PrefBlog

Assiduous Readers will remember that on 2023-4-30, RAV4guy commented:

CU has changed the rate that it is paying on CU.PR.C. After paying dividends at the rate of 5.20% in September and December of 2022 the rate was changed for the March 2023 payment to 5.196%. I found no explanation on CU’s website or SEDAR. The issue in referred to as a 5.196% preferred for the June payment as well. With 13M shares issued this saves CU $13,000/year. If one owns 1,000 shares this costs you $1.00/year so it is not worthwhile to spend any time asking CU why they changed what was originally announced.

This is odd behaviour by CU. With my limited experience i do not recall any company revising the rate paid after two payments were made. Pay what you announce you will pay.

… and I responded (links edited for ease of reading):

I have sent the following eMail to CU, using their Contact Form:

I note that in your July, 2022, dividend notice (LINK ) and October, 2022 notice (LINK) the issue trading as CU.PR.C is referred to as “Series Y 5.20%” and declared dividends of 0.32500, while in January, 2023 (LINK) and April, 2023 (LINK) it is referred to as “Series Y 5.196%” and declared dividends of 0.32475.

You will recall that in May, 2022, you announced (LINK)that the rate had been reset to 5.20% in accordance with the prospectus.

What is the reason for this reduction in dividend? Has any announcement been made to alert investors about the change?

Sincerely,

It took a while, and I had to send a second request, but today Investor Relations found some time in their busy schedules to get back to me via eMail:

Thanks for your note. What you’ve picked up on is a disclosure discrepancy based on how we round across our various documents where these figures are quoted. The dividend figures in our press releases, for example, are generally rounded to 3 decimal places, while our financial statements and other summaries are often rounded to 2 decimal places. The dividend was rounded to two decimal points when in fact it should be stated to three decimal points. We corrected this in 2023.

As a result of the rounding to two decimal points in 2022 we paid a slightly higher amount on the dividend than the amount formally owed as a result of the repricing. Going forward in 2023, with the correction to three decimal points, we are now paying the exact amount for the repriced dividend.

Kind Regards,

… and I got back to them, via normal eMail:

Will you be issuing a press release to notify the investing public of this error, or will it continue to take over a week to receive an answer when such a straightforward question is asked?

In addition, will press releases announcing future dividend adjustments for such issues include disclosure of whatever rounding convention you have decided to adopt at that time?

This prompted a ‘phone call in which I was told, basically: it’s not material, we’re not going to do anything at all.

This is not acceptable behaviour. I hold strong views on integrity. I consider that “integrity” means something more than not telling deliberate lies. Integrity means that you own up to your errors and fix them. As I said during the ‘phone call, they issued three successive press releases on this issue with false information. And it goes beyond that: these (slightly) excessive dividends were actually paid to shareholders. That means that somebody – presumably the CFO, but that’s just a guess – went to the Board of Directors and claimed they owed $X for dividends on this issue, paid at a rate of $Y per share. And the directors signed off on this false claim. The Canadian Utilities website continues to claim – falsely – that:

On May 24, 2022, Canadian Utilities reset the quarterly dividend rate on its Series Y Preferred Shares for the five-year period from and including June 1, 2022 to but excluding June 1, 2027. The fixed dividend will be paid as and when declared by the Board of Directors of Canadian Utilities based on an annual dividend rate of $1.299 per share or 5.20% per annum.

Well, 5.20% would be a dividend of 1.30 per annum, obviously, and current press releases refer to the rate as “5.196%”. I will note that the prospectus specifies that:

“Annual Fixed Dividend Rate” means, for any Subsequent Fixed Rate Period, the annual rate of interest (expressed as a percentage rounded to the nearest one hundred–thousandth of one percent (with 0.000005% being rounded up)) equal to the sum of the Government of Canada Yield on the applicable Fixed Rate Calculation Date and 2.40%.

They did get it right in the 2022 Annual Report:

Preferred Shares
On May 24, 2022, Canadian Utilities reset the quarterly dividend rate on its Series Y Preferred Shares for the five year period from and including June 1, 2022 to May 31, 2027. The fixed dividend will be paid as and when declared by the Board of Directors of Canadian Utilities based on an annual dividend rate of 5.196 per cent.

The directors nominated in the proxy circular are:

• MATTHIAS F. BICHSEL, PhD
• LORAINE M. CHARLTON
• ROBERT J. HANF, K.C.
• KELLY C. KOSS-BRIX
• ROBERT J. NORMAND
• ALEXANDER J. POURBAIX
• HECTOR A. RANGEL
• LAURA A. REED
• ROBERT J. ROUTS, PhD
• NANCY C. SOUTHERN
• LINDA A. SOUTHERN-HEATHCOTT
• ROGER J. URWIN, PhD, C.B.E.
• WAYNE G. WOUTERS, PC, OC

These individuals should make their irritation known and order a press release. It’s a minor screw-up, but it’s still a screw-up … and one that was made in three successive press releases … and one that went to the board which complacently signed off on it. A great company will have a culture of ‘if you fuck up, you ‘fess up’ and that cultural imperative must come, relentlessly, from the top. Even on little things.

The post on PrefBlog announcing the dividend reset has been corrected.

This entry was posted on Monday, May 8th, 2023 at 9:06 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.