Cdn. Yield: Corps, Trusts, GICs, Pref. Shares - Split preferreds as a safety in difficult times. Or Pfds with floor - Cdn. Yield: Corps, Trusts, GICs, Pref. Shares - InvestorVillage
Cdn. Yield: Corps, Trusts, GICs, Pref. Shares
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Msg  104017 of 104996  at  2/21/2020 4:11:14 PM  by

iluvnascar


 In response to msg 104016 by  freeagent
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Re: Split preferreds as a safety in difficult times. Or Pfds with floor

The reason is the possible redemption of the preferred on the reset date. The BPO.Pr.C is a perfect example because there is a real possibility that the issuer will simply redeem the preferred on Jun 30, 2021 for $25 and perhaps do a brand new issue at a lower rate of interest. If that happens, the stock at todays price would take a hit of $1.00; versus interest income of about $2.00 (6 quarterly dividends of $0.375) for a net overall gain of $1.00 in about 16 months which is about 3%.

That;s why it is really high-risk to buy these for more than $25 unless there is a long time to reset and the yield is attractive even if the issue is redeemed. There are lots of issues trading at $25 or less. One of my picks - BEP.Pr.G - is a bit over $25 (about $25.20 - $25.30); but it has a 5.5% coupon and my hunch is thtat i will not be redeemed. Even if it is, the yield to maturity is worth the risk (imho).


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Msg # Subject Author Recs Date Posted
104021 Re: Split preferreds as a safety in difficult times. Or Pfds with floor freeagent 0 2/21/2020 4:40:39 PM






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