There’s a thread in Financial Webring Forum now titled Practically guaranteed to lose money that points out (as of September 8):
As I write, ACO.PR.A (TSX) is bid at 27.00.
Atco can call this issue at 26.00 plus 0.36 in dividends on 2008-12-01.
PrefInfo tells us the redemption schedule is:
- Redemption 2008-12-01 2009-11-30 26.000000
- Redemption 2009-12-01 2010-11-30 25.500000
- Redemption 2010-12-01 INFINITE DATE 25.000000
and that the retraction schedule is
- Retraction 2011-12-01 INFINITE DATE 26.040000
The annual dividend is 1.4375, paid quarterly, with the last ex-date 2008-8-1 according to tmxmoney.com.
So: here’s the question … how might a rational investor reason that paying $27.00 for this issue has enough chance of at least a half-way decent return to make it worth while? This investor knows that the yield to worst is negative and that he’s taking a chance … why might he buy it anyway?
The answer is buried in one of my articles (click on the green squares down the right-hand margin of this blog). Only casually referred to … but it is there.
The best answer (or the first one that precisely matches my answer!) in the comments will get a free copy of the PrefLetter that will be published this weekend. Judge’s decision is final. Everybody’s eligible, even those poor benighted souls who don’t live in Ontario, because I’m not going to charge the winner for it. Contest closes immediately prior to my sending out this month’s issue, which will probably be sometime Sunday afternoon … but it could be anytime between 4pm Friday and 9:30am Monday.
Leave a Reply
You must be logged in to post a comment.