9 Responses to “October 12, 2022”

1. paradon says:

   October 13, 2022 at 3:21 pm

   Is there some risk that the taxation of dividends or some other structural element may change making prefs far less attractive as investments? I find it hard to believe that investment grade prefs (ie IFC) are now yielding close to 8%.

2. skeptical says:

   October 13, 2022 at 5:52 pm

   <Is there some risk that the taxation of dividends or some other structural element may change making prefs far less attractive as investments?
   That risk has always been present and IMHO will always remain. Considering the taxation of dividends is built on integration principle, there’s little to gain by moving dividends taxed more unfavorably. Other than of course, to make a statement, which politicians of various stripes are so fond of making at various times. e.g. small business taxation changes a few year ago.

   <I find it hard to believe that investment grade prefs (ie IFC) are now yielding close to 8%.
   These are rookie numbers, as the meme says. Try some others from TRP and FTS at constant rate and the calculator will throw ‘not allowed yield’ messages!

3. paradon says:

   October 13, 2022 at 6:40 pm

   Thanks Skeptical.

4. baffled says:

   October 14, 2022 at 8:00 am

   skeptical says: i agree with you , in addition to company risk , every aspect of investing carries lots of gov risk , the cap gain inclusion rate could be increased from 50% , the tfsa could be capped , the div tax credit could be changed , the tax rates on the companies you invest in could go up reducing the companies profits , the gov can change the int rate ,lowering your stock price (what is happing now ) . good luck

5. paradon says:

   October 14, 2022 at 9:16 am

   Baffled: I get all of that, what I was asking is if there was some change that could explain the outsized drop in prices of this asset class? I am happy to keep buying on the way down as I have a long time horizon. Didn’t want to be that guy that missed the headline however!

6. baffled says:

   October 14, 2022 at 10:49 am

   paradon says: ,there could always be an unknown that could happen , we are dealing with 10+ years of excesses caused by never before in history seen 0 and neg int rates , so house prices were sent sky high , and anything that paid a return was priced high , including div paying stock , now we are into the unwind of that , and the world has an unprecedented amount of debt so a miss step could be kaboom . having said that , i have 2 years of expenses in cash , some gold maple leafs , and i am buying the prefs and common div payers . my mind set is once i buy i know i may never see the paid price again , but i am okay as long as the div is paid . if i wake up and the headline is bce or royal bank cut the div then you know there are much bigger problems than just our dividends . the only way to avoid that problem would be to keep your money under the bed , but even then if it is really bad , and there is a bank holiday ,odds are your money will have a drastically lower purchasing power when things re open , thats the reason for holding some gold maple leafs , but even that is no guarantee . good luck

7. drahaque says:

   October 16, 2022 at 12:47 pm

   I’m not sure about the other discount brokerages, but the posted dividend rates of preferreds; especially the floaters, on TD Direct Investing are just plain wrong. For instance, ALA.PR.B has a posted rate of 6.34% when it actually currently yields 9.9%. So some retail market selling activity may also be driven by reliance on incorrect information.

8. paradon says:

   October 16, 2022 at 6:29 pm

   I think there is some of that. Rate resets also tend to take up to a quarter to reflect the updated dividend amount.

9. October 19, 2022 « PrefBlog says:

   October 19, 2022 at 9:49 pm

   […] PerpetualDiscounts now yield 6.58%, equivalent to 8.55% interest at the standard equivalency factor of 1.3x. Long corporates have been hammered in the past week to yield 5.56% (I’m suspicious about this number, especially since it’s precisely equal to the “Distribution Yield”), so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has declined to 300bp from the 320bp reported October 12. […]