# TRP.PR.C Why the drop?



## Karlou (Aug 6, 2013)

HI

Can somebody tell me what’s going on with TRANSCANADA CUMUL REDEEM PREF SER 5 (TRP.PR.C) a drop of around 10% since June 2013???

What should I do? Sell or Hold?

Thanks


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## stephenheath (Apr 3, 2009)

Probably the same thing hitting REITS and Bonds... interest rates are rising. So for example, it gives a dividend of .275 per quarter, or $1.10 per year, no matter what the stock price is... so on June 1st, it was yielding 1.10/25.62 = 4.29%, which people felt was good enough... now that yields are going up on bonds and other investments, to find a buyer sellers have lowered the price down to 22.06, giving a yield of 1.10/22.06 = 4.99%.

As for buying or selling, that's up to you, it depends on whether or not the reason you bought it still holds out, I guess, but two months ago you were getting $1.10/yr in tax preferred dividends, and now you're getting $1.10/yr in tax preferred dividends, that hasn't changed.


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## Karlou (Aug 6, 2013)

Thank you for the math StephenHeath

I will hold on to the stock, but I'll be watching long term interest rates more closely...
As I understand it has a big impact on my fixed income portfolio


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## andrewf (Mar 1, 2010)

Not to put too fine a point on it, but this is what happens when you buy assets with an eye only on yield.


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## liquidfinance (Jan 28, 2011)

Karlou said:


> HI
> 
> Can somebody tell me what’s going on with TRANSCANADA CUMUL REDEEM PREF SER 5 (TRP.PR.C) a drop of around 10% since June 2013???
> 
> ...


Why did you initially purchase this?
Has this reason changed?

Did you understand the risks involved at the time of purchase? Are you aware of redemption dates and the par value? If you haven't done so already I would advise you to read through the prospectus.

http://www.transcanada.com/stock-information.html
Really the most important question is number one. If the reason has changed and you wouldn't purchase today then you should probably sell.


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## HaroldCrump (Jun 10, 2009)

Keep in mind that unlike a stock, it is very unlikely that you will recover the paper loss on a preferred share, if the loss has been caused by a general market rise in yields.
Therefore, do not let that be a factor in deciding whether to keep or sell this position.

I don't know the terms of this pref. issue (esp. the redemption date and terms), so unless you bought this at or below the lowest possible redemption value, you may never recover the capital loss.
Don't sit around waiting for the distributions to make up the capital loss...that could take years and still not be enough.

Pref. shares and bonds that lose value due to rising yields are very hard to get out of, or hedge against.


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## liquidfinance (Jan 28, 2011)

HaroldCrump said:


> Keep in mind that unlike a stock, it is very unlikely that you will recover the paper loss on a preferred share, if the loss has been caused by a general market rise in yields.
> Therefore, do not let that be a factor in deciding whether to keep or sell this position.
> 
> I don't know the terms of this pref. issue (esp. the redemption date and terms), so unless you bought this at or below the lowest possible redemption value, you may never recover the capital loss.
> ...




Par is $25. Looking at the chart the price paid would have been over that figure unless it was purchased at issue in June 2010


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## Karlou (Aug 6, 2013)

Thanks everyone for your comments. It was bought at par (25$) in June 2010
I bought it for the 4,4% dividend and I thought it was more secure than the common share
I will keep them until redemption in January 2016 and stop worrying about the loss on paper


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