Preferred shares | Page 8 | Investing | Discussion forum

picassocat said
Well, if you like dividends, you might look into these preferred shares

Bombardier Inc Pref Share BBD.PR.C
Forward Div Yield 16.95%

Bombardier Inc Pref Share BBD.PR.B
Forward Div Yield 9.07%  

very bad recommendation. I will avoid that name.

I just sold all my mfc.pr.b... these were similar to ry.pr.w (which I sold a tr ago), but just a notch lower (ry is better than mfc). These preferred shares simply are not that stable ! Will never buy again!!! Buying the common shares is a better way to go since you know what your getting. Also, long duration prfds are really bad because they get discounted heavily if the environment changes and the company has no intention of reddening.

canadian.100 said

I also own MFC.B pref shares which I bought as a new issue in Feb 2005 @ $25 per share (including commission). The market value today is approx $24.60. They have paid me 4.65% dividend quarterly for 15 years. Yes, the market value did fluctate in the years when interest rates were "high" but since interest rates are very low now and likely to stay that way for at least a year or two - I am not in a big rush to sell them. As well, the present market value per share is $24.60. My question to you - you sold your MFC Preferreds - did you actually take the proceeds and buy MFC common shares?  

Nope, went to cash for now.. may buy financials/index at later date.
I thought that I would only be exposed to interest rates and MFC risk when I bought at around $23 many years ago. But the performance of these "non-redeemable ( in general)" has been extremely volatile and mirror the shares of the common.
Every 18-24 months these shares drop 10-20% .. sorry, now longer in my portfolio!!!!

maxb said
And luckily, MFc.pr.b are not the perpetual floating resets!!! These are awful. These essentially are valued at the price of the dividends in perpetuity, with no payback of principal ( yep just do the math adding up all the dividends for next 30yrs, but discount the future dividend because it's not paid today)....

Slowly getting out of these awful shares. No wonder they aren't being held by the pros!!  

I noted there was a fair volume of Reset Preferreds traded in November - I guess people like you were dumping them and buyers were picking them up at "half price" from what they were issued at. Agree that Resets were a bad investment for those who paid the original price when they were issued.
I read somewhere that buyers now do include diversified Pension Funds and Mutual Funds - which would suit their long term focus. They can wait until interest rates start to rise which will increase the value of the Resets.

maxb said

Nope, went to cash for now.. may buy financials/index at later date.
I thought that I would only be exposed to interest rates and MFC risk when I bought at around $23 many years ago. But the performance of these "non-redeemable ( in general)" has been extremely volatile and mirror the shares of the common.
Every 18-24 months these shares drop 10-20% .. sorry, now longer in my portfolio!!!!  

Preferred are illiquid so on top of exposure of IR and credit risk, you are exposed to "irrational seller dumping" risk. From time to time, they go so cheap and can be a stellar buy if you know what you are doing.

I own the ones that are min rate reset but those are hard to come by. Was a steal picking those up during the pandemic.

Yes, GIC and preferreds are very different products. They are not interchangeable !!

Note, one can get some info on the rate-resets on prefblog.com

Just remember, the company will most likely not buy you out!! Its only what you can get on the open mkt... so yep, when you need to sell, there may be nobody buying...

I'm buying the common shares from now on. At least there I know where I stand, and can benefit from the growth...

topgun said

topgun said

I purchased 17 1/2 and 18 1/2 year Ontario Hydro strip bonds called Cougars yielding 11.75% in early 1985 at Guaranty Trust. Not sure their name when I cashed the strip bonds in 1998.

I think you are correct about Victoria and Grey going to Scotiabank.

Many trust companies disappeared. Dominion Trust was bailed by CDIC. Interest stopped immediately on failure date. I received principle and interest to that time.

Cabot Trust failed.
I found some information about Cabot Trust Company on the internet. It was merged into Manulife Bank January 1, 1993. Huronia Trust Company and Regional Trust Company were also involved in merger. This matches some of my own records. Some assets went to Manulife Bank. Some assets went to Laurentian Bank. I think it depended on when my 5 yr GIC's matured.

  

But with those bonds, came very high inflation !!!! After tax, many interest bearing investments did not keep up with inflation just like now!!!

Some were fortunate to buy these right before inflation was tamed and made out well.

implode said
I finally don't own any more preferred shares. I've only owned 2 of them before. One sold and got back about 95% principal and the other a bit less than 90%. I took the losses as I have no longer have any faith in preferred stocks. I do not see the issuers redeeming the preferred shares so I'll never get back full principal. Stocks I own will now only be common shares.  

Holders of preferreds lucked out this year as there was a significant recovery due to low interest rates elsewhere. My perpetual preferreds (paying 4.5% - 5.5% dividends) now exceed my cost. The rate-resets are not quite at cost, but in my case, I have owned my rate reset preferred shares for more than 10 years so the dividends I received have way more than covered the "unrealized" capital losses. No rush to sell the rate resets because if interest rates actually increase in the next year(s), the dividend will reset at higher rates, so the dividend cash flow will be good. Perhaps I will sell the preferreds later this year or next year but I think we have gone through the worst with the rate resets if interest rates do actually rise. I also have moved to common shares in particular Canadian bank shares and that has been a good decision. But we must always remember to be diversified in our portfolios. Preferred shares still are useful as part of the fixed income portion of a portfolio. I prefer them to a 1.2% or 1.3% GIC.

For tax planning purposes you likely have enough capital gains on your common shares this year to apply against those capital losses on the preferreds you sold.