{"id":2239,"date":"2008-06-08T11:15:18","date_gmt":"2008-06-08T15:15:18","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=2239"},"modified":"2008-06-08T11:15:18","modified_gmt":"2008-06-08T15:15:18","slug":"ellen-roseman-of-the-toronto-star-on-preferred-shares","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=2239","title":{"rendered":"Ellen Roseman of the Toronto Star on Preferred Shares"},"content":{"rendered":"

Ellen Roseman<\/a>, who writes the “Money 911” column for the Toronto Star, devoted a piece to preferred shares today: Preferred Shares are Ideal for the Risk-Averse<\/a><\/p>\n

It’s a good introduction – considering she only had 600-words! I was interviewed and mentioned in the article:<\/p>\n

So, why invest in preferred shares? I asked James Hymas of Hymas Investment Management Inc. in Toronto, who runs a fund for high-net-worth investors, publishes a newsletter about preferred shares and has a website, www.prefblog.com.<\/p>\n

“The common share investor is taking the first loss,” he says. “Common shares provide a higher expected long-term return, but it could be a bumpier flight.”<\/p>\n

He points to U.S. banks, hit hard by the credit crunch. News reports indicate that up to half of them may be cutting their dividends this year.<\/p>\n

Preferred shares have a somewhat more secure dividend than common shares. Moreover, they trade in a tight price range, generally with no big gains or losses.<\/p>\n

Suppose you have $10,000 or more to invest in preferred shares. Hymas recommends buying at least three issues with a top-quality credit rating, such as Pfd-1 from Dominion Bond Rating Service.<\/p>\n

“If you can afford five to six issues, you can get a Pfd-2. And with 10 different issues, I wouldn’t mind too much if one was Pfd-3.”<\/p>\n

You don’t have much choice when it comes to sectors. A large proportion of preferred shares are from banks and insurance companies.<\/p>\n

“With Canadian preferred shares, you have to resign yourself to a high exposure to financials,” he says. “You can make allowances for that in the rest of your portfolio.”<\/p><\/blockquote>\n

I discussed US Banks cutting their common dividends in FDIC Releases 1Q08 Report on US Banks<\/a>.<\/p>\n

The column quotes me as saying “If you can afford five to six issues, you can get a Pfd-2” … I shouldn’t have said “a”, I should have said “some”. I have published an article on Portfolio Construction<\/a> which fleshes out my thoughts on this matter.<\/p>\n

It was very kind of Ms. Roseman to mention my product offerings! The fund mentioned is Malachite Aggressive Preferred Fund<\/a> and the newsletter is PrefLetter<\/a>.<\/p>\n

Update<\/b>: The column has attracted some comment on Financial Webring Forum<\/a>, where in response to a question about the ‘irritant of issuer calls’ I posted the following:<\/p>\n

There’s some data in my article A Call, too, Harms<\/a> – but note that data for that article reflect a period when, after a long period of declining long term rates, most perpetuals were trading above par … something that is not currently the case.<\/p>\n

Many investors – some of them professional – buy preferreds on the basis of current yield, ignoring potential calls. This is not a strategy I recommend to my friends. I’ve summarized data on potential calls at prefInfo.com<\/a>.<\/p>\n

In times where call-dates become important, they cannot be escaped by buying a passive fund, as I point out in my article Closed End Preferred Funds: Effects of Calls<\/a><\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

Ellen Roseman, who writes the “Money 911” column for the Toronto Star, devoted a piece to preferred shares today: Preferred Shares are Ideal for the Risk-Averse It’s a good introduction – considering she only had …<\/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-2239","post","type-post","status-publish","format-standard","hentry","category-press-clippings"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/2239","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=2239"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/2239\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2239"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2239"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2239"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}