It was pointed out in the comments to the post “BN.PF.A To Reset To 6.744%” that the stated dividend rate, as an annual percentage, did not easily relate to the stated dividend amount. So, as promised, I am looking into it:

JH to BN, 2023-9-5:

Sirs,

According to your press release at LINK “If declared, the fixed quarterly dividends on the Series 32 Shares during the five years commencing October 1, 2023 will be paid at an annual rate of 6.744% ($0.4249644 per share per quarter).”

However, a rate of $0.4249644 per share per quarter is equal to $1.699858 per share per year, which is 6.7994 of the $25.00 par value.

A rate of 6.744% would be 1.686 per year or 0.4215 per quarter on the $25 par value.

Can you please resolve this discrepancy?

Sincerely,

I received the following reply, BN to JH, 2023-9-5:

In accordance with the share documents, the fixed quarterly dividend will be based on the annual dividend rate of 6.744% or C$0.4249644 per share per quarter (C$25 x 6.744% x 92/365 days).

So I sent the following follow-up, JH to BN, 2023-9-5:

Thank you for your response.

This formula, including a daycount factor (92/365) for the dividend, does not appear to have been in prior use.

Your description of the terms of these shares at LINK states: “As and when declared by the board of directors, the fixed quarterly dividend on the Series 32 Preferred Shares during the five-year period from October 1, 2018 until September 30, 2023 will be $0.3163125 per share per quarter, which represents a yield of 5.061% based on the redemption price of $25 per share.” This clearly does not include a daycount factor.

When was the decision made to include a daycount factor and when was this disclosed to beneficial owners?

Additionally, the prospectus for this issue states: “For each five-year period after the Initial Fixed Rate Period (each a “Subsequent Fixed Rate Period”), the holders of Series 32 Shares will be entitled to receive fixed cumulative preferential cash dividends, as and when declared by the Board of Directors, payable quarterly on the last day of March, June, September and December during the Subsequent Fixed Rate Period, in an annual amount per Series 32 Share determined by multiplying the Annual Fixed Dividend Rate (as defined herein) applicable to such Subsequent Fixed Rate Period by $25.00.”

Does this imply that a varying daycount factor will be applied to each dividend on these shares, in order to ensure that the sum of the quarterly payments is equal to the product of the Annual Fixed Dividend Rate and $25.00? In leap years, will the divisor of the daycount factor be changed to 366?

Sincerely,

I have not yet received a reply, but I’m going to try again. I do hope that they abandon this daycount plan. I agree that it’s more accurate, but:

- It’s not done for bond interest payments, and
- It means that every single dividend payment has to be calculated or looked up, and
- It’s bloody annoying

[…] Update, 2023-09-06: See also BN Silent Regarding BN.PF.A Daycount Dividends […]