{"id":45779,"date":"2023-09-22T19:18:58","date_gmt":"2023-09-23T00:18:58","guid":{"rendered":"https:\/\/prefblog.com\/?p=45779"},"modified":"2023-09-22T19:18:58","modified_gmt":"2023-09-23T00:18:58","slug":"ffn-pr-a-to-reset-to-9-50","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=45779","title":{"rendered":"FFN.PR.A To Reset To 9.50%"},"content":{"rendered":"

Quadravest has announced<\/a>:<\/p>\n

North American Financial 15 Split Corp. (the \u201cCompany\u201d) is pleased to announce the Preferred Share dividend rate for the fiscal year beginning December 1, 2023, will increase by 1.75% over the current rate. Monthly payments to FFN.PR.A will be $0.07917 per share for an annual yield of 9.50% on their $10 redemption value.<\/p>\n

The Company invests in an actively managed, high quality portfolio consisting of 15 financial services companies made up of Canadian and U.S. issuers as follows:<\/p>\n

\n\n\n\n\n\n\n\n
Bank of Montreal<\/td>\n National Bank of Canada<\/td>\n Bank of America Corp.<\/td>\n<\/tr>\n
The Bank of Nova Scotia<\/td>\n Manulife Financial Corporation<\/td>\n Citigroup Inc.<\/td>\n<\/tr>\n
Canadian Imperial Bank of Commerce<\/td>\n Sun Life Financial Inc.<\/td>\n Goldman Sachs Group Inc.<\/td>\n<\/tr>\n
Royal Bank of Canada<\/td>\n Great-West Lifeco Inc.<\/td>\n JP Morgan Chase & Co.<\/td>\n<\/tr>\n
The Toronto-Dominion Bank<\/td>\n CI Financial Corp.<\/td>\n Wells Fargo & Co<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<\/blockquote>\n

I find I can’t much to say about this that’s better than what I said last year<\/a>:<\/p>\n

I must say, I am growing to dislike these annual resets intensely. The minimum rate on these resets<\/a> is only 5.5% and apart from this the company has full discretion. A prudent analysis must therefore assume that next year the rate will reset to 5.5% but there is every possibility, of course, that it will not. So refusing to buy these things might result in leaving money on the table. All in all, though, assuming the worst is always the way to go in securities analysis!<\/p><\/blockquote>\n

And actually, these things mature next year, so when they (almost inevitably) extend the Capital Units and refund the preferreds, there’s no minimum … except that holders of the current version of FFN.PR.A will get a $10.00 retraction option if they don’t like the dividend on the reissued preferreds, assuming that the NAVPU is higher than that.<\/p>\n

However, one point of interest is that the current NAVPU of the fund is only<\/a> $13.81. So for the next year the fund will be paying dividends at the rate of 9.50% on the $10.00 par value of the preferreds, which is $0.95, which must be earned by a portfolio worth only $13.81 … meaning that to break even BEFORE FEES the portfolio has to earn 6.88% income. Given that their base management expense ratio is 0.92%<\/a>, the portfolio has to earn 7.80% income just to pay their preferred shareholders. That’s a helluva drag, when according to DBRS<\/a>:<\/p>\n

Holders of the Preferred Shares used to receive cumulative monthly cash dividends at a rate of 6.75% annually until November 2022. However, with effect from December 1, 2022, this rate has been increased to 7.75% annually.
\n…<\/b>
\nThe current Preferred Share dividend coverage ratio is approximately 0.43 times (x). The average grind on the Portfolio is expected to be 5.3% annually for the next two years.<\/p><\/blockquote>\n

While an argument can be made that capital gains will save the day, I don’t see any reason to believe that their highly touted covered-call writing programme is going to make any net difference. As a point of interest, the cash weighting in the portfolio was 13% as of 2023-8-31<\/a>.<\/p>\n

Thanks to Assiduous Reader niagara<\/i> for bringing this to my attention!<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Quadravest has announced: North American Financial 15 Split Corp. (the \u201cCompany\u201d) is pleased to announce the Preferred Share dividend rate for the fiscal year beginning December 1, 2023, will increase by 1.75% over the current …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-45779","post","type-post","status-publish","format-standard","hentry","category-issue-comments"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/45779","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=45779"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/45779\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=45779"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=45779"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=45779"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}