PrefBlog

Mulvihill Capital Management Inc. has announced (on 2024-8-30):

Premium Income Corporation (the “Fund”) is pleased to announce the Preferred Share distribution rate for the fiscal year beginning November 1, 2024, will increase to 8.50% from 5.75% on their $15.00 redemption value and will move to paying a monthly distribution from a quarterly distribution. Monthly distributions will be $0.10625 per share or $1.275 per share per annum.

Premium Income Corporation is a mutual fund corporation, which invests in a portfolio consisting principally of common shares of Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, and the Toronto Dominion Bank. The Fund employs an active covered call writing strategy to enhance the income generated by the portfolio and to reduce volatility. In addition, the Fund may write cash covered put options in respect of securities in which it is permitted to invest.

The investment portfolio of the Fund is managed by its investment manager, Mulvihill Capital Management Inc. The Fund’s Preferred and Class A shares are listed on Toronto Stock Exchange under the symbols PIC.PR.A and PIC.A respectively.

This represents an increase from the 5.75% that has been effective since the last extension in 2017.

PIC.PR.A is tracked by HIMIPref™ but is not considered eligible for recommendation as:

• No credit rating
• No NAV test on Capital Unit distributions
• Relatively thin asset coverage

As I always say – most recently on August 29, but that issue wasn’t even tracked:

This issue is unrated and will not be tracked by HIMIPref™. This is not because I worship the Credit Rating Agencies and am unable to do anything without them; it is because I feel that a public announcement by the CRAs of imminent downgrades do an admirable job of concentrating the minds of management and the directors on fixing the problem. Such announcements by Hymas Investment Management Inc. or Joe Blogger do not carry the same weight.

The recent comment by Assiduous Reader niagara is worth passing along:

Re PIC.PR.A

So there is only about 19.3% downside protection (based on Aug 30 NAVs), the capital shares are paid $0.80 in dividends per annum with no NAV trigger to pause dividends on the capital shares (please correct me if I am wrong about this) and now pref divvys of $1.275 per annum, so total div of $2.075 per annum for the fund. Huge grind here I would imagine.

Better hope that the bank shares do damn well and that the fund managers don’t give away all that upside by selling too many calls.

I will pass on this.

See HERE for a yield calculator and HERE for a credit quality calculator.

Thanks to Assiduous Reader newbiepref for bringing this to my attention.

This entry was posted on Wednesday, September 4th, 2024 at 9:19 am 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.