Deposit Rates: ING etc. (2009)

Saving strategies, maximizing interest rates, budgeting.

Postby Money101 » 20 Jul 2009 02:26

Man, these rates are pitiful. Why not invest in the bank's stock to get a bigger return through their dividend?
Compounding is "the greatest mathematical discovery of all time." - Einstein
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Postby George$ » 20 Jul 2009 08:40

Money101 wrote:Man, these rates are pitiful. Why not invest in the bank's stock to get a bigger return through their dividend?

Yes for long term money.
But for short term money do you want to accept the risk that volatility can reduce the stock price by x% and so give you a negative return - maybe a significant negative return?
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Postby Bylo Selhi » 20 Jul 2009 09:22

Money101 wrote:Why not invest in the bank's stock to get a bigger return through their dividend?

In addition to George$'s comments, the bank could cut their dividend. While that may be unlikely for any of the big-5, it could happen, it's much more likely than a default on their GICs, and, if a dividend cut did happen, it would simultaneously devastate the stock's share price as well.
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Postby Money101 » 20 Jul 2009 16:23

Good points. I guess I already knew these risks, but needed to hear them again, especially from you guys. These rate are so bad, I was wishfully thinking for a safe alternative.
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Postby like_to_retire » 20 Jul 2009 16:41

These rate are so bad, I was wishfully thinking for a safe alternative.

Why not look at the banks preferred shares.....

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Postby Money101 » 20 Jul 2009 18:12

Actually, they were something I started looking at recently but Il don't understand the difference between those and regular dividend paying bank shares, at least not a difference that I would experience.
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Postby patriot1 » 20 Jul 2009 23:27

Money101 wrote:Actually, they were something I started looking at recently but Il don't understand the difference between those and regular dividend paying bank shares, at least not a difference that I would experience.

1. Both common shares and preferred shares are equity. That means the issuer has no obligation to pay the holder anything at any time. Some preferred shares have maturity dates which makes this slighly different, but the banks don't issue them.

Shareholders also rank behind debtholders in cases of bankruptcy, although preferred share holders come ahead of common share holders.

2. The issuer must pay the full dividend on the preferred shares as long as it is paying any dividend at all on the common shares. In the case of cumulative preferred shares (most non-financials), the issuer must also make up any missed dividends to preferred shareholders before resuming dividends on the common. This is not the case for non-cumulated preferreds (most financials). Because of this dividends on cumulative preferreds are rarely suspended even while the divdend on the common is suspended (e.g. Bombardier recently).
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Postby bones1 » 21 Jul 2009 09:53

Yeah, the non-cumulative nature of bank prefereds is one reason I'm not fond of them. If/when the banks do suspend dividend payments, you get nothing while you wait to see if the dividends will be reinstated. That means the preferred share value drops just as much as the common stock.

If a company goes bankrupt (or goes through bankruptcy protection) the prefereds are wiped out along with the equity. No company goes bankrupt if there's money to pay off all the bond holders, and that's the only time the prefereds would see any payout. So in bankruptcy, there's no real difference between the prefereds and the common stock: they're both worthless.

About the only benefit of preferreds is the dividend tax credit. It's a big benefit, but I don't think it's worth taking on the equity risk of prefereds while at the same time giving up the upside potential of the common stock.

If you want dividend income from banks, just buy the common stock.
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Postby like_to_retire » 21 Jul 2009 11:59

If you want dividend income from banks, just buy the common stock.

But the OP was basically looking for fixed income. As Bylo says above, the banks can easily cut their dividend. The preferred share cannot change the dividend, it's fixed, with the share price typically tied to interest rates and not the market as is the case with the commons.

I can't count the number of times I've seen the common dividend cut and the preferred share is unaffected. The risk with a preferred share is lower than the common and it generally offers a better current yield.

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Postby Money101 » 21 Jul 2009 13:08

bones1 wrote:About the only benefit of preferreds is the dividend tax credit.

Don't you also get this benefit with common stock?

bones1 wrote:It's a big benefit, but I don't think it's worth taking on the equity risk of prefereds while at the same time giving up the upside potential of the common stock.

Why does the common stock have more upside potential?
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Postby IdOp » 21 Jul 2009 13:32

MIP510 down to 0.90%

DYN500 down to 0.80%

PCF Interest Plus still at 0.75% (over $1000, 0.50% otherwise)
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Postby IdOp » 21 Jul 2009 13:42

Money101 wrote:Don't you also get this benefit with common stock?

Correct. Although you'd normally expect the current yield on the common to be less than on preferred; but that's not a hard and fast rule, I'll bet recently there may have been more exceptions to it than usual.

Why does the common stock have more upside potential?

The common represents ownership of the company. As, or if, the company earnings grow, then after preferred dividends and bond interest, what's left can flow to either the book value or increased dividends. If people buy using P/E or P/B as a guide, they will pay more for the common if this growth happens. Over time the growth could be substantial. Whereas for preferreds, the dividends are at best pretty much fixed so the price could oscillate with interest rates, but not have unlimited upside. (That would be my view of the basic idea, but I'm sure there's lots of details/exceptions one could ponder.)
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Postby Arby » 21 Jul 2009 15:13

IdOp wrote:MIP510 down to 0.90%

DYN500 down to 0.80%

PCF Interest Plus still at 0.75% (over $1000, 0.50% otherwise)


Another offering to add to your list is CIBC's Renaissance High Interest Savings Account yielding 1.05%. It's available through TDWH ... not sure about availability at other brokers.
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Postby IdOp » 21 Jul 2009 16:44

Thank you Arby, I'd forgotten about that one. :oops:
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Postby sydney2 » 29 Jul 2009 11:15

I am currently shopping for gic rates for cash that I need to keep liquid and the rates certainly stink....Achieva is offering 1.85 high interest savings as of today, rate could change on Aug 4th. Achieva guarantee their rates for 1 month at a time.

Does anyone have any knowledge of anything better out there.

BNS offered 1.35 for an 18 month gic.
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Postby scomac » 29 Jul 2009 11:49

sydney2 wrote:
Does anyone have any knowledge of anything better out there.


Check your PM, sydney2! :wink:
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Postby BRIAN5000 » 05 Aug 2009 19:18

I was in a TD branch today transfering My SMDI account to TDW.

The fellow there can get me 2.05% on a 6 or 9 month GIC. TDW will only give me .55% what BULL CRAP.

Yes there is some bonus in the 2.05 for it being new money etc.. This just happens to be registered money so to move it we need to open RRSP's at the TD branch and transfer, GOD help me.
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Postby optionable68 » 05 Aug 2009 23:15

I had a BNN flash today.

I noticed with my TD GIA account that after my first withdrawl, TD charged me $5.00 per withdrawl on this account.

"$5.00 per withdrawl?? ARE YOU KIDDING???? Just for the priviledge of having their top interest rate???"

BTW the "top" interest rate on this "high interest account is 0.75% on amounts above $5,000.... the first $5,000 gets nada.... ING beckons...
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Postby northbeach » 06 Aug 2009 14:48

Not sure if this information has been posted yet?

RBCDI now offers CIBC Renaissance High Interest Savings. Symbol is ATL5000.

The interest rate will be .95% effective August 11. Currently it is higher.

I have sold my Atamira High Interest positions which have been paying .75% since May.

Although People's Trust pays more, I figured too much bother to take my funds out of RBCDI. Perhaps if I had more cash to store I would think differently.
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Postby broke » 06 Aug 2009 15:53

northbeach wrote:RBCDI now offers CIBC Renaissance High Interest Savings. Symbol is ATL5000.


Ok, I've tried the symbol ATL5000 in several places at RBCDI and get nothing.

What's the secret? :D

Edit: I typed the wrong symbol in the post and is now corrected, sorry jeebuz. However, at RBCDI, I was doing a cut and paste of the symbol indicated.
Last edited by broke on 06 Aug 2009 16:03, edited 2 times in total.
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Postby jeebuz » 06 Aug 2009 16:01

broke wrote:
northbeach wrote:RBCDI now offers CIBC Renaissance High Interest Savings. Symbol is ATL5000.


Ok, I've tried the symbol ATL5000 in several places at RBCDI and get nothing.

What's the secret? :D


Try this: Click on "Trade", then "Mutual Funds" then put "ATL5000" in "Symbol", then hit "Refresh Quote". It should pull up the fund's vitals on your screen.

- Jeebuz -
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Postby broke » 06 Aug 2009 16:08

Aha.
Thanks, jeebuz. That works.

Funny how it wouldn't come up in the several other searches I had tried.

cheers
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Postby broke » 06 Aug 2009 16:42

broke wrote:Funny how it wouldn't come up in the several other searches I had tried.

For those that may be interested or for those thinking "Works for me, what a dufous."
It did not work in my previous searches because my cut and paste had a space in front of the capital "A" that I did not notice. :oops:

First day with the new brain.
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Postby BRIAN5000 » 06 Aug 2009 16:48

I may be double posting but thanks for the info just put in an order.
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Postby ward » 07 Aug 2009 09:22

ATL5000 is described at RBCDI as being "Front-end load." Meaning?
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