{"id":30384,"date":"2015-09-04T19:32:30","date_gmt":"2015-09-05T00:32:30","guid":{"rendered":"http:\/\/prefblog.com\/?p=30384"},"modified":"2015-09-04T19:32:30","modified_gmt":"2015-09-05T00:32:30","slug":"why-you-cant-trust-the-yields-on-preferred-etfs","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=30384","title":{"rendered":"Why you can\u2019t trust the yields on preferred ETFs"},"content":{"rendered":"<p>John Heinzl was kind enough to quote me in <a href=\"http:\/\/www.theglobeandmail.com\/globe-investor\/investor-education\/why-you-cant-trust-the-yields-on-preferred-etfs\/article26231003\/\">Why you can\u2019t trust the yields on preferred ETFs<\/a>:<\/p>\n<blockquote><p>Both CPD and ZPR have also cut their distributions recently. ZPR trimmed its distribution by about 6 per cent in July, and CPD reduced its monthly payout by about 10 per cent in August. That may be just a taste of what\u2019s to come.<\/p>\n<p>\u201cWe\u2019ll be seeing more cuts, almost certainly,\u201d preferred share specialist James Hymas, president of Hymas Investment Management, said in an interview. \u201cAny mutual fund with a significant position in fixed resets will be cutting its dividend. You can take that as near a certainty as you ever get in this business.\u201d<\/p>\n<p>If the trailing yields of preferred share ETFs are misleading, what sort of future yields can investors realistically expect? Assuming the five-year Canada bond yield stays well under 1 per cent, Mr. Hymas estimates that CPD\u2019s projected yield is 4.2 per cent. It could be higher or lower than that, depending on what happens to bond yields.<\/p>\n<p>If there\u2019s a silver lining, it\u2019s this: Rate-reset preferreds have been beaten up so badly that they could produce some handsome returns if bond yields start heading back up, Mr. Hymas said. And he believes they will \u2013 eventually \u2013 given that the five-year yield is now below the inflation rate, meaning that government bond investors are losing money on a real basis.<\/p>\n<p>\u201cIt is simply not sustainable for a five-year Canada to trade below inflation forever,\u201d he said. \u201cThat simply cannot go on.\u201d<\/p>\n<p>Plenty of bruised preferred share investors are hoping he\u2019s right.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>John Heinzl was kind enough to quote me in Why you can\u2019t trust the yields on preferred ETFs: Both CPD and ZPR have also cut their distributions recently. ZPR trimmed its distribution by about 6 &hellip;<\/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-30384","post","type-post","status-publish","format-standard","hentry","category-press-clippings"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/30384","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=30384"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/30384\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=30384"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=30384"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=30384"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}