Preferreds

Discuss your favourite picks, broker, and trading or investment style.
Feddar
Bronze Ring
Bronze Ring
Posts: 30
Joined: 08 Jan 2016 06:35

Re: Preferreds

Postby Feddar » 10 Mar 2016 12:17

Yes, it is 'the first dividend'.

But the call price includes a part dividend, right, assuming no early redemption higher price?

like_to_retire
Gold Ring
Gold Ring
Posts: 4664
Joined: 27 Feb 2005 07:14
Location: Canada

Re: Preferreds

Postby like_to_retire » 10 Mar 2016 12:33

Feddar wrote:But the call price includes a part dividend, right, assuming no early redemption higher price?

Correct.

ltr

Donsis
Bronze Ring
Bronze Ring
Posts: 10
Joined: 21 Jan 2008 17:29
Location: Mississauga, ON

Re: Preferreds

Postby Donsis » 11 Mar 2016 11:56

Feeling stupid, but just can't accept the loss of 50% of my investment in BAM.PR.B. Should I get rid of it? Or keep on collecting the dividends and hoping for interest rates to go up?
"Stay calm,be brave,wait for the signs" Tom King - wisdom from The Dead Dog Cafe

like_to_retire
Gold Ring
Gold Ring
Posts: 4664
Joined: 27 Feb 2005 07:14
Location: Canada

Re: Preferreds

Postby like_to_retire » 11 Mar 2016 12:31

Donsis wrote:Should I get rid of it? Or keep on collecting the dividends and hoping for interest rates to go up?

The latter.

ltr

Donsis
Bronze Ring
Bronze Ring
Posts: 10
Joined: 21 Jan 2008 17:29
Location: Mississauga, ON

Re: Preferreds

Postby Donsis » 11 Mar 2016 12:39

Thanks LTR for that:
The latter.
I feel better now :D
"Stay calm,be brave,wait for the signs" Tom King - wisdom from The Dead Dog Cafe

jay
Silver Ring
Silver Ring
Posts: 300
Joined: 19 Feb 2008 21:13

Re: Preferreds

Postby jay » 15 Mar 2016 09:49

I try to keep a close eye on the YTW of rate resets. According to https://www.blackrock.com/ca/individual/en/literature/brochure/cpd-characteristics-en-ca.pdf: as of the end of Feb, rate resets made up 62.7% of the index and their YTW contribution was 3.72%, making their YTW 5.93% (0.0372/0.627). This seems quite high to me. My own spreadsheet shows a YTW around 5.3% on Feb 29. http://prefblog.com/?p=32540 shows a median YTW that agrees with mine on that day.

Is blackrock's reporting of YTW wrong?

jay
Silver Ring
Silver Ring
Posts: 300
Joined: 19 Feb 2008 21:13

Re: Preferreds

Postby jay » 15 Mar 2016 09:57

jay wrote:I try to keep a close eye on the YTW of rate resets. According to https://www.blackrock.com/ca/individual/en/literature/brochure/cpd-characteristics-en-ca.pdf: as of the end of Feb, rate resets made up 62.7% of the index and their YTW contribution was 3.72%, making their YTW 5.93% (0.0372/0.627). This seems quite high to me. My own spreadsheet shows a YTW around 5.3% on Feb 29. http://prefblog.com/?p=32540 shows a median YTW that agrees with mine on that day.

Is blackrock's reporting of YTW wrong?


It seems they are using the GOC5 rate of Dec 31, 2015 which was 0.73 at the time (vs. 0.66 at Feb 29). I still think their calculation is off

jay
Silver Ring
Silver Ring
Posts: 300
Joined: 19 Feb 2008 21:13

Re: Preferreds

Postby jay » 11 Apr 2016 12:25

jay wrote:Seems to have caught a bid with decent volume today. I track all fixed resets and breadth remains high (>80% up this morning). Current weighted average YTW on fixed resets is just above +5% (based on my own calculations), and it lines up with prefblog's median YTW calculation. IMO, YTW can easily fall to 4.5% (all things equal) and the index would remain within fair value. My short term target for ZPR is thus another +10% from here which puts it between $10 and $10.5.

Over the last several months I have backed the truck on ZPR and individual names with high YTW (AIM.PR.A, HSE.PR.A, CF.PR.C, CPX.PR.C) and getting close to break-even overall. I am hoping to use this move if it continues to sell some.

@AltaRed, I remember you mentioned you were waiting for the preferred market to turn before you step back in. What are you thoughts these days?

EDIT: correct bad spelling


Feeling smart about my call on preferred last month :D :D. With the YTW dropping to ~4.6%, I started selling some individual names that I was lucky to catch close to their lows, namely HSE.PR.A, CPX.PR.C. Will use some of the proceeds to average down on AIM.PR.A as it seems to be the only one on my list that hasn't recovered like the rest yet.

BRIAN5000
Gold Ring
Gold Ring
Posts: 5581
Joined: 08 Jun 2007 23:27

Re: Preferreds

Postby BRIAN5000 » 05 May 2016 12:30

Anybody who owns either ZPR or CPD doing any tax loss selling?

If you own ZPR sell it and buy CPD or vice versa and either hold for 30 days and switch back or just hold the new purchase?
“Sometimes you are going to sell early and wish you would’ve held on, other times you will hold on a
little bit longer and wish you would’ve sold early - this is just part of the game.” - Frank Zorilla via Abnormal Returns

User avatar
AltaRed
Diamond Ring
Diamond Ring
Posts: 16703
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Preferreds

Postby AltaRed » 05 May 2016 13:51

It is not November or December yet would be my short answer.

But the other one would be is IF I intended to crystallize the loss, what is my guess on: 1) further downward trend of both CPD and ZPR which if downward, it would be better to wait to maximize the tax loss, and 2) whether CPD and ZPR track each other close enough to see them as a twin pair....or is one more likely to trend differently?

CPD contains regular perpetuals so I would expect it to behave a bit differently to material movements in interest rates. Maybe not enough to move the needle though.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom

BRIAN5000
Gold Ring
Gold Ring
Posts: 5581
Joined: 08 Jun 2007 23:27

Re: Preferreds

Postby BRIAN5000 » 05 May 2016 14:21

Thanks for your response.

Yeah there is a few other pref ETF's out there that I need to check, CPD is @ 60% resets now :(

All things being equal, waiting to November or December wouldn't be my issue.
“Sometimes you are going to sell early and wish you would’ve held on, other times you will hold on a
little bit longer and wish you would’ve sold early - this is just part of the game.” - Frank Zorilla via Abnormal Returns

like_to_retire
Gold Ring
Gold Ring
Posts: 4664
Joined: 27 Feb 2005 07:14
Location: Canada

Re: Preferreds

Postby like_to_retire » 05 May 2016 14:45

BRIAN5000 wrote:CPD is @ 60% resets now :(

But it was the resets that were beaten up the most and have the most to gain if interest rates rise, as opposed to perpetuals that will suffer the most with interest rates rising, so I don't know how to interpret your sad face.

ltr

BRIAN5000
Gold Ring
Gold Ring
Posts: 5581
Joined: 08 Jun 2007 23:27

Re: Preferreds

Postby BRIAN5000 » 05 May 2016 14:51

so I don't know how to interpret your sad face.


It's like they keep changing the rules of the game. If you're a DIY you have to keep up to date.

Another Preferred question on resets

If I have a reset and on its 5-year reset date I get to choose between carrying on at the new reset rate or converting to a floating rate how will it show in my account , will it be a different symbol ?
“Sometimes you are going to sell early and wish you would’ve held on, other times you will hold on a
little bit longer and wish you would’ve sold early - this is just part of the game.” - Frank Zorilla via Abnormal Returns

User avatar
adrian2
Diamond Ring
Diamond Ring
Posts: 11039
Joined: 19 Feb 2005 08:42
Location: Greater Toronto Area

Re: Preferreds

Postby adrian2 » 05 May 2016 15:28

BRIAN5000 wrote:If I have a reset and on its 5-year reset date I get to choose between carrying on at the new reset rate or converting to a floating rate how will it show in my account , will it be a different symbol ?

Yes.
Imagefiniki, the Canadian financial wiki
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]

User avatar
AltaRed
Diamond Ring
Diamond Ring
Posts: 16703
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Preferreds

Postby AltaRed » 05 May 2016 15:37

adrian2 wrote:
BRIAN5000 wrote:If I have a reset and on its 5-year reset date I get to choose between carrying on at the new reset rate or converting to a floating rate how will it show in my account , will it be a different symbol ?

Yes.

And almost entirely for recent resets, it has been better, per James Hymas analysis, to stay with the GoC5 reset, at least initially. Then consider a trade into the floating rate if you are brave and think interest rates will move materially upward in the next year or two. IOW, there is a reason the floaters are trading lower than the fixed resets at the current time. Given current speculation that near term interest rates are going nowhere soon, the floaters may well be a bad bet. We will know in 4-5 years which decision was best.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom

Hogwild
Bronze Ring
Bronze Ring
Posts: 62
Joined: 18 Aug 2015 21:46

Re: Preferreds

Postby Hogwild » 06 May 2016 17:12

May I ask everyone...I'm seriously considering getting some Canadian Utilities preferred shares for my portfolio. I'd like to buy one of the perpetual shares, as that seems safer to me, at least for now. I don't see interest rates going up any time soon..

It looks like all of these (and others) are perpetuals:
CU.PR.E
CU.PR.F
CU.PR.G
CU.PR.H



Would anyone care to share their opinion as to which might be the best value right now?

Are any of these NVCC applicable?

Also, has anyone heard about how the company might be affected by the fire in Fort McMurray? First estimates to rebuild Fort McMurray are already in the 9 billion dollar range, and they say it will be weeks before they can put out the fire.

BRIAN5000
Gold Ring
Gold Ring
Posts: 5581
Joined: 08 Jun 2007 23:27

Re: Preferreds

Postby BRIAN5000 » 07 May 2016 12:42

Anyone have a guesstimate of YTM on ZPR right now? Something close 3% ?

Anybody have an easy way to explain YTM?
“Sometimes you are going to sell early and wish you would’ve held on, other times you will hold on a
little bit longer and wish you would’ve sold early - this is just part of the game.” - Frank Zorilla via Abnormal Returns

MikeFreedom49?
Newcomer
Newcomer
Posts: 4
Joined: 29 Aug 2015 22:41

Re: Preferreds

Postby MikeFreedom49? » 07 May 2016 17:53

BRIAN5000 wrote:Anyone have a guesstimate of YTM on ZPR right now? Something close 3% ?

Anybody have an easy way to explain YTM?


According to BMO it is 5.33% see http://thehub.bmosalessupport.com/syste ... e&id=24375

User avatar
adrian2
Diamond Ring
Diamond Ring
Posts: 11039
Joined: 19 Feb 2005 08:42
Location: Greater Toronto Area

Re: Preferreds

Postby adrian2 » 09 May 2016 12:39

BRIAN5000 wrote:Anyone have a guesstimate of YTM on ZPR right now? Something close 3% ?

Anybody have an easy way to explain YTM?

You should not pay much attention to YTM; YTW is the metric to focus on.
Imagefiniki, the Canadian financial wiki
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]

jiHymas
Gold Ring
Gold Ring
Posts: 1508
Joined: 03 Mar 2005 10:21
Location: Toronto
Contact:

Re: Preferreds

Postby jiHymas » 09 May 2016 16:28

MikeFreedom49? wrote:
BRIAN5000 wrote:Anyone have a guesstimate of YTM on ZPR right now? Something close 3% ?

Anybody have an easy way to explain YTM?


According to BMO it is 5.33% see http://thehub.bmosalessupport.com/syste ... e&id=24375


Excellent link, thank you MikeFreedom49?

BMO Sales Support wrote:Implied Current Yield is the theoretical current yield assuming the preferred share was to reset to today’s 5 year Government of Canada yield.

Yield to Call (YTC) assumes each issue is called at its next reset date.

Yield to Maturity (YTM) assumes each issue is called at its last possible reset date.

Yield to Worst (YTW) Assumes the lower of YTC and YTM for each line. This measure will tend to be overly conservative.

Yield to Estimate (YTE) Assumes each issue that is trading at more than par value will get called at its next reset date.


I would go with Implied Current Yield, since (their definition of) YTW assumes that the issue will definitely be called at some point in the future, which I suggest is actually the opposite of overly conservative. You will note that YTW is much greater than Implied Current Yield for all sub-groups.

Problems with ICY (which I refer to in my writing as Expected Future Current Yield) are primarily:
I) The difference in the assumed dividend and the actual dividend between the current date and the next reset date is ignored.
ii) The potential for economically driven calls is ignored
iii) The potential for regulatory-driven non-economic calls (i.e., "Deemed Retractions" of NVCC non-compliant issues of banks [widely accepted] and insurers [more controversial]) is ignored.

like_to_retire
Gold Ring
Gold Ring
Posts: 4664
Joined: 27 Feb 2005 07:14
Location: Canada

Re: Preferreds

Postby like_to_retire » 25 May 2016 13:23

MFC.PR.F Series 3 resets to 2.178% commencing June 20 2016. That's a 48.1% drop in dividend payout for 5 years.

ltr

User avatar
snowback96
Silver Ring
Silver Ring
Posts: 415
Joined: 18 Mar 2007 18:15

Re: Preferreds

Postby snowback96 » 25 May 2016 20:02

like_to_retire wrote:MFC.PR.F Series 3 resets to 2.178% commencing June 20 2016. That's a 48.1% drop in dividend payout for 5 years.


OUCH! The pref pain never ends.

APunishedSaver!
Newcomer
Newcomer
Posts: 1
Joined: 05 Jun 2016 16:00

Re: Preferreds - Brookfield Conversion Option BPO.PR.N

Postby APunishedSaver! » 05 Jun 2016 16:16

A wonderful good afternoon all you smart folks out there.

Like many of you I remain in shell shock over the performance of the rate resets, sigh.

Your expertise would be gratefully appreciated to address this item related to the Annual Conversion Privilege of the above rate reset.

I received a letter from TD Direct Investing indicating I have an option to convert to a series O "quarterly floating rate cumulative preferential cash dividend" prior to the June 15 expiry of the 5 year term. If I do not elect to do this, then I do not have to give instructions to TD. The existing series N will remain with a reset rate rate, lower of course. The company will auto convert anyways if there is less than 1,000,000 N series shares.

I have read many prior posts and - am I correct that going the "floater" route does not yield any benefit.

May I ask for your opinion, dear folks?

Thank you so very much

APunishedSaver!

User avatar
AltaRed
Diamond Ring
Diamond Ring
Posts: 16703
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Preferreds

Postby AltaRed » 05 Jun 2016 20:06

James Hymas discusses these matters in Prefblog in some detail for each of the fixed resets that have been resetting over the past year plus. This particular issue is discussed here.

For the past year and a half, the market has not liked the conversion option to floaters. It may well be that most investors believe short term interest rates are going to stay lower for longer than any one imagined. The best option seems to be to do nothing, i.e. stay with the fixed reset and then if you are so inclined, sell the fixed reset after reset and buy the floater if/when the arbitrage makes it worthwhile.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom

User avatar
scomac
Gold Ring
Gold Ring
Posts: 5816
Joined: 19 Feb 2005 09:47
Location: The Greenbelt

Re: Preferreds

Postby scomac » 05 Jun 2016 22:37

snowback96 wrote:
like_to_retire wrote:MFC.PR.F Series 3 resets to 2.178% commencing June 20 2016. That's a 48.1% drop in dividend payout for 5 years.


OUCH! The pref pain never ends.


True that, but the more pertinent figure is a current yield of 3.97%. Still no bargain, but not horribly worse than the issue yield of 4.2% some 5 years ago.
I switched out of MFC.PR.C for the above issue based on a pick up in YTW assuming that at some point Basel III requirements would be enforced upon lifecos. At present YTW is running ~10.17% assuming no change in dividend rate upon subsequent resets and a retraction on or about 01-31-2025. It's all about the potential capital gain with a call option on the GoC 5 yr. going forward. Not a terrible trade-off IMO.
"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
Thomas Babington Macaulay in 1830


Return to “Stocks, Bonds, ETFs, Funds, REITS and More”

Who is online

Users browsing this forum: No registered users and 3 guests