{"id":17644,"date":"2012-01-20T23:46:14","date_gmt":"2012-01-21T03:46:14","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=17644"},"modified":"2012-01-20T23:46:14","modified_gmt":"2012-01-21T03:46:14","slug":"an-investment-that-never-stops-paying-you","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=17644","title":{"rendered":"An Investment that Never Stops Paying You"},"content":{"rendered":"

Rob Carrick was kind enough to quote me in his piece An Investment that Never Stops Paying You<\/a>:<\/p>\n

Think of a perpetual preferred like a corporate bond with no fixed maturity date. Other types of preferred shares have set dates when the issuing company will redeem them at the issue price, usually $25. \u201cPerpetuals could be paying out that dividend as long as you live,\u201d said James Hymas president of Hymas Investment Management and an expert on preferred shares.<\/p>\n

One reason why Mr. Hymas likes insurance company perpetuals right now is that they offer a high-yielding and relatively secure flow of dividend income. Preferred shares issued by Sun Life, Manulife and Great-West Lifeco are investment grade, although Standard & Poor\u2019s has Sun Life on negative credit watch. Investment grade means a low probability of default.<\/p>\n

Mr. Hymas also sees an opportunity to buy insurance company perpetual preferreds now and benefit from possible rule changes by regulators concerning the financial structure of this sector. Banks have already been subjected to these changes, which largely eliminate the attractiveness for them of raising money by issuing preferred shares. As a result, it\u2019s widely expected banks will gradually redeem their preferred shares over the next decade, including perpetuals.
…<\/b>
As far as Sun Life goes, there\u2019s also the worry of a reduction in the common share dividend. Truth is, cutting the amount of cash paid out to common shareholders helps ensure there\u2019s enough money to pay preferred shareholders. But Mr. Hymas said holders of the preferred shares should still expect some turbulence.<\/p>\n

\u201cPeople see a dividend cut and they instantly assume the preferred shares will be affected,\u201d he said. \u201cTypically, what will happen is that there will be a period \u2013 six months to a year \u2013 where the preferreds are depressed.\u201d<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

Rob Carrick was kind enough to quote me in his piece An Investment that Never Stops Paying You: Think of a perpetual preferred like a corporate bond with no fixed maturity date. Other types of …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19],"tags":[],"class_list":["post-17644","post","type-post","status-publish","format-standard","hentry","category-press-clippings"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/17644","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=17644"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/17644\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=17644"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=17644"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=17644"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}