returns-in-80-years-2016-06-14
Maybe this time it's different ... but I wouldn't bet on it.

Please pardon that digression, Agent.



agent99 said:


> There is nothing to say that the current dividends will be maintained. They could go up or down as shares reset.


This is absolutely true. And, yes, perpetuals will protect you from a dividend cut. However, perpetuals will leave you exposed to inflation risk. Perhaps that seems important, or perhaps not.
Remember, if rate reset dividends get cut it will be because interest rates have fallen. So, your real return is likely safe.

As for your question about the Scotia chart, I have a half-answer. 
The call numbers are related to the current trading price of the prefs. If they're trading above par you get a negative number -- i.e. some capital loss if called by the issuer. If they're trading below par, you get a positive number, indicating a cap gain if called at par. 
The further they are from par currently, the bigger the call number. 
However, I am not sure of the actual calculation being presented.


----------



## like_to_retire (Oct 9, 2016)

agent99 said:


> In looking through the summary of pfds from Scotia, in the section on Perpetuals there are these columns under Redemption . Can anyone explain what those numbers under call mean?


Agent99, those numbers are YTW (Yield-To-Worst) for the worst case call dates.

ltr


----------



## agent99 (Sep 11, 2013)

like_to_retire said:


> Agent99, those numbers are YTW (Yield-To-Worst) for the worst case call dates.
> 
> ltr


I think that is also what Fireseeker said. But I can't make the numbers work out.

I have a perpetual that I bought quite a while ago. PWF.PR.E. 
At the time of the Scotia report (10May2019) it had a price of $25.15. 
Redemption date is 6/10/2019. (and then rolling 30 days)
Annual dividend is $1.38 

Please tell me where I am going wrong???
If I bought that pfd on May10 for $25.15 and it got called on June 10, then I would lose $0.15. In the meantime, I would receive a prorated share of the dividend. $1.38x30/365=$0.11342. So, I would lose 0.15-0.11342=$0.0366 in 30days on a $25.15 investment. Annualized about -1.77%. Scotia has a number of -8.29


----------



## like_to_retire (Oct 9, 2016)

agent99 said:


> I think that is also what Fireseeker said. But I can't make the numbers work out.
> 
> I have a perpetual that I bought quite a while ago. PWF.PR.E.
> At the time of the Scotia report (10May2019) it had a price of $25.15.
> ...


Yeah, if I use the annualized rate or return (CAGR) formula of:

ROR = [ ( FV/PV )^1/N - 1 ] x 100

And use the values:
PV = 25.15
FV = 25+0.11342
N = 30/365 years

I get ROR = -1.755%

So I get the same as you.

ltr


----------



## agent99 (Sep 11, 2013)

I may be overthinking what will be a relatively small addition to portfolio, but at least I am learning by doing 

I found this R-J link - It summarizes their current thinking on pfds. 

It looks like there are a number of rate-reset pfds that will reset at close to 4% above the GOC rate. If I guess that GOC rate when they reset will not be any worse than 1%, then that will give them a reset yield of ~5%. A number of perpetuals I have looked at have yields of 5-5.5%. So at the time of reset, presumably the share values will be about the same (Not the most important thing to me). However, if GOC is higher then, I will get a higher yield and presumably a higher share price. If GOC goes below 1% then of course opposite will happen. Maybe 4-4.5% yield at worst. So do I take chance of my new pfd yielding .5-1% below the perpetual or perhaps 1% above it? The perpetual is no doubt a safer bet in shorter term. And those GOC+4% resets will probably get called if yield get really high?

I am not still sure which one, but will choose something that has reasonable rating and yielding in 5% range. 

BTW LTR, thanks for confirming my calc - Still don't know where Scotia get those numbers.

Fireseeker. When reset yields drop, it is true that real returns may be same. But then wouldn't the perpetuals with fixed yield bought earlier have increased real returns?


----------



## like_to_retire (Oct 9, 2016)

agent99 said:


> I see where you are going. But perhaps I am there already. Already have a lot of bank and utility stocks. Probably too much in banks. Just looking at swapping some stocks that I think may have higher risk of dividend cuts with something more recession-proof and less risk of losing much in cash flow. For us, portfolio value is less important than maintaining cash flow.


So you aren't buying my idea that it's perhaps less risky to add blue chip dividend stocks than preferred shares? 

My pitch is that you should decide on an asset allocation and then keep the fixed income side of it for the less risky, capital preservation vehicles. I think when you start selling stocks and swapping them for preferred shares, you're changing your allocation percentages. 

I don't feel preferred shares are a substitute or proxy for equities. There are lots of blue chip dividend stocks that will satisfy the cash flow you require along with the real possibility of dividend increases every year along with an increase in share price. Perpetuals will suffer share price reduction if rates rise and no prospect of dividend increases, and splits have little to no possibility of share price increase. 

So aren't preferred shares a bigger risk than just selling your present stocks (with possibilities of dividend cuts) and substituting blue chip dividend stocks? Surely there are some banks, telco, and utilites you could add.

ltr


----------



## agent99 (Sep 11, 2013)

Regarding allocation: That is the reason I am looking at pfds. In our two taxable accounts we have 85% equities. In TFSAs, about 90%. In RRIFs 50%. As a result, overall FI allocation is edging under 40% (I include pfds in FI) This partly due to gains in equities. For an almost 80yr old, 40% FI is low. So if I am going to change that, I must sell some equities (and not buy more!). 

Regarding selling off more risky equities: I want to cut back on some holdings in both RRIFs and taxable accounts for other reasons. IPL, bought early on, is one because I think they are overly optimistic about their PP project. Another is EIF that I bought early on and is showing big gains (mainly in RRIF). There are a few others too.

These days, 
When I have cash in RRIF, I tend to buy bonds, GICs or pfds. Currently hard to find decent yields in Bonds/GICs.
When I have cash in Taxable, I tend to add to split pfds, but as discussed above, also looking at adding individual pfds. 
Overall, trying to reduce Equity allocation, but hopefully without reducing yield from taxable accounts. 

It's good to discuss these thing. Hopefully above gives the bigger picture


----------



## like_to_retire (Oct 9, 2016)

agent99 said:


> It's good to discuss these thing. Hopefully above gives the bigger picture


Yeah, good stuff. It's clearer now. Reducing equities and trying to match the cash flow with the usual GIC/Bond is really tough for sure.

I also consider all preferred shares fixed income (if not, what else). Given your detailed explanation, I would stay away from resets, so I guess it's splits or straights as you've said.

ltr


----------



## agent99 (Sep 11, 2013)

like_to_retire said:


> Yeah, good stuff. It's clearer now. Reducing equities and trying to match the cash flow with the usual GIC/Bond is really tough for sure.
> 
> I also consider all preferred shares fixed income (if not, what else). Given your detailed explanation, I would stay away from resets, so I guess it's splits or straights as you've said.
> 
> ltr


I put an order in for more of a PVS split. Maybe it will go through this time! EXPIRED - again 

One problem we have, which is not a real big problem, is that our income is clawed back. I used to own the so-called tax-advantaged funds where most or all of distribution was ROC. Some REITSs still have that? We used to get ROC from Riocan, but not recently.


----------



## like_to_retire (Oct 9, 2016)

agent99 said:


> I put an order in for more of a PVS split. Maybe it will go through this time!
> 
> One problem we have, which is not a real big problem, is that our income is clawed back. I used to own the so-called tax-advantaged funds where most or all of distribution was ROC. Some RRIFs still have that? We used to get ROC from Riocan, but not recently.


Yeah, I get clawed back too, and even though it's onerous, my spreadsheets show me that dividends are still more tax efficient than interest income. With ROC, it not only defers tax, it can reduce clawback of OAS and age related credits and surtax, so it's worthwhile. I don't own any REITs, but I remember when I did there was quite a disparity in the ones that seemed to be huge ROC generators and some that offered almost none.

ltr


----------



## fireseeker (Jul 24, 2017)

agent99 said:


> Fireseeker. When reset yields drop, it is true that real returns may be same. But then wouldn't the perpetuals with fixed yield bought earlier would have increased real returns.


Yes. 
But expecting yields to drop -- or rise -- is a bet on the future of interest rates. I don't think it's possible for investors to succeed at that more than 50% of the time. 

One quibble with your conclusion that higher GOC rates should equal higher share prices (and low rates means lower prices). Logically this should not happen. The price should stay the same so that the real yield remains constant. 
It is the pref's spread over GOC -- either high or low -- that should determine changes in share price as investor perception of the pref's credit strength shifts. (Rate resets will also react as they get closer to a reset date.)
That's the theory, anyway. 
In practice it seems to me that many investors have been overvaluing changes in nominal yield (and ignoring real yield). This is one explanation for why rate reset prefs were killed in 2015-16 and one reason why rate reset prefs are suffering right now. Nominal yields seem low. But real yields are excellent.

I personally do not consider prefs to be fixed income. And I generally do not substitute them for bonds/GICs in my accounts.


----------



## Jimmy (May 19, 2017)

fireseeker said:


> Yes.
> But expecting yields to drop -- or rise -- is a bet on the future of interest rates. I don't think it's possible for investors to succeed at that more than 50% of the time.
> 
> One quibble with your conclusion that higher GOC rates should equal higher share prices (and low rates means lower prices). Logically this should not happen. The price should stay the same so that the real yield remains constant.
> ...


Higher GOC rates should mean higher bond rates and yields. Thus PS will have to have higher yields too to reflect the credit and other risk spreads over bonds. So if yields for rate resets were 5% and the GOC rose 1%, you could expect new issues to yield the difference ~ 6%.

For price changes, read the tables on prefblog each day. Disc rate reset preferreds have a duration of ~ 14.5. So a 1% hike in rates should yield a ~ 14.5% increase in price. Makes sense as the dividend yield will reset 1% higher and he uses maturity of ~ 30 yrs.


----------



## agent99 (Sep 11, 2013)

fireseeker said:


> One quibble with your conclusion that higher GOC rates should equal higher share prices (and low rates means lower prices). Logically this should not happen. The price should stay the same so that the real yield remains constant.


Not sure where I said that. I think that what I was getting at, was that if a rate-reset with high premium resets at a rate that is above what you can get from bonds or from other prefereds, then it's market value should be higher.


----------



## agent99 (Sep 11, 2013)

It's interesting to go back and read this 11 month old thread!


Equities haven't done too well!
GOC-5 rate has not gone UP! (now about 0.45 ?)
I sold all split pfds, bought several perpetuals, and may buy more with proceeds**
My only reset FTS.PR.H is not doing too well! (trading at $9.87 and due to reset June 1st at GOC-5 +1.45%) What will that be? 1.9%? About 4.8% at current price? or 3.2% based on my cost of 14.68? Meanwhile FTS resets with 2023/4 reset dates are yielding 6.3- 7.7%.

This was my first and only reset. I figured I might learn more if I owned one  No point in selling now.

There is a conversion option to Cumulative Redeemable Floating Rate First Preference Shares, Series I . At first glance no benefit - 1.45%+3month Tbill. Trading at same price as H series which will reset at about same rate.

** Perpetuals dropped, early in crash, in concert with the market as a whole. Seems to me that they were underpriced. Prices have been creeping up but volumes are low.


----------



## like_to_retire (Oct 9, 2016)

agent99 said:


> It's interesting to go back and read this 11 month old thread!
> 
> 
> Equities haven't done too well!
> ...


.

Myself, I've offered quite a few entries in this thread, if anyone cares to read it, and have done my best over the last year to warn agent99 from pursuing perpetual resets, and he has taken that amateur advice to heart I guess. Resets favor the issuer as evidenced by agent99's limited foray into these beasts.

Since this is an educational thread, I'll offer a CMF link to a post I previously made on this subject.









BMO Preferred Share ZPR vs GIC/HISA


The GoC 5 yr bond rate is what drives fixed reset preferred share prices. As mentioned by others, future inflation and GDP growth is now assumed to be anemic. Hence current GoC5 interest rate. Prefs are a difficult animal to understand and market time. A lot of us got burned about 3 years ago...




www.canadianmoneyforum.com





ltr


----------



## agent99 (Sep 11, 2013)

perpetual resets?


----------



## like_to_retire (Oct 9, 2016)

agent99 said:


> perpetual resets?


You know exactly that I meant preferred resets, and this is your response?

I won't be commenting further to try and help you. There is no help for those that don't want to have a discussion, rather find fault...........

ltr


----------



## agent99 (Sep 11, 2013)

Fine with me


----------



## agent99 (Sep 11, 2013)

For those interested in Preferreds or the market as a whole, this link may be of interest:



http://www.inglisprivateinvestmentcounsel.com/Branches/premium/pdfs/preferredsharesreport.pdf



The attached Scotia pfd listing is now out of date (many pfds have jumped in price this week), but is a useful listing of what is available.


----------



## agent99 (Sep 11, 2013)

I recently had several Corporate bonds mature, so looking to reinvest proceeds. No bonds that I like, so looking again at preferreds.

For those interested in current prices of preferreds, attached are the prices as of yesterday (Sept 21, 2020) (Thanks to Scotia!)


----------

