{"id":889,"date":"2007-06-02T16:51:44","date_gmt":"2007-06-02T20:51:44","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=889"},"modified":"2007-06-02T16:51:44","modified_gmt":"2007-06-02T20:51:44","slug":"lfepra-yield-to-worst-curve-price-valuation-sort-of","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=889","title":{"rendered":"LFE.PR.A: Yield-to-Worst, Curve Price &amp; Valuation (sort of)"},"content":{"rendered":"<p>In the <a href=\"#comments\">comments to the June 1 Market Action Report<\/a>, assiduous reader tobyone posted:<\/p>\n<blockquote><p>RE: 5.25% LFE.PR.A bid @10.26 indicates yield of over 5% according to Globeinvestor and TDW yield calculators vs. your table. I hope this is an error because I hold this one but don\u2019t want it @4.73%<\/p><\/blockquote>\n<p>Well, Globeinvestor and TDW are enormous companies, with an excellent record of sticking their brand name on various things, but I&#8217;ll see what I can do.<\/p>\n<p>I stand by my calculation of 4.73%. First, the details, in all their glory, from the HIMIPref\u2122 <a href=\"http:\/\/www.prefshares.com\/glossary.html#cashFlowDiscountingAnalysisBox\">cashFlowDiscountingAnalysisBox<\/a>:<\/p>\n<blockquote><p>A3555025 0138<br \/>\n2007-07-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.995022\u00a0\u00a0 0.04<br \/>\n2007-08-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.991082\u00a0\u00a0 0.04<br \/>\n2007-09-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.987158\u00a0\u00a0 0.04<br \/>\n2007-10-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.983376\u00a0\u00a0 0.04<br \/>\n2007-11-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.979482\u00a0\u00a0 0.04<br \/>\n2007-12-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.975729\u00a0\u00a0 0.04<br \/>\n2008-01-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.971866\u00a0\u00a0 0.04<br \/>\n2008-02-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.968018\u00a0\u00a0 0.04<br \/>\n2008-03-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.964433\u00a0\u00a0 0.04<br \/>\n2008-04-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.960614\u00a0\u00a0 0.04<br \/>\n2008-05-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.956933\u00a0\u00a0 0.04<br \/>\n2008-06-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.953145\u00a0\u00a0 0.04<br \/>\n2008-07-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.949493\u00a0\u00a0 0.04<br \/>\n2008-08-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.945733\u00a0\u00a0 0.04<br \/>\n2008-09-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.941989\u00a0\u00a0 0.04<br \/>\n2008-10-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.938380\u00a0\u00a0 0.04<br \/>\n2008-11-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.934664\u00a0\u00a0 0.04<br \/>\n2008-12-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.931083\u00a0\u00a0 0.04<br \/>\n2009-01-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.927397\u00a0\u00a0 0.04<br \/>\n2009-02-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.923725\u00a0\u00a0 0.04<br \/>\n2009-03-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.920421\u00a0\u00a0 0.04<br \/>\n2009-04-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.916777\u00a0\u00a0 0.04<br \/>\n2009-05-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.913264\u00a0\u00a0 0.04<br \/>\n2009-06-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.909648\u00a0\u00a0 0.04<br \/>\n2009-07-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.906163\u00a0\u00a0 0.04<br \/>\n2009-08-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.902575\u00a0\u00a0 0.04<br \/>\n2009-09-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.899002\u00a0\u00a0 0.04<br \/>\n2009-10-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.895557\u00a0\u00a0 0.04<br \/>\n2009-11-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.892011\u00a0\u00a0 0.04<br \/>\n2009-12-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.888593\u00a0\u00a0 0.04<br \/>\n2010-01-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.885075\u00a0\u00a0 0.04<br \/>\n2010-02-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.881571\u00a0\u00a0 0.04<br \/>\n2010-03-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.878418\u00a0\u00a0 0.04<br \/>\n2010-04-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.874940\u00a0\u00a0 0.04<br \/>\n2010-05-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.871587\u00a0\u00a0 0.04<br \/>\n2010-06-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.868137\u00a0\u00a0 0.04<br \/>\n2010-07-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.864810\u00a0\u00a0 0.04<br \/>\n2010-08-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.861386\u00a0\u00a0 0.04<br \/>\n2010-09-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.857976\u00a0\u00a0 0.04<br \/>\n2010-10-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.854688\u00a0\u00a0 0.04<br \/>\n2010-11-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.851304\u00a0\u00a0 0.04<br \/>\n2010-12-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.848043\u00a0\u00a0 0.04<br \/>\n2011-01-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.844685\u00a0\u00a0 0.04<br \/>\n2011-02-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.841341\u00a0\u00a0 0.04<br \/>\n2011-03-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.838331\u00a0\u00a0 0.04<br \/>\n2011-04-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.835012\u00a0\u00a0 0.04<br \/>\n2011-05-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.831813\u00a0\u00a0 0.04<br \/>\n2011-06-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.828520\u00a0\u00a0 0.04<br \/>\n2011-07-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.825345\u00a0\u00a0 0.04<br \/>\n2011-08-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.822077\u00a0\u00a0 0.04<br \/>\n2011-09-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.818822\u00a0\u00a0 0.04<br \/>\n2011-10-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.815685\u00a0\u00a0 0.04<br \/>\n2011-11-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.812455\u00a0\u00a0 0.04<br \/>\n2011-12-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.809342\u00a0\u00a0 0.04<br \/>\n2012-01-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.806138\u00a0\u00a0 0.04<br \/>\n2012-02-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.802946\u00a0\u00a0 0.04<br \/>\n2012-03-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.799972\u00a0\u00a0 0.03<br \/>\n2012-04-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.796805\u00a0\u00a0 0.03<br \/>\n2012-05-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.793752\u00a0\u00a0 0.03<br \/>\n2012-06-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.790609\u00a0\u00a0 0.03<br \/>\n2012-07-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.787580\u00a0\u00a0 0.03<br \/>\n2012-08-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.784461\u00a0\u00a0 0.03<br \/>\n2012-09-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.781356\u00a0\u00a0 0.03<br \/>\n2012-10-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.778362\u00a0\u00a0 0.03<br \/>\n2012-11-10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.04\u00a0\u00a0 0.775280\u00a0\u00a0 0.03<br \/>\n2012-12-01\u00a0 FINAL DIVIDEND\u00a0\u00a0 0.03\u00a0\u00a0 0.773199\u00a0\u00a0 0.02<br \/>\n2012-12-01\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 MATURITY\u00a0 10.00\u00a0\u00a0 0.773199\u00a0\u00a0 7.73<br \/>\nTotal Cash Flows\u00a0\u00a0\u00a0 12.8739<br \/>\nTotal Present Value\u00a0\u00a0\u00a0 10.2597<br \/>\nDiscounting Rate 4.7291 % (Annual rate compounded semi-annually)<\/p><\/blockquote>\n<p>More simply, I&#8217;ll say: OK, this thing pays $0.525 p.a. At a price of $10.26, it will give rise to a $0.26 capital loss on its maturity 2012-12-1. That&#8217;s 5.5 years away so call the annual capital loss $0.05 (for the sake of an argument). Therefore, of the $0.525 dividends received every year, $0.475 is income and $0.05 is return of capital. Over the period, my average capital invested is (10.26 + 10.00) \/ 2 = 10.13. Therefore, my (very roughly calculated)\u00a0yield is $0.475\/$10.13, or 4.69%, which is close enough to my precisely calculated yield of 4.73% that I&#8217;m not going to panic.<\/p>\n<p>I&#8217;m not familiar with the GlobeInvestor or TDW yield calculators &#8211; if you will send me a link, I&#8217;ll take a look at them. The most common errors with such things are:<\/p>\n<ul>\n<li>Are they calculating current yield = $0.525 \/ $10.26 = 5.12%? This is wrong, since it ignores the capital loss on maturity.<\/li>\n<li>Are all the dividends incorporated? Ex-dates can be a little tricky.<\/li>\n<li>Monthly dividends can be a little tricky to jam in to some calculators. Has this been done properly?<\/li>\n<\/ul>\n<p>I recommend <a href=\"http:\/\/www.telusplanet.net\/public\/kbetty\/ytc.xls\">Keith Betty&#8217;s Yield Calculator<\/a>.<\/p>\n<p>Now I have another question &#8230; you indicated that you didn&#8217;t want to own this thing at 4.73%, but you didn&#8217;t indicate precisely why. Now, I&#8217;m not going to take a public position on the merits of LFE.PR.A as an investment at the current price (and please, don&#8217;t spend hours parsing everything I write from here on in trying to decide what I really think!), but the comment makes me suspect that you think a sale at a 4.73% yield is a slam-dunk &#8230; and whatever the verdict is, I don&#8217;t think it&#8217;s a slam-dunk-sell.<\/p>\n<p>In your comment, you mentioned CM.PR.J as a possible buying opportunity, given its closing\u00a0pre-tax\u00a0bid-YTW of 5.03%. Now, this is more than LFE.PR.A, but CM.PR.J is a perpetual and there are other differences besides. In terms of the <a href=\"http:\/\/www.prefshares.com\/glossary.html#riskAttributes\">riskAttributes<\/a> examined by HIMIPref\u2122, the major differences are:<\/p>\n<ul>\n<li><strong>Credit Quality<\/strong>: CM.PR.J is better.<\/li>\n<li><strong>Retractible<\/strong>:LFE.PR.A is better.<\/li>\n<li><strong>SplitShare<\/strong>: CM.PR.J is better<\/li>\n<li><strong>Various Duration &#038; Convexity Measures:<\/strong> Well, they&#8217;re different!<\/li>\n<li><strong>Cumulative Dividends:<\/strong> LFE.PR.A is better.<\/li>\n<li><strong>Liquidity<\/strong>: (<em>not a formal risk measure, but it is important<\/em>) CM.PR.J is better<\/li>\n<\/ul>\n<p>Anything you can tell me about how <em><strong>you<\/strong><\/em> value LFE.PR.A will, at the very least, give me some ideas regarding what to write about!<\/p>\n<p>\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In the comments to the June 1 Market Action Report, assiduous reader tobyone posted: RE: 5.25% LFE.PR.A bid @10.26 indicates yield of over 5% according to Globeinvestor and TDW yield calculators vs. your table. I &hellip;<\/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-889","post","type-post","status-publish","format-standard","hentry","category-issue-comments"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/889","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=889"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/889\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=889"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=889"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=889"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}