Readers will remember that I wasn’t too impressed with this issue when it came out.
The market apparently agreed with me, as this issue is now a Blue-Light Special : currently at $23.67-95, last trade at $23.94, down $0.80 on the day. Over 17,000 shares have traded, mostly between $23.94 and $24.00.
At these levels the issue looks quite attractive! The dividend of $1.1125 represents a current yield of 4.63% on a price of $24.00, and it’s OK to use current yield on a discounted perp! This yields exceeds the issue yield of the new Royal Bank Issue, which I quite liked.
More later.
Later, more: At the close, this looked pretty good! At the closing bid of $24.00 the current yield was 4.64% and the Yield-to-Worst 4.66%, second only to the Pfd-2(low) (DBRS) rated WN.PR.E in the PerpetualDiscount index. There certainly seems to be plenty available, but there’s no telling how long it will stay at these levels … the bid size is 11,900 shares.
Deep thinkers fresh from reading the FOMC entrails will note that I am assuming that it won’t go down any further. Well … I don’t think it will … the objective of these blow-outs is to put such a ridiculously low price on your inventory you can dump it all quickly and stop worrying about it … but nothing is certain in this wicked world.
I received the following plaintive e-Wail
This was also a hot topic in the comments respecting RY.PR.B. And the short answer is “NO”. Without access to the underwriters’ books, you have no way of knowing whether they have cleared their shelves or not … all you can do is buy when it makes sense for your portfolio, when the issue looks sorta kinda more or less cheap. Hopefully you’ll be right more often than not.
Lousy answer, isn’t it? If it’s any consolation, the issue looks relatively inexpensive now … I haven’t done any proper analysis of this issue at a $24.00 price, but consider: as noted above, I think the new Royal issue is attractive at 4.60% yield … the SLF.PR.D at $24.00 not only has a slightly higher yield, but it also has more upside (since you don’t start worrying about being called until you’ve made at a dollar, at which point your upside has diminished to the level that the Royals have today.
Nitpickers, of course, will point out that the lower dividend on the Sunlifes ($1.1125 p.a.) compared to the new Royals ($1.15 p.a.) mean that the former will have a higher duration and therefore a (slightly!) more unpleasant downside in the event that interest rates rise. To which I say: Interesting point. Ain’t no such thing as a free lunch. It was to address such issues that HIMIPref™ was developed and subscribers can follow or ignore the advice at their leisure.
And I won’t be disclosing all the details of the advice in this Blog, either!
[…] The underwriters are unloading (have unloaded?) their inventory! See SLF.PR.D : Inventory Blow-out Sale! […]
[…] I suspect that this one will have an Inventory Blow-Out Sale, just like SLF.PR.D did last fall. Maybe early June, but I won’t bet any money on that part of the prediction. In the mean-time, I urge extreme caution when buying both BAM.PR.N and its twin sister BAM.PR.M … at least until the situation clarifies. […]