A Preferred Source of Income

Jade Hemeon was kind enough to quote me in her Financial Planning article at Investment Executive:

Because of the possibility of a preferred share being called, James Hymas, president of Toronto-based Hymas Investment Management Inc., says it is important for investors to calculate the prospective yields to the first possible call date, or “yield to worst.” If the security is trading at more than par value, investors should make sure they will be paid enough in dividends before the first possible call date to compensate for the premium being paid.

“Yield to worst is the single most important measure when buying a preferred,” says Hymas, who manages Malachite Aggressive Preferred Fund, an investment fund available to accredited investors, and also offers analysis of individual preferreds at his website www.himivest.com.

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