BCE.PR.F to Reset to 4.541%

BCE Inc. has announced (in an ad in the Globe and Mail, which I can’t find on either the Globe‘s website or BCE’s) that:

The “Selected Percentage Rate” determined by BCE Inc. is 168%. The “Government of Canada Yield” is 2.703%. Accordingly, the annual dividend rate applicable to the Series AF Preferred Shares for the five-year period beginning on February 1, 2010 will be 4.541%

This implies that the annual dividend will change to $1.13525, a slight increase from the current $1.10.

BCE.PR.F is convertible to and from BCE.PR.E for a short time every five years – and the window is about to close. Those who wish to convert should contact their brokers immediately.

I recommend holding the fixed rate issue, BCE.PR.F. While I will agree with most that prime will rise in the near future, I am not so convinced that the average over the next five years will exceed 4.541%. One way of achieving such an average, for instance would be a steady rise in prime to about 6.75% over a five year period, an increase of 450bp, or nearly 25bp each and every quarter. That sounds a little extreme, but then, what do I know?

BCE.PR.F was last discussed on PrefBlog when the conversion notice was published.

BCE.PR.F is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns. BCE.PR.E is not tracked by HIMIPref™ (there are less than 2-million outstanding) but I may add it to the list if there’s a rush to convert.

Update, 2010-1-13: Finally! BCE Notice from website.

3 Responses to “BCE.PR.F to Reset to 4.541%”

  1. pierce says:

    should you not compare 100% of prime based on a $25 par and the divide by 19.5 if prime went up 2% that would be 4.25% X 25/19.5= %5.40%

  2. jiHymas says:

    You could, but the 4.541% paid on the fixed rate issue is also calculated on the $25.00 par value, so it’s a wash as far as the comparison goes.

  3. […] is a logical result (I recommended BCE.PR.F as the better of the pair), but is nevertheless unfortunate. The decline in BCE.PR.E outstanding […]

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