Updating our bank preferreds

Article Excerpt

We recommended five newly issued bank preferreds in our February 2009 issue. The big five Canadian banks issued these preferreds on especially attractive terms to attract investors in a time of weak stock markets. Despite rising over 10% in price, their yields are still high. As well, holders can reset the dividends at higher rates in 2014 if interest rates rise. However, the banks have the right to buy back all five shares at $25 each in 2014. In that case, you’d have a capital loss if you bought them at today’s prices. The banks may choose to buy them back if interest rates stay low and bank credit quality remains high. That would let them issue new preferreds at lower rates. All five preferreds are worth holding, but we don’t recommend them as buys at today’s prices. BANK OF NOVA SCOTIA 6.25% SERIES 26 PREFERREDS $27.89 (Toronto symbol BNS.PR.T) yield 5.6%. Hold. TORONTO-DOMINION BANK 6.25% SERIES AG PREFERREDS $27.78 (Toronto symbol TD.PR.G)…

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