Tag: preferred shares

What are preferred shares?

There are generally two types of stock issued by a company: common and preferred. Preferred stocks typically have no voting rights (unless a specified number of dividend payments have been missed). Instead, preferred shares are entitled to a fixed dividend payment. In the event of company bankruptcy, preferred shareholders have a higher priority claim on company assets than common shareholders.

Dividends on preferred shares must be paid out before dividends to common shareholders. Sometimes preferred dividend payments are cumulative—all preferred dividends in arrears must be paid out before common dividends are resumed in a troubled company. But sometimes preferreds are non-cumulative.

There are ETFs that hold preferred shares. For example, the BMO S&P/TSX Laddered Preferred Share Index ETF, symbol ZPR on the Toronto stock exchange, holds floating-rate preferred shares that pays dividends that fluctuate with changes in interest rates. The dividend rate may range from 50% to 100% of (usually) the prime bank rate. As interest rates rise, so do floating-preferred dividend yields.

Sometimes the floating-rate feature only kicks in several years after the issuer sells the preferreds to investors. For example, the preferreds may pay dividends at a fixed rate for five years, and then the payout floats with interest rates.

High-quality preferred shares are okay to hold in your portfolio, although we think that the best common shares can offer both high yields and growth prospects. All in all, we think you should follow TSI Network and use our three-part Successful Investor strategy:

  1. Invest mainly in well-established companies;
  2. Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; the Consumer sector; Finance; Utilities);
  3. Downplay or avoid stocks in the broker/media limelight.

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A Yield to Caution: BCE 1st Preferred Series B

February 23, 2023||Dividend Stocks

BCE 1ST PREFERRED SERIES B $19 (Toronto symbol BCE.PR.B) is a preferred share issue from BCE Inc. (symbol BCE on Toronto).
The BCE Series B preferreds yield 8.8%. That’s much higher than the 6.3% offered by the utility’s common shares.
Note, though, that preferred shares behave more like long-term… Read More

Carveout should unlock value

September 22, 2022||Spinoffs

VOLKSWAGEN AG is a hold. The German automaker (Manufacturing sector; Shares outstanding: 5.0 billion [preferred and common]; Market cap: $177.6 billion; Dividend yield: 3.8%; Takeover Target Rating: Medium; www.volkswagenag.com) has its main listing on the Frankfurt Stock Exchange, but it also trades on the U.S. over-the-counter market under two symbols:… Read More

Not all high yield ETFs are created equal

August 11, 2022||ETFs

High yields, especially in what is still a relatively low interest-rate environment, have lots of appeal for many income investors. But ETF investors should look beyond the historical distribution yield for any danger signs.
The managers of ETFs use various strategies to generate high yields for… Read More

A yield to caution

March 24, 2022||Dividend Stocks

TD 1ST PREFERRED CLASS A SERIES 1 $23.05 (Toronto symbol TD.PF.A) is a preferred share issue from TD Bank (symbol TD on Toronto).
The TD Series 1 preferreds yield 4.0%. That’s higher than the 3.5% offered by the bank’s common shares.
Note, though, that preferred shares behave more like… Read More

Updating your Cyclical-Growth Payers: Russel Metals Inc.

January 27, 2022||Dividend Stocks

RUSSEL METALS INC. $31 is a buy. The company (Toronto symbol RUS; Cyclical-Growth Dividend Payer Portfolio, Manufacturing & Industry sector; Shares outstanding: 63.0 million; Market cap: $2.0 billion; Dividend yield: 4.9%; Dividend Sustainability Rating: Above Average; www.russelmetals.com) is one of the largest metals distributors in North America.
Russel has paid… Read More

We don’t see all spinoffs as winners

December 16, 2021||Spinoffs

While most spinoffs pay off for investors over time, some deliver big gains right away while others can go into a deep slump. Here are two recent spinoffs moving in opposite directions.
GXO LOGISTICS INC. $88 is a spinoff buy. The company (New York symbol GXO; Manufacturing sector;… Read More

Get 4.5% yield from Russel Metals

Get 4.5% yield from Russel Metals
December 1, 2021||Value Stocks

This firm hasn’t raised its dividend for several years. That’s mainly because it operates in a cyclical business with unpredictable revenue streams. However, as a leader in its niche industry, its current payments still look secure for income investors.

A new agreement to combine operations with… Read More

Two small-caps with dependable income

October 28, 2021||Dividend Stocks

Calian and Russel haven’t raised their dividends for several years. That’s mainly because they operate in cyclical businesses with unpredictable revenue streams. However, as leaders in their niche industries, those current payments still look secure for income investors.
CALIAN GROUP LTD. $62 is a buy. The company (Toronto… Read More