17 Responses to “May 23, 2024”

1. fsabbagh says:

   May 24, 2024 at 10:21 am

   Hi,

   Was wondering if you guys have been buying these days at these prices? I brought up my preferred to 10% of my net worth. I am using James’ newsletter for recommendations. I find it hard to hit the buy button these days, knowing I could have bought them much cheaper in October of 2023. C’est la vie!! Still have a way to go. Trying to bring the preferreds up to 30% of my net worth.

   Ferris

2. paullo says:

   May 24, 2024 at 12:34 pm

   I track issues in relation to their prices over the previous 10 years and measure their current percentile. Most of the issue I own are currently in the 45th – 55th percentile. I was a buyer last fall with many issues in the 10th – 20th percentile. Actually bought until I was significantly overweight my pref position. I am now trimming down a bit but still slightly overweight. Hope that helps.

3. Nestor says:

   May 24, 2024 at 7:50 pm

   fsabbagh, you are engaging in market timing. good luck to you.

4. fsabbagh says:

   May 24, 2024 at 7:59 pm

   Nestor, not timing the market. Just pissed at myself for not buying more last fall 🙂. Had most of my cash locked in GICs. Still buying though.

5. brian says:

   May 24, 2024 at 8:33 pm

   This is the way I look at it… At current prices, rate reset preferred shares will pay, on average, somewhere around 3.5% above the long term average of the Canada 5 year bond rate(rough estimate). Another very loose approximation I make is that the inflation rate is roughly equal to the 5 year bond rate (I know it doesn’t work that way, but over the long term they are often within shouting distance of each other). If you’re looking for a fairly safe investment that will pay somewhere around 3.5% above inflation for the long term, then keep buying!

   FWIW, I still have a LOT of prefs, although I am starting to sell some of my rate resets and move the money back into long term bonds (eg. XLB) because they are safe steady income and also at a fairly low price right now (with a good chance of future capital gains if interest rates eventually settle lower again).

6. Yomgui says:

   May 24, 2024 at 8:51 pm

   I am glad you made this comment fsabbagh because I feel exactly the same way. I have been very active in the pref market over the last 2/3 years but much less so recently. It feels like treading water.

   It was nice to see 2 new split share funds launched recently though with yields of 7.2%/7.5% I think. I loaded on these because I don’t see many obvious opportunities today and I liked those yields + risk/reward.

   For me, there is still a lot of uncertainty when it comes to the direction of the Canada 5-Year Bond Yield and if we get a no/hard/soft landing… so I am kinda in a wait&see mode.
   And although I doubt we will retest the lows of october 2023 anytime soon, it still gives you an idea of the possible downside if things go wrong.

   Like James highlighted recently, rate resets were the way to go for a long while but the gap has closed considerably and it is no longer that obvious that they are a better bet than perpetuals.
   Sure, if the new normal is a 5yr at around 3+%, most RR are still the best bet but not by a lot and it depends on which issuer.

   Oddly enough this quiet period forced me to look elsewhere and find ways to diversify my portfolio and it led me to invest a small amount of money in gold/silver mining stocks and believe me, it rocked my portfolio ah ah

   Anyway, I guess I’ll stand pat for a while and see if there are more opportunities with preferred shares down the road… even though it is odd to say that because if I had been told 3/4 years ago that I could get a 6.5% yield in perpetuity from pretty solid issuers, I would have drooled over these numbers.

7. stusclues says:

   May 25, 2024 at 9:48 am

   Ferris – look at the chart showing the spread between GOC-5 and the interest-adjusted FixedReset (Discount) rate that James published every month as part of his MAPF performance report. This tells you what you need to know about how much further discount fixed resets have to run.

   We are about half way in the “reset” of the fixed reset class, recovering from the 3rd major blowout in spreads in the last ten years. Those crazy high spreads (essentially the spread that a hypothetical new issuer would have to offer for a new issue) were never sustainable and they still are not.

   I’m not a buyer because I am far overweight from the blowout levels. If I didn’t own, I’d still be a buyer.

8. fsabbagh says:

   May 25, 2024 at 10:38 am

   Thanks everyone for the feedback. I am not convinced that the BOC will lower rates anytime soon. I highly recommend listening to the Financial Sense Newshour especially the Smart Macro segment. Very informative and good analysis of the economic environment though it is US centric.

9. niagara says:

   May 25, 2024 at 11:24 am

   fsabbagh, you don’t think that the BOC will cut? I think June a shoe-in for a cut (if not then, July). However, beyond that, I am wondering. The US economy is still going strong and the Canadian economy, while not a strong as the US, has not rolled over yet. The 5yr GOC is pricing in lots of cuts….i think that the 5yr will eventually trend back over 4%/

   stusclues – Difficult, in my view, to determine exactly what a “normal” FixedReset-GOC spread is, it has been so volatile over the years. One thing seems clear from the graph is that when the spread starts moving decisively in one direction, it keeps running for some time. You are probably right: apart from the bank prefs, there is likely still some good upside to many issues eg. the utilities and pipelines still look good (not as good as last Oct, of course!)

10. stusclues says:

    May 26, 2024 at 10:25 am

    “I am not convinced that the BOC will lower rates anytime soon.”

    Fsabbagh if this comment is related to the chart I suggested, you should take another look. Rates do not have to fall (or rise) for the FR/GOC5 spread to fall.

    “Difficult, in my view, to determine exactly what a “normal” FixedReset-GOC spread is”

    Niagra – true but not too difficult to understand that the high levels of the three peaks were highly irregular and unsustainable. Unless we believe “this time is different”, the spread ought to have more room to fall.

11. Le_bib says:

    May 27, 2024 at 3:21 pm

    Another day with lots of 4PM market orders bringing all prices up.
    Not complaining, but I wonder what’s going on.

12. IrateAR says:

    May 27, 2024 at 4:10 pm

    Was redemption day for BMO.PR.F and BMO.PR.S… some of that being reinvested in market on close.

13. alex3 says:

    May 27, 2024 at 7:08 pm

    Looking for some Cnd Pref issues that pay dividends in US$. I found 3 issues from Enbridge. Does anyone know if there are any others? Ideally i would like to see a list of all CND prefs paying US$ dividends.

14. alex3 says:

    May 27, 2024 at 7:24 pm

    To clarify, looking for CND prefs which are traded in US$. Of course they will also pay dividends in US$.

15. niagara says:

    May 28, 2024 at 7:54 am

    Brookfield Intrastructure has 2 USD issues: BIP.PR.A and BIP.PR.B. Both are traded on US exchanges. Be aware that there are two Cnd BIP prefs with the same ticker symbols that trade on the TSX. These are not the same (the Cnd prefs are rate resets, the US prefs are perps).

    Brookfield renewable has one USD issue traded in the US: BEP.PR.A.

    There might be others but these are the ones of which I am aware (in addition to the ENB prefs).

16. jiHymas says:

    May 28, 2024 at 2:42 pm

    BIP is a Bermudan company:

    Our partnership was formed as a limited partnership established under the laws of Bermuda, pursuant to a limited partnership agreement dated May 17, 2007, as amended and restated. Our partnership is a subsidiary of Brookfield Corporation (“Brookfield”). Our partnership’s units are listed on the New York Stock Exchange and the Toronto Stock Exchange under the symbols “BIP” and “BIP.UN”, respectively. Our cumulative Class A preferred limited partnership units, Series 1, Series 3, Series 9 and Series 11 are listed on the Toronto Stock Exchange under the symbols “BIP.PR.A”, “BIP.PR.B,” “BIP.PR.E,” and “BIP.PR.F”, respectively.

    So is BEP::

    Brookfield Renewable is a publicly traded limited partnership established under the laws of Bermuda pursuant to an amended and restated limited partnership agreement dated November 20, 2011 as thereafter amended from time to time.
    …
    The LP units are traded under the symbol “BEP” on the New York Stock Exchange and under the symbol “BEP.UN” on the Toronto Stock Exchange. Brookfield Renewable’s Class A Series 7, Series 13, Series 15, and Series 18 preferred limited partners’ equity are
    traded under the symbols “BEP.PR.G”, “BEP.PR.M”, “BEP.PR.O”, and “BEP.PR.R”, respectively, on the Toronto Stock Exchange. Brookfield Renewable’s Class A Series 17 preferred limited partners’ equity is traded under the symbol “BEP.PR.A” on the New York Stock Exchange.

17. alex3 says:

    May 28, 2024 at 6:17 pm

    I was looking for USD issues prefs since the dividends paid are designated as “eligible dividends” for Canadian income tax purposes. If the issues are traded in US as Niagara mentioned above, the income received is reported as regular interest on CND tax return.

    From my research, the only ones which qualify as “eligible dividends” and traded on Canadian Exchanges in USD are from ENB.