Canadian Chat

There is plenty of discussion going on throughout the site on various Canadian securities so this post is for creation of a “Canadian Discussion” page.

This was requested by a reader and it is easy to do so we can do it quickly.

Hopefully this will be a page for those with Canadian interest will meet up.

434 thoughts on “Canadian Chat”

  1. For those of you unlucky enough to have Schwab as your broker, please see the following correspondence that I received from their client advocacy team with regard to the characterization of the income from many Canadian preferred + TNP pfds. The list of my 14 issues in question is pasted below.

    This is extremely frustrating and upsetting. It’s bad enough that I’ve lost a boatload of money on these issues but now to have the income taxed at a higher rate it’s just rubbing salt in my wound.

    I would love to any and all comments. Has anyone else heard back from Schwab?

    Per my question from a couple of days ago, I’m still wondering if any of you had these issues in 2018 and I would love to know how they were characterized then.

    Also note that my TNP-C is classified as qualified but my TNP-F and TNP-B are not.

    HFRO-A: for those of you with other brokerages, are your firms classifying all income from this issue as ordinary dividends like Schwab is doing?

    I would really appreciate it if any of you smart folks could comment on this issue. We all have so much stress in our lives right now and this is just adding to the plate of stress.

    April 2, 2020

    Dear,

    It has been a pleasure working with you on this matter. I appreciate the extra information in your email of March 30, 2020. We have completed our review of the recent reclassification of dividends to “non-qualified” status and did not find support for additional action. Schwab has a responsibility to report information to the IRS and we are committed to our clients to provide the most accurate information available. Please remember that nothing in this e-mail constitutes tax or legal advice, I am sharing information with you in the hopes that it will clarify some of the information you have heard in the past.

    The IRS provided guidelines as to the classification of dividends from foreign companies. These guidelines can be found here:

    https://www.irs.gov/pub/irs-drop/n-03-79.pdf

    The foreign company is subject to review based on this notice. Many of the securities in question are issued from “qualified foreign corporations”. For a dividend paid on non-common/non-ordinary shares (i.e.. preferred) to qualify, the notice states that there are five tests which include the 2 tests mentioned in page 2 of the notice:

    “Accordingly, the security with respect to which the distribution is made must be equity rather than debt for U.S. federal income tax purposes (the “equity test”), and the distribution must be out of the corporation’s earnings and profits. . .(the “E&P test”)”.

    Additional consideration is then described under the section titled equity test in the above notice. On page 5, in the second paragraph it describes a way that the dividend can meet the equity test “if the foreign corporation has a public statement filed with the SEC stating that the security will be, should be, or more likely than not will be properly classified as equity rather than as debt for U.S. federal income tax purposes.”

    I believe, based on what you have shared, that the E&P test has received more focus in these message boards than the equity test, which has potentially created some of the concerns voiced. They are separate tests. I am not able to speak to the process or policy of other firms in regards to these dividends; but hopefully, this information will assist you in your future investments and reaffirm your trust in Schwab’s efforts.

    I greatly appreciate your patience as we championed your concerns and gathered a more clear and comprehensive response to the reason for the reclassification of these dividends. Again, this is information only and not intended as specific tax advice.

    Thank you for allowing Schwab to assist with your financial needs. Due to the COVID-19 pandemic, I am currently working from home and do not have direct access to receive telephone calls. However, a message box is in place and may be reached by dialing 1-800-468-3774. If you would please indicate your call is for me and leave your full name, number and the best time to contact you, I will be pleased to return your call. If email communication is your preference, my email address is clientadvocacyteam@schwab.com.

    Sincerely,

    Dawnn Lone

    Resolution Manager

    Client Advocacy Team

    1-800-468-3774 / Fax 1-800-977-0122

    ALTGF – series C (ALA.PR.U)
    ATGAF – series G (ALA.PR.G)
    TGAPF – series I (ALA.PR.I)
    CDUTF – series FF (CU.PR.I)
    ERRAF – series C (EMA.PR.C)
    EBBGF – series 1 (ENB.PR.V)
    EBBNF – series L (ENB.PF.U)
    EBGEF – series 5 (ENB.PF.V)
    FORFF – series F (FTS.PR.F)……..part is listed as QDI and part as NON-QDI but I think that 100% should be Qualified.
    FTRSF – series G (FTS.PR.G)
    NPIWF – series 3 (NPI.PR.C)
    HFRO+A – Quantum Online lists the dividend as “Variable,” but Schwab has 100% listed as NON-Qualified.
    TNP+F
    TNP+B

    1. Amy, I did receive a call a couple days ago from Debra Smith with Schwab’s client advocacy group. She is the one that TNTowanda has been communicating with. I had previously sent her info on the Canadian preferreds that I hold. I missed the call but she left a voice message saying that they were still working on the issue. I wonder if she and the person you heard from are together on this.

    2. I spoke with Ms Smith on Weds. Apologies for not posting ASAP

      Tomorrow I will provide detailed information in this venue

      Working on project that is critical time line

  2. Regarding Schwab’s mis-characterization of many of our CN holdings, has anyone found a problem with their 2018 1099? I will admit to being lazy (too trusting…) when it comes to scrutinizing my 1099 but will be checking my 2018 characterizations.

    I am hoping that since nobody has mentioned having a problem in 2018…that Schwab is only screwing up our 2019 1099s. Also, I understand that many of us just got into the CN issues in 2019 but I note that Schwab has also characterized my TNP F and B pfds as NON-QDI….so they are not just making mistakes with only CN issues.

  3. I don’t normally pay any attention to Canadian issues, but when Exantas Capital (XAN) got a margin call this week from the Royal Bank of Canada I started to poke around for possible underlying reasons and found this.

    https://seekingalpha.com/news/3555979-canadian-crude-plunges-to-record-low-costs-to-ship-to-buy

    If Canadian banks are so pressed for capital that they try to squeeze one of their smaller clients in the middle of a global pandemic, I can only imagine what’s going on behind the scenes with their much larger oil related holdings.

  4. March 28 Update on Schwab characterization issue.

    Ms. Smith has continued to phone me. The issue is not resolved. The good news is that Schwab is still researching.

    The third-party vendor that has characterized these dividends are a long time vendor for Schwab. I tried getting the name but did not. Schwab outsources the dividend characterizations to mitigate its risk if questioned by the IRS as to why it classified, etc.

    If I heard Ms. Smith correctly, Schwab’s clients have over $500 million in CAN securities. Ms. Smith said the issue is large enough for management to continue its review.

    She did not promise re-classification. Only a final determination once Schwab internally reviews the third-party classification.

    I will continue to update as I receive information.

  5. March 27, 2020 – Bank of Canada lowers overnight rate target to 0.25 percent.

    QE1 – Bank will begin acquiring Government of Canada securities in the secondary market. Purchases will begin with a minimum of $5 billion per week, across the yield curve.

    https://www.bankofcanada.ca/2020/03/press-release-2020-03-27/

    March 26, 2020

    Canada Emergency Response Benefit – The Agency has updated information on the new Canada Emergency Response Benefit. ($2000 CDN) aka helicopter money for all.

    March 20, 2020

    Tax-filing and payment deadlines – The Agency has updated messaging on the payment deadlines for individuals and businesses, and has extended the deadline for charities.

    New pages – The Agency has published two pages with updates on its programs and services:

    Call centres
    Charities

    March 19, 2020

    Temporary wage subsidy for employers – The Government announced a temporary wage subsidy for employers for a period of three months

    New pages – The Agency has published two pages with updates on its programs and services:

    Collections, audits, and appeals
    Outreach and Liaison Officer services

    March 18, 2020 – The Government of Canada has announced a series of tax measures to help support those affected by the COVID-19 virus, some of which affect tax-filing and payment deadlines.

    Question is what happens next?

  6. Update on Schwab Classification of CAN preferreds.

    Ms. Smith phoned me yesterday with an update. To her credit the team is continuing to work on this issue. She informed me Schwab uses a third-party vendor to determine classification. (The information given earlier to me she acknowledged was confusion resulting in errors).

    No CAN company notified Schwab to reclassify.

    As I was not at my desk I could not take notes so the below may be in error but I hope it is somewhat reliable:

    The third party vendor has been asked by Schwab why it reclassified. The answer was that the preferred securities can be potentially paid from either profits or DEBTS. It is the debt component that is the underlying issue. The third party vendor stated that the CAN corporations did not file with the SEC information that the third party vendor could verify that the dividends were paid from profits. Therefore, due to a conservative approach it advised Schwab to reclassify.

    Schwab has now assigned a team to “audit the auditors” so to speak. This is not actually auditors but a review of the third party determination.

    Ms. Smith has the prospectus from some of the CAN and will share that with the internal Schwab team that is reviewing the third party vendor reclassification.

    She again acknowledged that she has received emails from users of this site. She stated there are over 300 (?) CAN securities that are being reviewed. While she may not answer directly each email, she is working on the issue.

    This has become above my pay grade. If anyone has information that Schwab can use internally to assist with the determination that the dividends were paid for profits, it would be of great assistance.

    Good health wishes to all.

    1. Ah, I betcha they dont know this as it will fly over their pea brains. Actually a preferred can be paid by debt and still be QDI. How? Because it can be declared off “Retained Income” off the balance sheet if the company has any. Most do or they wouldnt be in business very long. Profits are not cash laying around available to distribute to shareholders. In fact even if they were profitable that year they still could in reality be issuing debt to pay the preferred if they are running cash flow negative despite profitability, but getting too deep in the weeds here. 🙂

    2. I would check to see if the company made a profit last year that was sufficient to cover dividends. Easily checked by looking at the financial statements in the annual report.

      1. Tim,

        This is above my pay grade but I don’t think that will suffice. It seems common sense is not being used. What the third party vendor requires is documentation from filings that no component of the dividend was debt. Not a website or an email from the corporation. Schwab is aware these corporations made a profit. It has been advised to conservatively reclassify unless there is documentation that no component is debt.

        There probably is filings, I just don’t know what or how to find them.

        1. TNT, Its garbage in garbage out with computer entered info from 3rd party vendors. Then brokerage reads whats on the screen and think it came from the Almighty and cant be questioned. The problem is none of them have a brain and arent willing to take 5 minutes to understand anything. Im a dummy with a BSE in history, and I took the 5 minutes to figure it all out.

          1. Gridbird,

            In the middle of this chaos, one thing is certain you are not a dummy. I plan on emailing your point regarding payments from retained earnings to Schwab.

            I will attempt to learn the name of the third party vendor (but to what purpose I have no idea).

            I am from the south and we have a saying, “Don’t take me around the barn just to get to the stall next door”. I told Ms. Smith Schwab was taking us all around the barn but I just hope we do end up in the stall next door.

            Stay healthy.

            1. The purpose of getting the name of the third party vendor would be to possibly be able to choose to take the fight directly to them and by-pass Schwab. If Schwab is truly relying 100% on the decision making prowess of this third party vendor for how they, Schwab, are classifying CDN dividends, then why fight with the entity that claims not to have the final say as to reversing the decision? It also seems quite odd that this “third party vendor’s” expertise is miraculously not used by any other house on the Street for their decisisons on classifying CDN dividend as Schwab continues to be the only one misqualifying the dividends.

  7. Now the ‘Zipper Index’, ZPR has crossed 8%+ on a monthly div look back. Shazam!
    Gotta rely on IG credit ratings across the board in all accounts to carry the day. We know what happened last time. I hope I will not get proven naive. Suspensions and cuts by many knives? I have a two and a half year waiting period to just let things work…now that the damage is done, that means reversion toward some mean? (That’s why they call it ‘the mean’) Theory or fact, fact or hope? Now it’s live!
    Hey, I can always go drive a bus for the local school district! Naw…I think I’ll color Easter eggs with some kids.

  8. Schwab Classification Issue on Preferreds.

    Ms. Smith phoned today with an update. Schwab is continuing to investigate this situation. She hopes shortly to have information to substantiate that the reclassification’s were correct or advise clients an error was made by Schwab.

  9. Canadian resets (no minimums) …..

    The average reset closed Friday at $13.46 , compared to an issue price of $25.00 (all prices CA$ stripped, except US$-denominated issues; all yields stripped). Most reset issues closed at new 10-year lows during the last week, some beating the old low by 10 percent or more . The blood was definitely flowing.

    The average yield on the resets is 8.11% and the average reset yield is 7.43% (the “true” yield being somewhere between the two figures).

    Issues to watch are those that 1) repriced within the past 6 months and have at least 4.5 years of “runway” before next reset, or 2) last reset off a low BOC5 (less than 75 bps) so that if reset today would less room to fall. “Less” doesn’t mean “none” as clearly rates in Canada are going to follow the U.S. lower from where they closed Friday.

    I particularly notice the banks and non-bank financials that fit this criteria.

    Recently repriced with US OTC tickers:

    FFH.PR.E (FRFGF) just repriced and will yield 7.41%.
    FFH.PR.C (FXFLF) yields 8.41%.
    ALA.PR.G (ATGAF) is yielding 9.20%

    And issues with with less room to fall:

    IFC.PR.C (INTAF) yields 6.26%.
    RY.PR.R (RYMTF) yields 6.07%.
    BAM.PR.R (BAMGF) yields 6.39%.
    TRP.PR.C (TCANF) yields 7.04%
    TD.PF.H (TORDF) yields 5.87%.

    Sorry, no spreadsheet today.

    1. Bob,
      Your post re average CA reset price being $13.46 is helpful. I own a lot of EBGEF, now at $13.00 (U.S.) at which price the yield until 3/24 is 10.34%. I currently have a 33% loss in my position and have debating a sale. The fact that EBGEF’s price is in line with other CA resets gives me a little comfort.

      I note that Enbridge common stock has declined in price around 50% in the last month. I hope that the decline is not company specific as opposed to the general malaise in the energy industry.

      1. All the highest quality energy names are being left for dead.

        Majority of producers need $28-33 oil price to break even. Current price for western Canadian select $5.43

        Majority of my income Stream is generated in this sector expecting a lot of chapter 11s if this keeps up for more than a couple of months.

  10. Canadian min rate preferred …

    Min rates are the most structurally robust of the Canadian preferred. All of them are 5-year resets (based on BOC 5-year) with a minimum rate equal to the initial coupon. They can go up in rate but they can’t go down. They are redeemable by the issuer each five years (one time, not continuous) and the holder has the option at the same time to convert to a floating rate issue (based on BOC 3-month). More on redemption and conversion below.

    Until the market plunged recently the min rates had been trading, as a group, close to the redemption amount, some above and some below, such that many had call risk. As of the close Friday, the average min rate was selling at $19.52 per share. Almost every issue is close not just to its 52-week low but to its 5-year low, which is to say its all-time low.

    Call risk is gone, so these have gone from being short term plays to buy-and-hold opportunities. The average stripped yield is 6.81%. None of these can reset lower as said above but 3 are in a position to reset 50 bps higher. Credits range from BB- to BBB-.

    If handled properly by your brokerage all are QDI except the one AX issue (REIT) and the 5 BEP issues (partnership). All will withhold 15% in a non-qualified account except the BEP issues, which will have no withholding.

    In a qualified account, again if your brokerage handles them properly, there should be zero withholding.

    The BEP issues will get you a K-1. The rest will show up on your 1099.

    5 of the 30 issues have U.S. OTC tickers. The Crown Jewel of the 5, to my eye, is BEP.PR.G (BRENF) but ONLY is held in a qualified account.

    Given that call risk is off the table I personally would not hedge new purchases of min rates. If you are inclined to hedge you can do so in increments of CA$10,000 or CA$100,000. Hedging is almost cost-less if done with futures.

    As mentioned above, each five years the holder has the option to convert from a 5-year reset to a 3-month floater. (The option is subject to at least 1 million shares opting to convert.) Options have value, including this one. If the BOC rates are very low at the time of reset, converting to a 3-month floater could be interesting. Instead of being locked in for 5 years one can make a bet that rates are headed higher and convert. If you’re right it can be a very profitable trade; if you’re wrong it could be costly. With the exception of the one CU issue all of the conversion issues loose their min rate protection upon conversion.

    https://docs.google.com/spreadsheets/d/1g41CbLlTiTYD9gTsIVsYvh8jHWYmLw_9b286I5IAoWI/edit?usp=sharing

    1. Bob, there are a couple variables to ponder here though concerning floaters and 5 yr resets. As witnessed from recent action in yields descending towards recession/market fears, the long end acts first the short end lags. And coming out of recession its the long end that leads higher and short end trails behind.
      And since the resets alway move on expectations not reset protection duration that needs to be factored in. And any worries about negative rates? Check the european yield curve, guess which end is more negative and drains off the adjustment more?
      Of course pricing which changes daily can trump value in any segment. But typically my above reference to yields is pretty standard. The short end is tied to Fed action and the long end moves in anticipation.

      1. I can’t know where rates are headed but I would certainly lean toward lower-for-longer right now.

        I keep track of my fixed income portfolio by rate structure, which everyone should do. Combine that with how each rate structure behaves in each rate environment and you get something of a picture of the future. Understand your vulnerabilities.

        Right now, I see the most vulnerability in the U.S. LIBOR (or SOFR) fixed to float issues. Many of those are going to see their coupons clipped by 1.5 to almost 2.5 percentage points. And I don’t think that is priced in yet.

        1. TCANF pays 2.263% on $25 CDN up until 1/30/2021. It then resets @ 5 yr CDN Treas + 1.54. So if today was 1/30/21 (actually a date set a little earlier than 1/30/21, not on that date specifically), it would begin paying @ 2.163%.

    2. Sum:
      No one will call the top or bottom of any market. irrational selling has caused reset, minimum reset, and fixed issues to be priced at 5yr lows.

      Price/risk appears to be at a more advantageous ratio than US issues of similar grade.

    1. Yes, and the effect is that he Canadian yield curve is no longer inverted. Would have been better had that happened because the longer term rates came up. But that isn’t going to happen soon it appears.

  11. Update on Schwab Dividend Characterization Issue.

    Ms. Smith phoned me early today as she had promised. She informed me the information is in front of the right folks at a high level with the authority to evaluate and determine if an error was made or not.

    She of-course cannot make that determination but understands the reasonableness of Schwab’s clients questioning.

    She also acknowledged that she has received emails from this website’s users. She will attempt to reply. I told her for our collective benefit her focus on ensuring this issue is evaluated takes precedence. She also spent time on the website and has several strings of comments that have been forwarded for senior Schwab management evaluation.

    Ms. Smith will follow up with me on Tuesday of next week. I will of-course post any new information obtained.

    1. Thanks again, TNT, for pursuing this. I was one of those who forwarded information to Ms. Smith, mentioning that I got her contact info from this site. I appreciate you (and your sons) diligence!

  12. The bath water has got to be getting pretty low. A Rated companies that have accidentally become high yielders.

    TSE:MFC-K RATED P1-L (A) Type: Reset 9/19/2023 9.50%
    TSE:MFC-Q RATED P1-L (A) Type: Reset6/19/2023 9.22%
    TSE:MFC-J RATED P1-L (A) Type: Reset 3/19/2023 8.95%
    TSE:MFC-L RATED P1-L (A) Type: Reset 6/19/2024 8.60%
    TSE:RY-S RATED P1-L (A) Type: Reset 2/24/2024 8.30%
    TSE:RY-Z RATED P1-L (A) Type: Reset 5/24/2024 8.25%

  13. Update on Schwab classification of CAN preferreds:

    First, thanks to all that provided me their redacted 1099s. All are in the hands of Ms. Smith at Schwab. The Schwab filter is fierce and it took several attempts but enough information got to her that she thinks she can work with it.

    Ms. Smith did check this website and commented on all the posts. I wish I knew a means to assist her in finding the strings speaking just to this dividend classification issue but I don’t know how to do that.

    Ms. Smith has kindly called me several times today and I have returned her calls. Easiest calls I have ever made to any brokerage firm! I don’t have to go thru voice identity and the calls are not even recorded!

    Ms. Smith stated she had received other emails from this site. I told her I had posted her contact information. If you do decide to email her be sure and mention this site so she understands the collective team. That being said, I am not sure she needs any more information.

    She is working diligently and will prepare a case for the legal team to review.

    I thanked her and told her to please communicate that folks are upset not because Schwab made an error but because Schwab failed to evaluate the possibility it is capable of such an error. Schwab’s front line customer service team has been let down as has Scwab’s clients.

    I will post updates. Ms. Smith is to call me back on Friday with a progress/status report.

    1. TNT – Thankfully, I’m not a Schwab client so have had nothing to add, but what you’re doing here for everyone is magnificent and I know time consuming…. I hope you end up receiving a final positive response, AND that it becomes apparent to the right people just how the collective minds on III have contributed to get wrongs righted…..

      On a more general note, you said, “I thanked her and told her to please communicate that folks are upset not because Schwab made an error but because Schwab failed to evaluate the possibility it is capable of such an error. Schwab’s front line customer service team has been let down as has Scwab’s clients.” How we all can relate to this experience no matter where we do our brokerage business! How frequently have we all been met with a firm’s attitude of its inability to believe it’s even capable of having committed an error and then had to deal with front line customer service left to come up with whatever answer they can try to bluff their way through and hope it’ll fly with the client on the other end of the line…. definitely a pet peeve of mine….

    2. One of my accounts has been corrected so far, waiting for the revised statement on the other. Looking very optimistic.

  14. As a follow up to my mentioning an old research resource I mentioned a few days ago: Tweedy, Browne, a hundred years old value money manager. No referral to invest there as their as fees are high, but their published studies are excellent. I did go back and visit their site. They HAVE changed their tune regarding currency hedging, have a nice paper published there on HEDGING and have a global fund fully hedged now. Let’s face it, it has been difficult to fight USD hegemony lately. Their research papers are published at this site:
    https://www.tweedy.com/research/papers_speeches.php
    Their other tome is a classic: ‘What has Worked in Investing’ and is worth the print paper and a couple of nerd read-sessions.

  15. I tip-toed back into resets today after a long hiatus.

    Bought shares of FFH, MFC and EMA at close to or at 10-year lows. The issues I bought had all reset withing the last few months, meaning that the coupon will not change for the next 5 years. The price may go lower but the dividend is set.

    The volatility is amazing. In resets the big up of the day was +12.64% and the the big down -12.88%. Intraday volatility within issues is extremely high. Pricing that usually moves pennies at a time can move a dollar at a time. Pick the issues you like, put in obscenely low bids, and you may take some home

    For what it’s worth my view is that the CA$ will recover recent losses. The CA$ is very tied to oil prices and Putin’s refusal to play ball with OPEC caused the crash. Putin will give in to OPEC (quietly perhaps) and oil prices and the CA$ will come back when that happens. Russia needs to maximize oil revenues (for currency), not maximize price, so it makes sense.

    Again, that’s my OPINION. That, and twenty buck or so, will get you a latte at Starbucks.

    1. Bob,
      I am all in at the Canadian sell off. I just could not ignore…
      MFC.PR.M @ 7.45% yield locked for the next 5 years (almost),
      MFC.PR.L @ 7.60% yield for the next 4 years 3 months,
      ENB.PR.P @ 9.03% yield for the next 4 years.
      FTS.PR.G @ 7.8% yield for the next 3.5 years.
      CM.PR.P @ 7.05% yield for the next 5 years (almost)
      TD.PF.K @ 7.09% yield for the next 3.5 years.
      TD.PF.C @ 6.66% yield for the next 5 years (almost)
      TD.PF.G @ 5.78% It has a ridiculous reset 4.66 + 5year BOC. It was never supposed to trade below 25 CAD to begin with. I am very comfortable to hold it forever until TD will call it at one of the future resets.
      IAF.PR.I @ 7.9% yield
      IAF.PR.G @ 6.56% yield
      IFC.PR.G @ 7.63% yield
      And list is going on…
      In addition, I got a free money for 400 shares of BPS.PR.A all bought below par with x-div on Mar 12. Somebody forgot BPS.PR.A has a hard bottom at 25 CAD.

      1. can you tell me what the resets are for
        EBBNF
        EBGEF
        TCANF
        FTRSF
        or, how can I find them……thanks

        1. Grid, I have an account at Merrill, in order to buy on the TSX I have to use their “advisor” and pay commissions….is there a US brokerage that enables you to trade on line in Canadian shares?

          1. Martin, you can dig them out through preferred stock screener found on OTC Markets the link I gave you. Or you can type in name of company and find out. for example below I did that for you with TD… There are 4 that trade US OTC. Tickers are to the right side of screen.
            https://www.otcmarkets.com/stock/TD/overview

          2. Martin, Make sure we are on same page…You understand these tickers I am giving you are traded on US OTC markets. Now whether Merrill allows you to buy them is another matter. But they are US traded via OTC markets.

            1. I understand…seems like I am very limited…I CAN trade those on the right hand side….so is there a US brokerage that you know of that can buy issues on the TSX on line?
              Grid, you are clearly familiar with these reset situations…I would think the further out the reset the better(especially ones that have just reset)…can you simply my life and suggest a few for me to look at?…..I just purchased EBGEF and FTRSF yesterday….and thanks for taking the time to help….

              1. Martin, No problem trying to help. Just make sure you keep asking questions until you are comfortable before buying as these arent “pennies from heaven” issues. :). These tickers you see technically are not TSX issues…They are unregistered Canadian stocks trading “Over the Counter” via an intermediary providing the liquidity into US market. Some brokerages allow online trading and some do not. Of my 3 brokerages, TD allows it, ALLY and Vanguard do not.
                As an overall generality, its a faux strategy in anything with Canadian resets as they largely within days all rise and fall in general relative sympathy no matter how long your reset length is protected.
                Really the only thing you can control is length of income stream protection until reset. That wont shelter you from price volatility. Well and course you can control quality in terms of buying issues that will be able to pay out in times of relative trouble also.
                Do you have concerns of currency risk? If so that just leaves a smattering of 3 Enbridge issues and Altagas and maybe a couple more that trade US OTC.
                Find the TSX equivalent ticker of ones you are interested in and go to TSX Money website and pull down their 5-10 yr chart history to see what you think. Also do your own math…Take reset adjustment plus 0% 5 yr and .5% 5 year and calculate the dividend to see it that potential future reset yield alarms you or not.

                1. >These tickers you see technically are not TSX issues…They are unregistered Canadian stocks trading “Over the Counter” via an intermediary providing the liquidity into US market

                  Im pretty sure this is incorrect. The OTC listings are fungible to the tsx listings meaning they can be converted back and forth and are registered. This is called a cross-listing. market makers usually make this straightforward by providing liquidity on both ends by making a small spread but IBKR allows you to do north and southbound transfers on issues like these. (Ive never done it on canadian prefs but I have with common stock)

                  1. MCG, Maybe I didnt express myself clearly. Edit..I see I inserted TSX and meant “not US” and I dont know why I did that, ha. ….Glad you questioned that as my post made no sense from there… These are unregistered US securities. Clearly they are registered on Canadian exchanges as that is their intended home and where they were underwritten. They are not registered US securities and there is no dedicated market maker for these securities. Consult the prospectus of these preferreds and you will see they are not US registered securities, and most state they are specially not registered.
                    Here is an example for you from Enbridge Series L which masquerades under US OTC ticker EBBNF
                    Neither the Series L Shares nor the Series M Shares have been or will be registered under the U.S. Securities Act. They are being sold only outside the United States to non-U.S. Persons (as those terms are defined under Regulation S under the U.S. Securities Act) and may not be reoffered, resold, pledged or otherwise transferred in the United States or to U.S. Persons.
                    So clearly they are not and will not be registered US securities.

                2. Obviously, these are extraordinary times but for the uninitiated, it’s probably worth pointing out the amount of currency risk alone experienced in the past month and a half. I only own one CDN currency denominated preferred but my timing probably couldn’t have been worse. I bot a starter position in TCANF on Jan 30 @ $9.09US. At the time, that was the equivalent of $12.02 Cdn. Today, $12.02 CDN = $8.704. That means exchange rates alone have caused a 4.25% loss. Then again, oil itself has fallen 38.5% over the same time, so like I said, these are extraordinary not exemplary times. TCANF itself is down approx 35% since 1/30, but to be honest, I’m potentially more interested in buying than selling. This is such a discounted to $25 “par” issue now at about $6 US, the leverage on a turnaround is extraordinary, and as a starter position looking longterm , I’m willing to hang on and maybe add. It resets on 1/30/21 but right now, it would only reset from 2.263% to 2.218% and it presently throws off a 6.93% current yield….

                  1. 2WR, Yes it is volatile, but its a whatever thing to me. Over time it evens out. And if we run $2 trillion deficits it may make the Loonie look like a hide out spot, ha. Now, let me pick your brain here…Will it work opposite with the Mounties buying the Enbridge US based currency reset issues or not? I havent used my brain for this and wont. I expect you to give me the answer! 🙂

                    1. Grid – I’ll get back to you on that after I consult with Carnac the Magnificent…He’ll know for sure………

                    2. I agree Gridbird. Over the past couple of years I have acquired positions (about 1%) in 8 Canadian preferreds, all below par. It hurts some to see the value drop, but I am not a trader and so have them for the dividend. Not too sure what the Mounties will do, but I feel pretty comfortable with Canadian preferreds.

                  2. If currency movements bother you then hedge. You have both CA$10 and 100k products available. The cost to hedge via currency futures is almost nil.

                    But remember, currency “risk” is also currency diversification.

                3. Grid, once again I appreciate the time you spent responding to me…I have decided to only invest in EBGEF as it trades in some volume and is 2024 reset….I will stick to the good ol USA for my income….no sports on TV…baby boom or domestic violence…one or both….stay careful and healthy…..lots of open space on the golf course…..FORE!

                  1. Martin, always good to stay in ones comfort zone. But remember disregard US trading volume it means nothing. Look at TSX volume. You can find bid ask spread on TSX market and buy anything with an OTC ticker that has never even traded before and you can get it off TSX volume…Keep in mind EBGEF, EBBNF, and ENBBF all are US currency based so its like trading in essence a US security, sans the 15% withholding if bought in taxable of course.

  16. Schwab clients. My youngest son is negotiating his spring break budget. I told him he could take the trip if he got Schwab to correct the CAN preferreds.

    He took my phone and tweeted. Immediate tweet back. Phone call within 30 minutes.

    Debra L. Smith 1.800.468.3774 x 35668 email: cientadvocacyteam@schwab

    She asked for all 1099s from other brokerages; the name of this website so the history of Schwab customers attempts to correct can be viewed; and information from CAN corporations stating dividends were not re characterized.

    I told her I would get something to her in a few hours.

    She is in San Fran and promised to coordinate with executive team. She also will be contacting my client representative who has gone beyond his duty trying to correct this.

    Bob, I will try connecting with you thru SA but don’t really know how to do this.
    Tim, I can send a screenshot of the reply you received but if you could also email Debra with the information it would be helpful (or send to me).
    I suppose I am also on SA but again, am not certain as I have never used it for direct messaging.

    Let’s give it one more try!

    1. Thanks for pursuing this TNT. I would be glad to send you a screen shot of my 1099. The only Canadian preferred I held long enough was EBBNF which was shown as non-qualified.

      My biggest issue is that Schwab is withholding the 15% Foreign Tax on the 4 Canadian preferreds that are in my IRA. Based on the tax treaty we have with Canada I believe these withholdings should not be made. I obviously don’t have a 1099 for the IRA, but could send you a screen shot of the history showing the withholding.

      1. Alan,
        What we need is a 1099 from a peer brokerage firm that shows the correct classification. Showing Schwab a Schwab 1099 will not assist.

        If we get this situation resolved, I would suggest you follow up and ask Schwab to correct. I will send a screenshot for Scwhab from this website. She seemed very interested that there was a chat regarding this issue.

        Hoping someone on here will volunteer a redacted 1099 demonstrating what peer brokerages have classified.

        The power of social media is can serve a good purpose.
        Hoping

        1. TNT, thanks for pursuing this so doggedly and kudos to your son for hitting them up on Twitter!

          I’m not sure why another brokerage’s 1099 should have any standing with Schwab???, but I can provide one from TDA showing EBBNF as qualified.

          Send a message to me on SA (730Cap) with your e-mail and I will send it to you by tomorrow morning

          1. Thanks. I was told that the fact peer brokerages are differing will require executive legal team review. She did state that at times Schwab is “leading” and in fact correct but other times Schwab is in error.
            I will try you on SA.

            PS My son also included Vanguard and TDA on the tweet. They tweeted back stating happy to provide customer service. He and his fraternity friends really want this spring break. 🙂

          2. 730Cap,

            I may not be doing it correctly but on SA I receive “no results found” when typing 730Cap.

            Perhaps you can contact me on SA?

            Thanks.

        2. OK. Schwab is the only broker I use so I can’t help in that regard. If your son and friends want to tackle the IRA withholdings (I understand from other commenters that Schwab is not consistent on this), I will send you a screen shot of the foreign tax being withheld in my account. I guess I could also just send it directly to your Schwab contact, Debra.

  17. Carnage on Bay Street …..

    Up until today the most carnage I had ever seen in Canada was a 1976 hockey game between the Broad Street Bullies and the Maple Leafs. Those players who were not carted off to jail were carted off to the hospital.

    I had been suggesting that the Canadian preferred market would “crack” at some point and it did today, and yesterday. Many, many issues went below not just 52-week lows but 10-year lows.

    Stats: 1-day drops in price, by category: mins off 6.00%, fixed down 1.89%, resets down (get an emesis bucket) down 10.12%, and floaters off 7.95% The trophy for the day goes to HSE.PR.A after a 20.9% drop. 1-day.

    So, what’s at work here? Is the the opportunity of a lifetime or a deathtrap? This is my take, for what’s that worth.

    For starters oil price is a big driver of both assets prices and the CA$ exchange rate. The big drop in oil over the weekend was a huge hit for Canada. Putin thinks here was getting at the U.S. shale producers but he probably did more damage, proportionately, to the Canadian economy.

    Plus, you have the Corona virus thing, plus plunging interest rates, plus the political uncertainty caused by the U.S. election. Appreciate there is an imbalance here: the U.S. isn’t impacted very much by what goes on politically or even economically in Canada but the reverse is not true.

    To talk currency first, the CA$ is outside of the range where I will turn a blind eye. Anything between 1.31 and 1.35 (.76 and .74) I was going to ignore. At this moment, the rate is 1.37 (.73), which is hedge time for me.

    Hedging as I’ve said in other posts in nether expensive nor difficult, but does require a command of the product details. Efficient hedging is done in increments of CA$100,000 nominal. You can do “minis” at CA$10,000 per contract but the spreads are bigger and you can’t go out more than a few month. As a practical matter, if you don’t have at least CA$100,000 of exposure I’d say don’t even consider hedging.

    I replied to those that messaged me about hedging but for those of you that didn’t this will cover the basics:

    https://www.cmegroup.com/trading/fx/files/hedging-foreign-exchange-rate-risk-with-cme-fx-futures-cad-vs-usd.pdf

    I have personally hedged about half of my CA$ exposure and have enough cover that I can look just at the investment merit and not think about currency risk.

    I don’t have a crystal ball but when I look at the yields available after the drop today, and the quality of the companies, I will be a buyer. My focus is min rate issues and resets that either reset very recently or reset very soon. In other words, I am certain or relatively so at the coupon I’ll be getting.

    The min rates are structurally very safe and the chances of calls went much lower today. For me, It comes down to credit risk as I’ve removed currency risk as an issue.

    The resets have reset risk to be sure but I personally like 7-8% yields from good companies that have 4-5 more years before they reset.

    Off to watch Hockey Night in Canada.

    1. Bob this market stuff is immaterial…Speaking of hockey, my $2k Blues 96.5 over is money in the bag…Trouble is I also had same amount on LA Kings 74 over. I had long ago gave up. Except suddenly when they trade off half the team and gave up on the year, they have suddenly won 5 in a row and a 8-2-1 run. Now I got a punchers chance as they sit at 60 points and 7 more home games in a row and 9 of 14. Plus last game if Dallas is locked in they will send the JV team to get smoked like they did last year… 7-6-1 last 14, and I pull a rabbit out of my hat!

    2. Hey Bob. I’m going to use that opening hockey sentence as the opening for my next short story. Looks like it’s not copyrighted.
      In regards to hedging, Tweedy Browne has a long history of global (value) investing. I recall their analysis, “…if your time horizon is four to five years, then hedging is not a ameliorating factor…” There was a great deal of work presented and I do not know if their work is still out there especially, “What Has Worked in Investing”, it may be on their site for those who love the good read. I should go look. Maybe it has been updated. Very Temleton-esque, but I have followed their lines of thinking and it did me great service in 2000 and 2008. I feel that resonance circling back now too.
      All ways the best, JA

      1. Joel – I am splitting the baby on hedging. Especially so inasmuch as I’m placing a big bet on issues that may be called in a year. I don’t want my profits on those to disappear.

        Also, there is hedging and there is hedging. Forex futures are close to zero cost. Not like hedging the S&P 500.

  18. Bob, Why dont you assure me 5 yr CAD will be 2.5% by Thanksgiving…That way I will load up on TC Energy Series 5 at $8.44 CAD and bag me a 12% QDI investment grade preferred tomorrow. 🙂

    1. Grid – I give you a 100% iron clad guarantee.

      If any problems arise you can reach me in Hermanus.

      1. I went ahead and bought hoping I dont have to hunt you down…What is funny is it appears prior to my purchase today, the last time it traded was my last sell. And that was 32% ago. Glad I didnt subscribe to buy and hold on this TCANF stink bomb.

    1. Actually with the Cad exchange rate now at 0.73091 cents, the yield was 7.93%. Bob : did you find a way to hedge Cad currency risk. It may be a smart thing to do.

  19. New thinking on Canadian preferred and qualified (IRA) accounts.

    Instinctively, I oppose putting QDI issues in an IRA because you are “wasting” the QDI. QDI issues, all else being equal, have lower coupons than non-QDI issues. A BBB rated bank issue is going to have a lower coupon than a BBB rated REIT issue. So, the general rule is put all the non-QDI investments in the qualified account and QDI in taxable.

    But then a funny thing happened on the way to the forum, and it concerns Canadian preferred issues. What’s relevant here is that almost all Canadian preferred produce QDI (despite Schwab not getting it), the few exceptions being a couple of REITS (e.g. AXA) and a few partnerships (e.g. BEP). Also key is that dividends from Canadian preferred are going to be withheld at 15% (for a US tax domicile) if it’s held in a non-qualified account but zero percent if it’s held in a qualified account.

    But for some taxpayers, the 15% withholding is a waste because their marginal tax rate on QDI income is less than 15%. In some cases, it is zero.

    This may apply if you fit this financial profile: you are retired or mostly so, don’t have a humongous pension, don’t take social security (yet), don’t need more than about 100k per year (cash in hand) to live on, and have discretion over your investments. If you have no more than 27.5k in “ordinary” income and up to 78.750k in QDI income (common or preferred stock), your Federal tax rate is zero. That’s 106.25k of cash in hand with no Federal tax.

    If that describes you, or close to you, then you may want to put those Canadians in a qualified account, i.e. an IRA of any species. You won’t get 15% withheld and 100% of those fat Canadian dividends will go to the bottom line and accumulate and compound.

    EBBNF compounding at 7.41% annually is going to put a lot of money in your pocket. Your grandchildren will thank you.

    1. Bob, I have several Canadian preferreds in my IRA. Schwab is withholding the 15% Foreign Tax on CDUTF, EBGEF, FTRSF and NPIWF. I have been unsuccessful in getting Schwab to change so am resigned to getting 85% of the dividend I should be getting.

      1. That would be a line in the sand me for me. I’d be moving the account.

        As is, I have 2 small holdings at Schwab that have been misclassified as non-qualified and I will sell those at some point. I opened a Schwab account mainly to work around Vanguard’s slowness to post new preferred issues. It just has not worked out for me.

    2. Exactly the kind of thinking needed. I had to file a full year after retiring to get ‘real numbers and rates’. Do these permutations and DD. One has to figure out WHAT is REALLY important to THEIR situation. It has been important to our situation, but no broker and very few CPAs will help you because they are tainted by their own investment paradigm. Nice comment!

  20. Opportunities in min rate issues ….

    There are 6 min rate issues that become subject to call withing the next year. The min rates range from 4.50% to 5.75%. Stripped yields are 4.51% to 5.73%. One is selling a dime over par and the rest below, so there is no loss if called.

    In my judgement there is a good chance that 5 of the 6 will get called. The companies don’t like these issues and agreed to make them min rate because the underwriters pretty much said they had to.

    Unlike US preferred, which become (and stay) callable past the first call date, Canadian preferred issues (other than fixed rate) have a short call window each 5 years and if not called by the call date are your to keep for 5 more years.

    These opportunities may make sense if you are wanting to protect your portfolio from a lower for longer scenario. If they are called, you bought a 1-year CD. If not called you bought yourself 6 years of a min rate.

    Because of the risk of call I don’t like this opportunity unless you are either Canadian, or hedged. Hedging via currency futures is neither expensive nor difficult but you need to understand the product.

    Even if you buy off the US OTC you are still getting CA$ risk.

    Issues in question are CU.PR.I (CDUTF), ALA.PR.I (TGAPF), BAM.PF.H, W.PR.K, BEP.PR.G (BRENF) and PPL.PR.K.

    Be aware that BEP is a Bermudian partnership. K-1 will be messy in a non-qualified account but perfect for an IRA. Rest are QDI (except at Schwab).

    I own meaningful amounts of 3 of the 6.

      1. A4I – for the benefit of others, BECEF is a BCE (old Bell Canada) issue, a floater that floats off a somewhat weird formula tied to Prime. Prime is 3.95% right now and has not changed for some time in spite of the crash in BOC rates. I’m showing it at 13.75 (CA$) to yield 7.28%. It’s trading close to its 52-week low and not that far from its 10-year low. BB from DBRS and BBB- from S&P.

        It can go lower, and I have to think it will when the inevitable cut in Prime comes. But if you are a long term holder, and won’t faint if the price goes lower, and can live with currency risk, I like it.

        Worth noting that Prime went to 2.70% at its lowest in the 2016 rate swoon, when the BOC 3-month was down to almost 0.3%.

        At this time, for Canadian preferred, I’m a nibbler (aka fence sitting) and I am hedging incremental CA$ exposure via currency futures.

  21. Fortis Shareholder Services has confirmed they gave no instructions to Chas. Schwab to reclassify dividends from qualified to non-qualified. Hopefully the accumulation of these statements will prompt Schwab to make the necessary corrections.

    1. Tim. Would you be willing to share this with my Schwab rep? Alta has given no response what so ever to myself or Schwab’s customer rep. His hands are tied without documentation from CAN. company. I own no other CAN so without Alta IR response he cannot do much.

      I believe surely this situation might demonstrate the error Schwab has made with respect to CAN issues

      And I have sold Alta. I do not wish to own any securities with such an IR department. Ignoring me is one thing but ignoring Schwab is quite another

      1. TNT – my sense is that Schwab is turning the process on its head. It is not incumbent on the investor to convince a broker that a dividend is qualified, or for a dividend paying company to call up a broker and report that it’s dividends are qualified.

        And it certainly isn’t incumbent on a Canadian company to make a determination with respect to U.S. tax treatment of its dividends. That said, ALA pretty much does that on its website:

        https://www.altagas.ca/invest/share-information/tax-information

        As far as Schwab claiming that Alta has not returned its call, do you fully trust Schwab here? From comments left by others Schwab has been less than truthful in their answers about company contact. They have said contact was made in cases where the company concerned denies it, and Schwab has refused to turn over documents they claimed support their position because they were “internal”.

        It doesn’t pass the smell test with me.

        For you, or anyone else, who is going to pursue this further with Schwab I offer to give you copies of sections of my 1099s showing Canadian dividends as qualified by Vanguard and IBKR and TDA. This includes 4 different Altagas issues and 100+ dividend payments overall.

        I can be reached through messaging at SA.

      2. “Good afternoon Tim,

        I can confirm that Fortis Inc. did not direct Schwab to change the classification of dividends. The dividend should have the same classification as before. I suggest that you touch base with Schwab regarding this issue and if they would like to reach out to us they can.

        Best regards,
        Investor Relations”
        investorrelations@fortisinc.com

    2. Tim, I tried contacting you thru SA. Couldn’t find you. Is there a means to communicate so we can get this Schwab situation corrected?

  22. As predicted by Bob. The list of resets trading 10% below 52 week mid price has expanded rapidly (6 ->44). Still no big moves in fixed.

    Tracking 26 reset issues with calls/reprices in 2020 only 1 with a positive yield increase expected. Be prepared for further drops.

    TSE:BNS-I Bank of Nova Scotia
    TSE:BPO-N Brookfield Office
    TSE:CM-O Canadian Imperial Bank
    TSE:CM-Q Canadian Imperial Bank
    TSE:CM-S R Canadian Imperial Bank
    TSE:CPX-A Capital Power Corp
    TSE:EMA-A Emera Incorporated
    TSE:EMA-C Emera Incorporated
    TSE:FFH-G Fairfax Financial
    TSE:FTS-G Fortis Inc
    TSE:FTS-H Fortis Inc
    TSE:FTS-I F Fortis Inc
    TSE:GWO-N Great West Life
    TSE:MFC-F Manulife Financial
    TSE:MFC-G Manulife Financial
    TSE:MFC-H Manulife Financial
    TSE:MFC-I Manulife Financial
    TSE:MFC-J Manulife Financial
    TSE:MFC-K Manulife Financial
    TSE:MFC-L Manulife Financial
    TSE:MFC-Q Manulife Financial
    TSE:PPL-E Pembina Pipeline Corp
    TSE:RY-H R Royal Bank of Canada
    TSE:RY-J R Royal Bank of Canada
    TSE:RY-M R Royal Bank of Canada
    TSE:RY-S R Royal Bank of Canada
    TSE:SLF-G Sunlife Financial
    TSE:SLF-H Sunlife Financial
    TSE:SLF-I R Sunlife Financial
    TSE:TRP-B TC Energy
    TSE:TRP-C TC Energy
    TSE:TD.PF.A Toronto-Dominion Bank
    TSE:TD.PF.B Toronto-Dominion Bank
    TSE:TD.PF.D Toronto-Dominion Bank
    TSE:TD.PF.E Toronto-Dominion Bank
    TSE:TD.PF.I Toronto-Dominion Bank
    TSE:TD.PF.J Toronto-Dominion Bank
    TSE:TD.PF.K Toronto-Dominion Bank

    1. Micaha, As I have stated before, I would not use 52 week midpoint as a guide to anything. I would use late August and Jan. 2016. And some are there now. But that doesnt mean more pain ahead will not happen. But long term entry points are getting attractive now depending on ones future interest rate thesis.

      1. RE: Entry points on resets and floaters.

        On the issues that I follow I look at price relative to 52-week lows as well as 10-year lows. The BOC 5 is not that much above where it was in 2016, which was the low point of the decade. But AVERAGE prices are still well above 2016 levels. It’s the highest credit rating, lowest coupon issues (banks and insurance) that are lowest relative to those measure.

        For a one chart view of the market, look at ZPR:

        https://web.tmxmoney.com/charting.php?qm_symbol=ZPR

      2. In my tracking sheet I have a binary value for issues 10% below 52 week mid price. At the bottom of the sheet I have totals for reset, float, and fixed to judge where to go bargain hunting.

        Within each stock have 52 week, 5 yr, 10yr low price data. Take current price and score against. Highest score determines first to investigate.

        1. You need a system to deal with all the figures, that’s for sure.

          The Holy Grail, for me, would be to track, graphically, the spread of each issue’s yield and the relevant BOC rate. But I don’t have the data set to do that.

          With resets, you also have to figure in the time to reset. I don’t post it but for my own use I calculate a time-weighted yield based on current yield, reset yield and time to reset.

  23. This is an absolute “pain trade” but Im sticking to plan. Bought more of Fairfax Series E today. Its basically at all time low despite having the absolute maximum 5 yr protection going forward on protected income. I do have low yielding perpetuals but am not chasing that path everyone is on. One will be getting over 6.5% coming following divi now, plus a divi in a week.
    Long term down road these offer better value. Consider as 2 White Roses was discussing with me yesterday the power of the multiplier. If in 5 yrs , 5 yr is 2% you are looking at over a 8.6% yield. Im not going hog wild yet dont get me wrong…But the more some of these drop the more it will interest me to add.

    1. Normally Bank of Canada likes to double barrel the rate cuts. Recent 50 point cut should have a follow up.

      Might skip resets and go floaters instead if the price is right.

      1. Micahc, just my personal opinion only, but I dont pay attention to floaters as the long end of yield curve on any economic cycle improvement generally moves faster and more independent than the short duration end. Either way sentiment is poor now no question.

        1. Have a look at some of the floaters. Calculate the yields at present BOC 3 and at BOC 3 of zero. Some look pretty good. You may have to hold them forever (not your style I understand) but the cash will come.

          1. Bob, I just wont go there. Everything short term is headed lower. However the 3 month is always more anchored to the over night rates and such than the longer durations. Once the next economic cycle begins it will be the longer end that moves out first. Plus as you know, for the only current position I own for now the rate is locked in until June 2025.

      2. To me it comes down to price (and rate expectations). I look at the yield spreads between resets and floaters. If both the BOC 3mo and 5yr are at pretty much the same level, and the floater is offering me 100 bps more yield, I’m interested.

        FFH is a good one to keep an eye on for comparison of resets vs floaters.

        Also, be aware that there are sometimes huge mispricings in floaters, albeit at times just for a few hours or minutes. Some issues have had a 20% difference in inter-day pricing recently.

        1. Yes, certainly not discrediting your process. I am just walled off from those issues dont like the instant float adjustment and lack of yield certainty. I know I basically bought the E series within fingertip reach of all time low. Yet am getting a lot better price and yield than last reset of 2015 also.
          I have been very disappointed in TC Energy Series 5 price action. It has plummeted but nearly enough. If any issue needs to be knuckle dragging at its all time low it should be this one with a miserly 1.54% adjustment. I need about 15% more carnage to get in on this, so its watchful waiting for now.

    2. Grid–figured you were over on SA watching the BT/Pendy fight. Wow–talk about 2 people who can’t shut up and/or admit a loser.

      1. Tim they both are hucksters IMHO. Brad had a “Tanger Conundrum” article today…I responded in comments section…The only conundrum I see is trying to sync your purchase prices and returns with the actual stock price every time you recommended it for everybody else to buy.

        1. Unfortunate for BT when he put together the dividend kings he really opened himself up–his/sensei recent CCL call is underwater 16/share. Unfortunately there are too many people that act on this BS.

          1. Tim there is no question this endeavor wasnt created for wealth of others. Another marketing wallet enhancing idea for himself.

            1. Pretty much why a few years ago–before his empire–and him being out of work, I said ‘no thank you’ to an opportunity to team up with him. Fortunately I had a full time job and didn’t share his ‘vision’ but we did discuss it a time or two.

              1. Well Tim, its pretty obvious he could have used your experience, guidance, and integrity. But I understand why you said thanks, but no thanks.

      2. I haven’t been on Shrinking Alpha in a bit and seems like I should check in. It may be sophomoric but I love a good food fight.

        BT clearly does not like criticism. That’s a very bad trait in someone purporting to be a securities analyst. I would be pretty sure that he makes his money as a writer, not an investor.

        Where are the Customers’ Yachts?

        1. Bob, I actually posted a comment on SA last night. BT has written a book about his real estate experience but in the forward of the book he states that he lost his $2M house. So last night I just asked him if he paid off the loan and made the past due interest payments on the house. My comment was deleted. Guess I’m just not going to take investment advice from someone who has had their own personal residence taken back by the bank.

          1. Kaptain, Dont be offended…2/3 of my posts never get past moderation or get deleted later after they figured out I tricked them. I got to see the post by the way. You have sharpened your critical sarcastic edge posts lately. Stepping up your game, and I like it!

          2. I bet you tear the wings off butterflies, too 🙂

            I’d bet the bank went after him for the deficiency. They are not exactly bleeding hearts.

            1. Bob and Grid – my question on SA was actually a sincere one. I just wanted to know if the people there recommending stocks (and telling people to buy) had their own financial “house” in order. I’m just not sure why anyone would pay over $500 per year for a financial subscription to a guy that lost his house to the bank. Probably the last person I would take financial advice from.

              1. Lou – I never doubted you; I just find it very amusing.

                I admit that I would sometimes post (or attempt to) at SA just to see how far I could push the limits of free speech there. I would make a post, get it rejected, and then make a slight tweak and see it go through.

                Only, often, to see the post taken down hours or days later. Clear that stuff gets by the SA moderators but the authors complain, and the complaints get acted on by SA. It’s not the open forum some think it is.

                Some authors are especially think skinned, and dismissive of well-founded criticism. If they can’t get SA to pull a post you get a scathing rebuke of a response.

                Tell me again, Steve Bavaria, why taxes don’t matter when comparing returns of CEFs and equities in a taxable account?

      3. Just had a look over at SA. New term: “Mister High Yield Smokester.”

        Almost as good as “Lying, Dog-Faced Pony Soldier.”

        1. Bob,
          Thanks for mentioning BT’s Tanger article. Been a while since I read any of his articles. I have to admit he has a few defenders who went after negative comments but if SA deleted most of the negative ones, there wouldn’t of been much left of the 211 posts still up !

  24. Bob,
    Quick question concerning IBRK. I had a small amount of CN cash, all CN prefs in my account and five open orders on CN prefs, relying on margin to cover me if something filled. Today two orders were canceled after one filled.
    One of the canceled orders then executed three orders (for other traders) 10 cents below my open order price. Two others remained open and are still open. That’s crazy. I was told that a credit look back auto cancelled, but only two of the four open orders? Why not all of them?
    I was just told that none of the CN prefs are marginable, so treat my account as a cash account.
    What has been your experience? Have you ever smelled BS over a phone line?
    Thanks, JA

    1. For what it’s worth, Joel:

      I admit that I don’t fully understand how IBKR does margin. It’s on my to-do list but I haven’t dug into it as I’m not actually operating on margin right now. I know they have more than one margin program and I believe the “good” program requires a minimum balance and you have to opt into it.

      What you described – getting an execution and then having other orders cancelled – has happened to me maybe 2 times. I don’t think it’s nefarious and I do believe it was nothing more than you had no margin left. Unlike some others, who will allow the execution and leave it to you to cover by end of day, IBKR won’t allow the execution if doing so puts you in violation.

      I have never had an execution issue with IBKR and I’ve probably done 200 trades with them now. I follow the bid, ask, and trades live on the TSX website and IBKR’s execution is always exactly right that I can see.

      IBKR is short on telephone help. I’ve ever only made 2 calls to them and they don’t waste time on calls. Almost every question one could ask is answered on the website, but you have to dig.

  25. There has been a considerable move down in price of both resets and floaters in the last 2 weeks. This is related, obviously, to interest rate movements. Both long (5-year) and short (3-month) rates have moved lower but, until today, the 5 had dropped much more than the 3. Thus the curve was very steep. Today, it flattened out a lot.

    As I write this, the 5 is at 0.905% and the 3 at 1.134%. The BOC dropped their equivalent of the Fed funds rate by 50 bps today. I am looking hard at starting to buy again. Especially so the floaters. The yields, even at present low rates, even at a BOC of ZERO, look interesting to me.

    I may do some CA$ hedging on incremental purchases. Currency futures are cheap and easy to do, but you have to understand them, and appreciate that they are a margin product.

  26. Ok, enough is enough…I sold all my Fairfax Series E at $11.04 in January and bought 1000 back at $9.39, plus I will not miss a divi payment either. Saved 15% and also have a definitive yield going forward as it was just reset officially yesterday with public announcement. It will be 3.18% off “par”. So I am locked in over 6.3% for 5 years.
    FWIW this is actually an increase from 2015 reset. It reset at 2.91% in 2015.
    Also bought some fixed perpetual Canadian Utilities Series H.
    This is my first toe in back into Canadian issues after dumping some time ago.

    1. Interesting to hear you say this, Grid, because I was just reviewing the same approach under the “enough is enough” theme…. Not being anywhere near as nimble as you though I did halfheartedly try on this one, I did NOT save myself 15% by getting out of my starter position in TCANF but it sure is getting interesting now…. it’s certainly an example of leverage working in both directions that’s for sure and it’s worked against me for sure so far! However, right now, despite the gigantic downward move in CDN 5 year the last 2 months, this one would still reset at a rate higher than it is today (but only 10 basis), so I’m playing with some math for a 2nd tranche buy but at level still substantially lower than tsx.com’s CDN equivalent last trade at 10.28 which translates into 7.66 for TCANF. I’m still amazed at the degree of swing in USD/CDN conversion rate though…. I never expected that to be able to swing 13 cents down on my original purchase price in such as short period of time. Whew! lesson learned the hard way so far…

      1. 2WR, I got out of everything in January. But a few weeks ago I did test some TCANF, saw yields dropping and got back out with maybe a $20 short term profit of a few days…Glad I did cause a week or so later it started going down and continues to. I am afraid with this one and its reset late this year the 5 yr could be near 0%. The Fairfax reset with 5 yr over 1% at least. But if it keeps dropping I will be tempted.

      2. 2WR, Here is some useless drivel. Fairfax Series E last reset was March 2015, where it reset to 2.91% (par) and .1818 quarterly divi (CAD). The stock price then after announcement was $15.50.
        So today after new reset you have a 3.18% (par) yield and quarterly divi of .1989 (CAD). And the stock price is $12.56. ~20% cheaper and higher reset yield and considerably higher actual yield. I decided to bump it up to 1500 shares. Goes exD in a week also. This may take a while to play out and more near term pain could be ahead. But, it certainly protects against rates moving up even modestly long term especially being bought 50% ish under redemption value.

        1. Gotcha – that’s what I meant by leverage, the math that happens when these things are trading at 50 % ish of redemption value magnifies the impact of a small change… as you know TCANF is even greater at 40% ish.

          1. Yes, I was just emphasizing the relative value of the purchase in relation to actual price of last reset which was lower yield and higher stock price. Im too chicken with TCANF without the 5 year lock in I have with the Fairfax E. Things could get worse before they get better. That reset 6 months or so out with TCANF still and the 1.54% adjustment makes me a bit nervous.

    2. The IRS has to love you. I did not sell anything other than part of 1 position and that was because it was just too outsized. So I rode the prices up from where I bought things last summer and fall and rode them down again more recently. All of my IBKR positions are less than 1 year old and I wasn’t prepared to take the tax hit. I pay a lot of attention to taxes.

      I’m going to consider putting one smallish qualified account at IBKR and using it as a Canadian preferred trading vehicle. It also gets rid of the 15% withholding.

      1. Bob, I have learned I generate more income churning and giving Uncle Sam his cut than riding them down and losing the 3/4ths I get to keep after giving Uncle Sam his due. Plus it generated more taxable profits flipping shares with proceeds from January sell additionally.
        Unfortunately I have more taxable investment money than non taxable. But fortunately all my non taxable is Roth and HSA. I will never have to do draw downs.
        Certainly nothing wrong with buy and hold, but I am not willing to ride anything down without a fight. I want to keep what is mine,…. and Uncle Sam’s his, ha.

    3. Gridbird/Others
      I also purchased the Fairfax Series E in my Schwab IRA not realizing the dividends would be subject to the Canadian foreign tax. Do you know if there is a way around paying it?

      1. Jakester, Sorry, but its gonna be a bitter pill to swallow every 3 months. This advise is useless as it varies company to company and brokerage to brokerage. But for me these grey market OTC issues all had 15% withheld in tax free accounts despite the fact it shoudnt. You can fight like hell and call and call and you may get lucky….One friend was a bulldog and got ERRAF treated correctly which benefited me at the time when I owned.
        For me once I saw, I just sold the others and moved on. A few I could shove in tax free such as Enbridge and Fortis when I held…But Canandian Utilities, Fairfax, and other grey listings I quickly learned to avoid in tax free accounts.
        I started toeing back in this week…I would love a 20% more pain trade drop off to buy more.

        1. Gridbird, I called my Schwab guy and after two or three different guys they came to the conclusion there wouldn’t be any Canadian tax consequences for the Fairfax Series E or EBGEF held in my IRA. I know Fidelity doesn’t apply a Canadian tax to EBGEF because I’ve had it for sometime and have never been taxed. Oh well I’ll wait and see what happens.
          Thanks…..

          1. Jakester, I hope it works out. And it should, as there shouldnt be anything taken out per tax treaty. And yet it happens here and there depending on brokerage.

      2. RE: Canadian tax.

        To be technically correct, it’s not a tax it’s a tax withholding. It actually does matter for Canadian tax purposes, but it’s too esoteric to get into here.

        In non-qualified accounts there is no way around the withholding. It should be 15% per the US/Canada tax treaty. Just make sure it isn’t 25%. BTW, the withholding goes to Canada, not the US, so if you have a problem with it you should contact Mr. Dress-up in Ottawa. Just know that you will not find any sympathy in Canada for your situation.

        In a qualified account there should be zero withholding, but not all brokerages get it right.

        On a practical level, the 15% withholding may be costing you money or maybe not. If your marginal tax rate on QDI issues is less than 15%, the withholding is costing you money because you will not get the full 15% credited back to you on your US tax return.

        But if your marginal tax rate on QDI is 15% or more, the withholding costs you nothing at the end of the day.

  27. Here is the response from BCE about Schwab’s misclassification of dividends, etc.

    “Good afternoon!
    Thank you for your email. You are probably correct when you state that it must be an error applied in your account by Schwab. First, we did not receive any indication of such change from our tax people or transfer agent and secondly, we have no access to accounts held by brokers or to brokers who would be holding shares on behalf of their clients; therefore, BCE would not have been in a position to direct Schwab to “code” your account from “qualified” to “non qualified”; we do not know who is holding BCE shares if the shares are not registered.

    Schwab surely knows about the dividends payment process. Indeed, any shares held on a book basis (or streetname) are reported under two sub-organizations, i.e., the CDN and the U.S. depositories. As such, Schwab, and any brokers, or most probably their “trading desk or back offices”, reports under one or the other through which the dividend being paid will go through to be “redistributed” to the depositories’ “participants”, then deposited in your account.

    If there was a change, one we are not aware of, as to our knowledge, no registered holders of any of our preferred shares are non Canadian residents, it may be a fairly recent change issued from the U.S. tax agencies (IRS). If this is the case, Schwab may have been directed to apply it to its clients’ accounts. In such case, if you insist on talking to a supervisor or someone higher up in the ladder, I am confident that they will shed light on this matter. I insist on the fact that this has not come from BCE.

    I will question our transfer agent on this and will get back to you if I learn anything contrary to our understanding. If you do get more information, do not hesitate to let us know of your discovery as well.

    Regards,

    Investor Relations, BCE Inc.

    1. I received a revised 1099 today from Vanguard, and 100% of qualified dividends were handled correctly, including Canadian preferred.

      Score remains brokerages that got it right 3 (Vanguard, TDA and IBKR), brokerages that got it wrong 1 (Schwab).

      Anyone with enough at stake here to consider an action with FINRA? I will provide documentary support and I’m sure others would, too.

    2. I received a similar response today from Emera with a request to be put in touch with the Schwab unit concerned. They say they have no idea how Schwab could have gotten the idea these dividends should be reclassified. Will continue to post responses.

  28. This week, the BOC 5-year plunged from 1.303% to 1.074% and the BOC 3-month from 1.630% to 1.489%, for an inversion of 415 bps.

    As one would expect, the prices of resets and floater fell heavily, but still not enough to my eye. Both the BOC 5-year and 3-month are at 52-weeks lows, while prices of resets and floaters remain well above 52-week lows, telling me that things should fall further.

    Here are my thoughts, by category:

    Mins are holding up well, as they should. There are several de-facto 1-year CDs available among the mins, but only if you hold CA$ or are willing and able to hedge. I would not advise 1-year plays on an unhedged CA$ for most folks.

    Fixed. Nope.

    Resets. Wait for the market to capitulate. 3 big issues reprice Monday at 10:00 AM eastern time, so rates will be fixed for next 5 years. BAM.PR.E will reset to yield 5.90% (present price, present BOC), FFH.PR.E (FRFGF) will reset to yield 6.32%, and HSE.PR.E will reset to yield 6.82%. I might be a buyer on any or all of these 3 depending on where prices and rates go Monday.

    Floaters are getting interesting. I’m not a buyer but I am circling. As the BOC 3-month goes lower so, too, will prices on the floaters. A lot of risk but fat yields. I bought ENB.PR.C on Friday at 13.15, to yield 7.72% (on purchase price), or 6.48% if BOC drops to 1% or 4.58% if BOC drops to zero. If BOC really does drop to zero, and I’m collecting 4.58% on cost, I can live with that.

    Today’s spreadsheet:

    https://docs.google.com/spreadsheets/d/1AaExX18fxb-vBb8mU_IsQMAt6JOQ81O0rwokAwNxAYE/edit?usp=sharing

    Later this week, as time allows, I have a few thoughts on hedging and on putting Canadian preferred in qualified accounts.

  29. This week, the BOC 5-year plunged from 1.303% to 1.074% and the BOC 3-month from 1.630% to 1.489%, for an inversion of 415 bps.

    As one would expect, the prices of resets and floater fell heavily this week, but still not enough to my eye. Both the BOC 5-year and 3-month are at 52-weeks lows, while prices of resets and floaters remain well above 52-week lows, telling me that things should fall further.

    Here are my thoughts, by category:

    Mins are holding up well, as they should. There are several de-facto 1-year CDs available among the mins, but only if you hold CA$ or are willing and able to hedge. I would not advise 1-year plays on an unhedged CA$ for most folks.

    Fixed. Nope.

    Resets. Wait for the market to capitulate. 3 big issues reprice Monday at 10:00 AM eastern time, so rates will be fixed for next 5 years. BAM.PR.E will rests to yield 5.90% (present price, present BOC), FFH.PR.E (FRFGF) will rests to yield 6.32%, and HSE.PR.E will rests to yield 6.82%. I might be a buyer on any or all of these 3 depending on where prices and rates go Monday.

    Floaters are getting interesting. I’m not a buyer but I am circling. As the BOC 3-month goes lower so, too, will prices on the floaters. A lot of risk but fat yields. I bought ENB.PR.C on Friday at 13.15, to yield 7.72% (on purchase price), or 6.48% if BOC drops to 1% or 4.58% if BOC drops to zero. If BOC really does drop to zero, and I’m collecting 4.58% on cost, I can live with that.

    Today’s spreadsheet:

    https://docs.google.com/spreadsheets/d/1AaExX18fxb-vBb8mU_IsQMAt6JOQ81O0rwokAwNxAYE/edit?usp=sharing

    Later this week, as time allows, I have a few thoughts on hedging and on putting Canadian preferred in qualified accounts.

  30. This week, the BOC 5-year plunged from 1.303% to 1.074% and the BOC 3-month from 1.630% to 1.489%, for an inversion of 415 bps.

    As one would expect, the prices of resets and floater fell heavily this week, but still not enough to my eye. Both the BOC 5-year and 3-month are at 52-weeks lows, while prices of resets and floaters remain well above 52-week lows, telling me that things should fall further.

    Here are my thoughts, by category:

    Mins are holding up well, as they should. There are several de-facto 1-year CDs available among the mins, but only if you hold CA$ or are willing and able to hedge. I would not advise 1-year plays on an unhedged CA$ for most folks.

    Fixed. Nope.

    Resets. Wait for the market to capitulate. 3 big issues reprice Monday at 10:00 AM eastern time, so rates will be fixed for next 5 years. BAM.PR.E will reset to yield 5.90% (present price, present BOC), FFH.PR.E (FRFGF) will reset to yield 6.32%, and HSE.PR.E will reset to yield 6.82%. I might be a buyer on any or all of these 3 depending on where prices and rates go Monday.

    Floaters are getting interesting. I’m not a buyer but I am circling. As the BOC 3-month goes lower so, too, will prices on the floaters. A lot of risk but fat yields. The exception: I bought ENB.PR.C on Friday at 13.15, to yield 7.72% (on purchase price), or 6.48% if BOC drops to 1% or 4.58% if BOC drops to zero. If BOC really does drop to zero, and I’m collecting 4.58% on cost, I can live with that.

    Today’s spreadsheet:

    https://docs.google.com/spreadsheets/d/1AaExX18fxb-vBb8mU_IsQMAt6JOQ81O0rwokAwNxAYE/edit?usp=sharing

    Later this week, as time allows, I have a few thoughts on hedging and on putting Canadian preferred in qualified accounts.

  31. Canadian resets 10% Below 52Wk Midpoint. All have very low reset spreads (1-2%).

    TSE:MFC-K 2.22% spread to index
    TSE:TD.PF.J 2.70% spread to index
    TSE:FTS-H 1.45% spread to index
    TSE:TRP-B 1.28% spread to index
    TSE:SLF-G 1.41% spread to index
    TSE:MFC-F 1.41% spread to index

    1. Micahc, You may want to not compare to 52 midweek, but to end of August to get a different prospective. As 5 yr has already broached those levels. I smelled something wrong in the bond market and basically sold everything right near this past peak. If one wants to use the end of August benchmark (and one can reasonable and not, but its my benchmark) they got room to instill considerably more pain a head.

  32. I have written to investor relations at all my Canadian holdings over the Schwab dividend issues, but cannot find an email address for Fairfax Financial. Does anyone have an email contact they can pass on, please?

  33. I will write in more depth this weekend but the short story is this: BOC 5-year CRATERED this week, with 3-month moving relatively little. The current 469 bps inversion is huge.

    Fear finally hit the preferred markets, especially the resets and the floaters, as would be expected. After weeks of stout upper lips prices moved sharply lower in the last 2 days.

    I am riding it out, because of taxes as much as anything. Will explain in next post.

    I also did today what I advised against recently: I bought a floater. A non-prime based floater. 7.72% (all yields stripped) at present coupon, 7.58% at present BOC, 6.48% if BOC goes to 1% and 4.58% if BOC goes to zero. ENB.PR.C at 13.15. DBRS BB+ and S&P BBB-. No OTC symbol.

    I also did a CA$ future as some of my recent plays are short term trades.

  34. Canadian resets getting shellacked along with everything else. I own EBGEF and it’s back to where I bought it last year. This is an income play for me so I’ll hold with an eye to add at some point lower but not before we get some kind of clarity on this coronavirus black swan.

  35. Real time factual reporting from this past week:
    TSX unavailable for trading huh? No big rigged surprise.
    Oh yeah and my open orders from last Friday were all conveniently erased by Sunday last weekend just before the Monday rout. Could not be audit trailed either, it just disappeared and no one could see it. Usually audit trail is all activity to the fractional second for last five trading days. Unfortunately, I could not be at my desk all day last Monday and other panic sells did fill below my prices which were purposefully placed low as open GTCs. I keep it all in a written day book.
    Never said hockey was not a brutal game either, but the game is beginning to have a real stink.

    1. Joel, I think it was a good thing you didnt get a transaction. If your dabbling in resets you are stepping in front of a freight train. I have been out for a while now avoiding the price drops. But more pain should be coming too.

    2. I see, there are a few pertinent comments by the gentleman at PrefBlog too. I WILL take it as a good thing that I was out of the flak. Sometimes fools are sheltered.

    3. In a perfect world an exchange would never go down. But the TSX made the right decision to close rather than host a bad execution environment.

      I had a large number of outstanding TSX orders before and after the outage (I have them in all the time) and not one got cancelled. So if someone’s TSX orders got cancelled I would think it was a brokerage issue rather than an exchange issue. To my knowledge an exchange has no way to cancel a brokerage order. If I’m wrong someone please let us all know.

      Oh, forgot to mention that Vanguard’s brokerage platform went down this morning. As in totally out. For about 30 minutes prior it would barely respond to inputs. For perhaps an hour this morning, during the critical period immediately after opening, I was effectively cut off by Vanguard.

      1. Bob in theory that sounds wrong. Depending on what kind of order you place and how your brokerage handles it any pending limit orders should rest in the exchanges matching engine on the limit book. So in the case of an outage, if the exchange cancels all resting orders, they’ll be canceled back to the brokerage.

        1. MCG – I’m looking to learn on this. I know that Vanguard cancels or drops orders on me all the time. Sometimes, for obvious reasons like corporate actions but sometimes out of the blue. I had one issue this week where the order was open for hours and then just dropped.

          In any event, of literally hundreds of TSX orders I’ve placed at IBKR never had one dropped.

          1. Orders shouldn’t drop out of the blue, I’d be asking my broker what happened 🙂 Depending on the type of order you place at IBKR, it may be going to their internal ATS rather than to the market.

            1. I agree, mcg. The only one I’ve ever had problems with is Vanguard. Sometimes I will get an order dropped a couple times (instantly) and on the next try it will hold.

              Every call to Vanguard is a 20-minute adventure so I avoid if I can get it done without the call.

        1. The min rates, too. Prices on many are now at the point where they have big call risk. It will be interesting to see what happens to the mins when they become callable. The oldest min rate out there is only 4 years old so one has never become callable. If rates stay low I have to believe they will be gone.

  36. On Alta Gas dividend classification issue, I received an email that will reach the I.R. folks (from my customer rep at Schwab). It is: JNieukere@altagascanada.ca My customer rep has committed to challenging the group within Schwab that has reclassified these dividends, if any documentation can be received from Alta. I sent the below email. I think the more sent the better. (My rep. also said if we can prove Alta is in error, he will challenge the entire CAN issue).

    Dear Mr. Nieukerk,

    I am a U.S. citizen shareholder in your preferred shares, ALTGF and TGAPF.

    These shares are held by Schwab brokerage firm.

    Schwab issued a 2019 1099 that reclassified the payments from these securities from qualified to non-qualified status.

    No other brokerage service (Vanguard, TD America, IBKR) has reclassified your dividends. Only Schwab.

    I have contacted and spoke to Schwab many times over this matter.

    Schwab states on Feb. 3, 2020 it received instructions from Alta to reclassify.

    I do not believe this is factual (I think Schwab has made an error); but Schwab is adamant on this issue. Schwab has directed me to go your company and verify the payments were reclassified on Feb 3, 2020.

    As tax filing season is underway, I would appreciate your most prompt attention to this matter.

    Kindly,

  37. Schwab called me today. Bad news. According to the cost reporting folks on Feb. 3 Schwab received instruction from Alta to re-characterize the payments. Schwab was insistent on the phone.

    I asked for a copy of the Alta directive and was refused. Schwab stated it was internal.
    I then asked if Alta had by phone confirmed to Schwab that the payments were re-characterized. I was told by customer relations representative that Alta had not called back. (But he did offer to notify me if he does receive a call from Alta IR.)

    The only recourse seems to be to obtain documentation from Alta that Schwab is in error.

    Very frustrating. Other than obtaining the date of Feb 3 as the re-characterization day, Schwab would not disclose any other information.

    1. TNT, I dug deeper tonight as Vanguard issued a corrected 1099 yesterday. I actually had Altagas Series C in taxable for a while… All dividends were reported QDI.. Schwab needs to get their act together as my biggest brokerage is TD.

      1. Gridbird. Thanks. I don’t know if it would help but perhaps if someone could share a screenshot or photo of the classifications from other brokerage firms (without personal information of course) it might help

        Alta only has a phone number at IR and I am told that if it answers at all the person on the phone simply says they will have to check

        My guy at Schwab promised to PM an email at Alta. I don’t have it yet and not sure it will help. But if I receive I will email and post the Alta email for all.

        Bottom line is the folks in the shadow department located in San Francisco claim on Feb 3 Alta changed payment status for 2019

        1. TNT – has the discussion with Schwab been about more than just Altagas? I have only Altagas and Emera at Schwab, and both were shown as non-QID.

          On Vanguard 1099 I have 3 ENB issues all treasted as QDI.

          On TDA 1099 I have one ENB issue and one BCE issue treated as QDI.

          On IBKR 1099 I have about 50 issues from about 25 issuers, all treated as qualified.

          I willing to hand these over to you if you are continuing to pursue.

          1. Bob, I just posted an update which contains the two Alta securities I own.

            While I have informed Schwab there are other CAN securities impacted, my rep. has been placing his efforts on Alta.

            Let us all try contacting Alta and hopefully someone will receive a reply.
            Certainly, no one at Alta IR responds to phone calls.

            Further if anyone can obtain documentation from ANY of the CAN issues from ANY CAN company, I know my rep. will take that information to challenge the group in San Francisco. (It was not only me the condescending lady spoke down to; he placed an internal ticket on her response tone.)

    2. My advisor told me today that Schwab has begged off on giving a quick answer on these corrections saying their tax department is “very backed up.” I bet they are. Excerpts of our discussions regarding reasoning, etc. have been passed on where appropriate, without attribution.

    3. Thanks for the update TNT. However, I give up. I’ve been thoroughly defeated by Schwab in every way. I leave this battle an utterly broken man.

      I’m going to move my Canadian preferreds to Fido. I think Fido charges $50 to trade foreign stocks. However, they don’t charge a fee to transfer out. So if I want to sell (which I probably won’t unless the CAD appreciates considerably vs. the USD), I can move back to Schwab and let them sell it for me for free.

      Schwab charges $25 for a partial transfer out. I initiated the transfer earlier tonight. I included IPWLO in the batch too. If they take IPWLO and the Canadians without any problems, I’m going to try to transfer all my illiquid utility preferreds in the second transfer batch just to be safe.

      1. Tex, I hope you are successful on a transfer out, but these issues from myself personally and a few others I have talked to have not made headway. Camroc, raised holy hell and got his moved but they were not resets or gray markets.
        I got Ameren Ill moved only after an appeal and them “giving me a break” because it was the last remaining issue in my Roth that would have stayed stranded. I had zero luck in resets and any other OTC issues including the highest level OTCQX such as my Corning Gas issues. This is why I am stuck with 3 brokerages instead of 1. The process of “consolidation” decreased my brokerage accounts from 2 to 3.
        That consolidation idea of mine was only a bit less successful than my UMH-D divi capture flip, ha. Maybe Fidelity will be more accommodative for you.

        1. Thanks Grid. I did call Fido first about the transfer and I was told they can accept these issues. I already have the account open so it didn’t cost me anything.

          I’ll report back on whether this works.

          1. Yes, Tex, please let me know how it plays out. Hopefully the left hand is telling you correctly what the right hand will do for you. You deserve a victory here! Schwab is being hard headed fools… All 3 of my brokerages counted all resets and grey markets QDI…Maybe because any bonehead that has 5th grade reading comprehension knows except them they have to be QDI.

        2. Grid,
          I just picked up the Corning Common with TD. Because of all the concerns here people seem to be having with Schwab, maybe I need to move my account.
          Not just for this one stock, but maybe other illiquid preferred’s I may want to pick up.
          What is your experience or opinion with Fidelity or Vanguard? if you have a account there

          1. Charles, your best bet probably is hanging tight. The tax issue may finally get fixed as they probably just werent prepared for these types of issues. Vanguard is banning purchasing basically most OTC issues of illiquid nature effective in a week.
            I am keeping my TD and will let it all play out. Maybe TD will be good for them.

      2. Tex, Best of luck with the transfer. All I can say, is accountant and lawyers are assisting me with damages from Schwab due to its transfer errors. We have settled on damages but the final straw was Schwab stating it would credit my account the agreed upon sum. I want cash from Schwab.

        For the emotional damages, I guess I will have to go to Judge Judy.

  38. Canadians are starting to crack.

    Or at least the preferred are, specifically the resets. BOC 5-year is at 1.206% at this moment and was under 1.2% earlier in the day. The BOC 3-month is holding tough at 1.613%. BIG inversion.

    Min rates are remaining strongly priced, just as one would expect. Those min rates are almost all now “live” (min rate is above the reset rate absent the min rate).

    Resets, which have hung tough in the last few months while the BOC-5 was dropping almost daily cracked yesterday. My cohort of resets dropped 26 cents in one day, or 1.36%. Down more today.

    I still look for resets to drop more, possibly a lot more. They had held up as rates declined (presumably) because Canadians felt the decline in the BOC-5 was temporary, and would be headed back up. But it’s not. The BOC-5 is right now almost as low as it was in the summer, when average reset prices were MUCH lower than now. That’s why I say they have a lot of room to fall.

    For floaters, if you love high yields and think holding your hand in an open flame is fun, you should be buying. People of sound mine are not. Maybe an exception to floaters based on Prime.

    My idea of the day is FFH.PR.E, aka FRFGF. It reprices on March 1st (which, I think, becomes Feb 28) and even at the very low BOC rate would yield 6.11% if reset today. FFH is Canada’s Berkshire Hathaway. Sort of.

    Current price of CA$13.92 translated to US$10.48, but do your own figures.

    1. Bob, I have been completely out for a bit…But like a doctor doing watchful waiting. One I want is dropping but I need a lot more to start hitting the buy button.

  39. Sharing your frustration …..

    I did something today that I have not done in a long time …. I tried to buy a Canadian preferred OTC. I did so because I wanted to stuff the issue at issue into a Roth at Vanguard. No IBKR option.

    I had a bid in most of the trading day in between the bid and ask, at times even up to the ask, and not a single share executed. I watched literally thousands of shares sell on the TSX under my bid.

    Frustrating, as several of you have reported.

    More, later, on why I’m putting QDI into a Roth and how surprised I was that Vanguard allowed me to enter the trade. Maybe they didn’t really but that would take a call to Vanguard to determine.

    As is, I spend so much time on the phone with Vanguard my wife starts to wonder.

  40. Follow Up on Schwab 1099 CAN issue

    Schwab’s client service, cost basis and representative called me back today. Again the call went over the three steps of payment classifications, with the current issue being the 3rd (after payments a corporation re-characterizes).

    An explanation was given as to the internal process for these re-characterizations. I forgot the acronym (was driving while on this call), but there exist a shadow group that documents when corporations change the tax status of payments.

    There is no written documentation that is given/shared with anyone else within the Schwab organization; only this shadow group is privy.

    Interestingly no one on my call had dealt with this group before. I asked the lady running the cost basis team how it is possible she does not work or know this shadow organization since she is relying on the group to re-characterize the tax status of dividends. And, she in turn communicates with others in Schwab that 1099s are correct.

    I think this lady has little use for me as she ignored my question.

    Regardless, the Schwab shadow group has received an internal ticket and internal upper management directive to provide the documentation that the CAN corporation re-characterized the payments. It is due by close of business Monday.

    Additionally, the Schwab group I am working with called Alta Gas IR. The IR folks told Schwab it is not aware of any re-characterization. The Schwab group I am working with asked for written confirmation. At this point, IR stated it would need to work with Alta’s managers to provide the documentation. Alta committed to responding in writing to Schwab on Monday.

    I hope this is of some small assistance. At least there is a bit of understanding of the mechanics within Schwab and how these classifications are made. And I did state on the call this situation is not unique to Alta but other CAN issues. Schwab said if the Alta payments are in error, it recognizes it has a systematic issue and will correct accordingly.

    I will update once Schwab contacts me on Monday/Tuesday

    1. TN – you deserve a trophy for this. I hope very much Schwab figures out they have erred.

      If they do not, I may contact you privately. I think it will be of interest to the folks at companies like Royal Bank, Brookfield, and Enbridge to know that a major U.S. brokerage is mischaracterizing their dividends. These companies have billions of dollars of securities in the hands of U.S. investors so they have an interest in the matter.

      I think it would also be of interest to FINRA.

      It’s always best to try “nice” first but some times grenades are required.

      1. Bob, confessional here. I slowly liquidated all CAD issues and am presently out. I have been playing the very low yielding fixed ancients flip and buy game. The CAD resets have held up considerably better with yields dropping than I thought. But I had some nice gains on mostand wasnt losing them. Want to see some sell pressure to get back in.

        1. Grid – if I was a dolphin (flipper) like you I’d have done the same. But I will hold most.

          I have a considerable cap gain, which I could lose, but I have no great place to put the cash. So I will ride the waves. With the redemption of STT-C I have cash out the wazoo.

          1. Bob, In defense of your decision, I dont think it is wrong at all. I dont think the resets will capsize like they did last fall when yields were around here. Why? Because fixed issue yields are lower now than then so that should bolster prices of the resets risk/reward wise. BTW, In my full on passive aggressive nature towards Vanguard cutting off most pink sheets, I have bestowed upon them many preferreds to store in possible perpetuity to spit in their eye…CNIGP,IPWLK, MNESP, NRGSP, SBNCM, SOCGP, UEPEN, and UEPCO amongst a few others will stay under their watchful eye despite banning from future trades.

      2. I’ll be honest the amount of money for me isn’t great.

        I read your past post yesterday stating you have given greatly to the cause and asking others to help.

        You were and are correct

        And so far I have made only one call to
        Schwab the follow up has been 100% their initiative. That isn’t bad customer service (or at least from my perspective).

        1. TN – also not a lot for me at stake at Schwab. IBKR, now that’s a different matter.

          But my sense is that Schwab is important for many. It’s been the one brokerage that has made getting OTC symbols easy. It’s an irony that they turn out to be the one brokerage (apparently) that can’t figure out QDI.

          It also occurs to me that the common and the preferred divis would get the same tax treatment. They are both either QDI or not. How silly to think the common shares of huge and profitable companies, listed on the NYSE, would not be QDI. The point evidently escapes the people at Schwab.

    2. Interestingly my contact is also pursuing Alta as a first example from my list to her. If there is enough kerfuffle from enough investors they may actually fix this.
      I think it is questionable that any of the Canadian issuers would have told Schwab or anyone else how their dividends should properly be characterized under US law in the first place, let alone, thereafter, all of our issuers who had supposedly done so telling Schwab they had changed their going-forward characterization. I expect most all would have said, “We think they should/might qualify but check with your US tax advisor.”

      1. The only issues I own at Schwab are ALA and EMA. I also own ALA at Vanguard, TDA and IBKR, and EMA at IBKR.

        Vanguard, TDA and IBKR all show ALA and EMA dividends as QDI. Schwab is the only one of the four brokerages showing these issuers an non-QDI.

        Someone has crow to eat.

    3. Thank you for sharing this, TN. If you have a contact that ends up being responsive and corrects the classification, I would appreciate knowing the phone number of the group you are talking to. When I called Schwab Tuesday of this week I was directed to someone on the “tax team” who didn’t know why some dividends were classified as QDI and some weren’t.

      1. Alan. If the guy at Schwab that is driving this process (and he is trying, to the extreme aggravation of his tax cost accounting peers) I will share. It would be good if all concerned would send kudos

        But of course let us see what evolves Monday Tuesday

        I actually emailed him a thanks and promised I would call the authorities if anything suspicious happens to him over the weekend. (He was told he should not call CAN IR , he replied “well, I had to call Alta 3 times before they answered so it’s a good think I didn’t know I should not call on behalf of Schwab “.

    4. TNT – thank you very much! I’ve been trying to contact them as well and I haven’t been getting anywhere at all. If they agree that there’s a problem, would you be willing to provide them a list of all the Canadian preferreds with OTC symbols? We can provide you with the list.

      1. Tex, of course I will assist. But I think Schwab will correct all issues if it discovers the one issue is in error.

  41. Duplicate Post from Brokerage Section.
    Schwab Qualified CAN Dividend Issue.

    Spoke today briefly with Orlando management, which third partied in cost basis team. Cost basis team was adamant that Schwab is correct. The Schwab system characterizes dividends through three means: 1. expected status, 2. received status, 3. corporate notification of status.

    The “Paid/Adjusted in 2020 for 2019” reflects Schwabs’ system initially recorded the dividends as qualified. Then corporate notices were received which altered the status to non-qualified.

    I told my Schwab representative, I did not believe the cost basis department had received any such documents. The lady representing cost basis became quite defensive.

    My representative tomorrow will reach out to each of the corporations which I have securities “paid-adjusted” to ask for definitive confirmation that the underlying corporation actually sent to Schwab a notice to change from qualified to non-qualified.

    I hold a few but not the totality mentioned here on the ILL site. Perhaps, all affected parties asking for confirmation from Schwab on the corporation’s notification to change the status of the dividends would be prudent.

    I have incurred damages with Schwab on a totally different matter and negotiations are ongoing. Schwab’s current offer to reimburse, while not what I would wish, I will probably accept. The emotion toil and time is overwhelming dealing with Schwab’s errors. And, they are reimbursing my accounting and legal fees.

    The only reason I was able to get these folks on the phone over the CAN dividend issue is this ongoing matter with Schwab.

    I hope this helps and I will post the results from Schwab when it provides me the documentation.

    1. TN – I have about a dozen U.S. brokerage accounts with 4 different brokerages and I have received the 1099s for all of them. I hold Canadian preferred as USOTC tickers at 3 of the 4 brokerages, while the fourth holds them as actual TSX issues.

      Every one of them, except Schwab, got it right, meaning they treated every single issue as QDI. About 50 issues in total. TDA got it 100% right, Vanguard got it 100% right, IBKR got it 100% right, Schwab got is 100% wrong.

      And Schwab wants to defend that position? Schwab wants our business?

      Feel free to use this info with the Schwab lady. I’ll even talk to her.

    2. I have in inquiry going on through my independent advisor who was initially told the same lie (“We classify them that way because the issuer told us they were non-QDI”) by her Schwab contact. If this doesn’t get fixed I’m clearly going to have to move a lot of assets over to Vanguard.

      1. I also use Vanguard and IBKR. With a Goldman’s advisory. All brokerages have their good and bad. Vanguard doesn’t offer many of the CAN issues

        I think early next week documenting the status will be completed

        Personally I would not move an account solely over this.

  42. Does anyone have conclusive evidence that dividends on our Canadian preferreds that are “eligible dividends” in Canada and taxed to us by Canada at a 15% rate are, in fact, eligible by some rule or guideline for QDI treatment for US taxpayers? It seems obvious they should qualify as they are not being paid by “pass through” entities like MLPs, REITs, publicly traded limited partnerships, etc. but I am being challenged to provide something other than general business judgment to get Schwab to reclassify them.

    I’m always a bit surprised when a basic question with a (to me) obvious answer has to be documented and I can’t come up with a source.

    1. Here is the information I previously posted in the broker section of the site.

      For anyone who will be contacting Schwab about QDI classification of Canadians and OTC traded illiquids, I thought the following may be helpful to cite in your discussions/correspondence. Please see the following excerpts from IRS Publication 17 (https://www.irs.gov/publications/p17#en_US_2018_publink1000171596).
      ===============================================================
      “Qualified Dividends

      Qualified dividends are the ordinary dividends subject to the same 0%, 15%, or 20% maximum tax rate that applies to net capital gain. They should be shown in box 1b of the Form 1099-DIV you receive.
      The maximum rate of tax on qualified dividends is the following.
      • 0% on any amount that otherwise would be taxed at a 10% or 15% rate.
      • 15% on any amount that otherwise would be taxed at rates greater than 15% but less than 37%.
      • 20% on any amount that otherwise would be taxed at a 37% rate.

      To qualify for the maximum rate, all of the following requirements must be met.
      • The dividends must have been paid by a U.S. corporation or a qualified foreign corporation. (See Qualified foreign corporation , later.)
      • The dividends aren’t of the type listed later under Dividends that aren’t qualified dividends , later.
      • You meet the holding period (discussed next).

      Qualified foreign corporation.

      A foreign corporation is a qualified foreign corporation if it meets any of the following conditions.
      1. The corporation is incorporated in a U.S. possession.
      2. The corporation is eligible for the benefits of a comprehensive income tax treaty with the United States that the Department of the Treasury determines is satisfactory for this purpose and that includes an exchange of information program. For a list of those treaties, see Table 8-1.
      3. The corporation doesn’t meet (1) or (2) above, but the stock for which the dividend is paid is readily tradable on an established securities market in the United States. See Readily tradable stock , later.
      Readily tradable stock.

      Any stock (such as common, ordinary, or preferred) or an American depositary receipt in respect of that stock is considered to satisfy requirement 3 under Qualified foreign corporation , earlier, if it is listed on a national securities exchange that is registered under section 6 of the Securities Exchange Act of 1934 or on the Nasdaq Stock Market. For a list of the exchanges that meet these requirements, see http://www.sec.gov/divisions/marketreg/mrexchanges.shtml.”

      Table 8-1 lists Canada as a country that the US has a treaty with.
      ===============================================================
      “Dividends that aren’t qualified dividends.

      The following dividends aren’t qualified dividends. They aren’t qualified dividends even if they are shown in box 1b of Form 1099-DIV.
      • Capital gain distributions.
      • Dividends paid on deposits with mutual savings banks, cooperative banks, credit unions, U.S. building and loan associations, U.S. savings and loan associations, federal savings and loan associations, and similar financial institutions. (Report these amounts as interest income.)
      • Dividends from a corporation that is a tax-exempt organization or farmer’s cooperative during the corporation’s tax year in which the dividends were paid or during the corporation’s previous tax year.
      • Dividends paid by a corporation on employer securities held on the date of record by an employee stock ownership plan (ESOP) maintained by that corporation.
      • Dividends on any share of stock to the extent you are obligated (whether under a short sale or otherwise) to make related payments for positions in substantially similar or related property.
      • Payments in lieu of dividends, but only if you know or have reason to know the payments aren’t qualified dividends.
      • Payments shown in Form 1099-DIV, box 1b, from a foreign corporation to the extent you know or have reason to know the payments aren’t qualified dividends.”
      ===============================================================
      To summarize, if you received a dividend from a Canadian preferred stock that is traded OTC (pink or grey), this company should appear to be considered a qualified foreign corporation due to the US/Canada tax treaty. The OTC aspect should be irrelevant due to the US/Canada treaty. If you received a dividend from an illiquid utility stock that is traded OTC (pink or grey), the dividend should be qualified since it is paid by a U.S. corporation.

      Just a word of warning about changing the qualified treatment on your tax return. As most of you already know, your 1099 gets reported to the IRS and they can very easily and automatically compare the 1099 to your 1040 and see that you changed the dividend income to qualified. This can result in a notice or audit. You could receive a notice saying you own additional tax as well as penalties and interest. Is dealing with an IRS notice or audit something that anyone really wants? Would you have to hire representation (attorney/CPA) and how much would that cost?

      I think it makes sense to fight this pretty hard with Schwab and try to get them to issue amended 1099s. At a minimum, they should have to explain how they are arriving at their conclusions that these dividends are non-qualified.

      Also, see below for the Internal Revenue Code that defines qualified dividend income. This would be cited as IRC Sec. 1(h)(11). Here is a link: https://irc.bloombergtax.com/public/uscode/doc/irc/section_1

      (11)Dividends taxed as net capital gain
      (A)In general
      For purposes of this subsection, the term “net capital gain” means net capital gain (determined without regard to this paragraph) increased by qualified dividend income.

      (B)Qualified dividend income
      For purposes of this paragraph—
      (i)In general
      The term “qualified dividend income” means dividends received during the taxable year from—
      (I)domestic corporations, and
      (II)qualified foreign corporations.
      (ii)Certain dividends excluded
      Such term shall not include—
      (I)any dividend from a corporation which for the taxable year of the corporation in which the distribution is made, or the preceding taxable year, is a corporation exempt from tax under section 501 or 521,
      (II)any amount allowed as a deduction under section 591 (relating to deduction for dividends paid by mutual savings banks, etc.), and
      (III)any dividend described in section 404(k).
      (iii)Coordination with section 246(c)Such term shall not include any dividend on any share of stock—
      (I)with respect to which the holding period requirements of section 246(c) are not met (determined by substituting in section 246(c) “60 days” for “45 days” each place it appears and by substituting “121-day period” for “91-day period”), or
      (II)to the extent that the taxpayer is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property.

      (C)Qualified foreign corporations
      (i)In general
      Except as otherwise provided in this paragraph, the term “qualified foreign corporation” means any foreign corporation if—
      (I)such corporation is incorporated in a possession of the United States, or
      (II)such corporation is eligible for benefits of a comprehensive income tax treaty with the United States which the Secretary determines is satisfactory for purposes of this paragraph and which includes an exchange of information program.
      (ii)Dividends on stock readily tradable on United States securities market
      A foreign corporation not otherwise treated as a qualified foreign corporation under clause (i) shall be so treated with respect to any dividend paid by such corporation if the stock with respect to which such dividend is paid is readily tradable on an established securities market in the United States.

      (iii)Exclusion of dividends of certain foreign corporations
      Such term shall not include—
      (I)any foreign corporation which for the taxable year of the corporation in which the dividend was paid, or the preceding taxable year, is a passive foreign investment company (as defined in section 1297), and
      (II)any corporation which first becomes a surrogate foreign corporation (as defined in section 7874(a)(2)(B)) after the date of the enactment of this subclause, other than a foreign corporation which is treated as a domestic corporation under section 7874(b).
      (iv)Coordination with foreign tax credit limitation
      Rules similar to the rules of section 904(b)(2)(B) shall apply with respect to the dividend rate differential under this paragraph.

      (D)Special rules
      (i)Amounts taken into account as investment income
      Qualified dividend income shall not include any amount which the taxpayer takes into account as investment income under section 163(d)(4)(B).

      (ii)Extraordinary dividends
      If a taxpayer to whom this section applies receives, with respect to any share of stock, qualified dividend income from 1 or more dividends which are extraordinary dividends (within the meaning of section 1059(c)), any loss on the sale or exchange of such share shall, to the extent of such dividends, be treated as long-term capital loss.

      (iii)Treatment of dividends from regulated investment companies and real estate investment trusts
      A dividend received from a regulated investment company or a real estate investment trust shall be subject to the limitations prescribed in sections 854 and 857.

    2. Tim, did you look at my link below on your previous post? Here is an excerpt from the A series from Altagas…
      By notice in writing on AltaGas’ website, AltaGas has designated all dividends paid by AltaGas after July 1, 2010 to be “eligible dividends” within the meaning of the Tax Act unless otherwise notified.
      Dividends received by a Holder who is an individual (other than certain trusts) may give rise to a liability for alternative minimum tax.
      Dividends (including deemed dividends) received on the Series A Shares or the Series B Shares, as the case may be, by a Holder which is a corporation will be included in computing the Holder’s income and will generally be deductible in computing the Holder’s taxable income. A “private corporation”, as defined in the Tax Act, or any other corporation controlled (whether by reason of a beneficial interest in one or more trusts or otherwise) by or for the benefit of an individual (other than a trust) or a related group of individuals (other than trusts), will generally be liable to pay a 331/3% refundable tax under Part IV of the Tax Act on dividends received (or deemed to be received) on the Series A Shares or the Series B Shares, as the case may be, to the extent such dividends are deductible in computing its taxable income.
      The Series A Shares and the Series B Shares will be “taxable preferred shares” as defined in the Tax Act.

      They just arent going to say “qualified dividend” that rarely is stated flat out anywhere as it depends on which entity, country, and tax situation of the buyer. But its C Corp dividends, they earned the required profit, its no return on equity, so it qualifies for qualified income.

      1. Just wanted to highlight, when mentioning Tax Act, they are referring to the Canadian IRC. Canada has a similar concept to what we have with QDI. Basically that it is paid out of earnings & profits (way oversimplified). Just for fun, suppose these were not paid out of E&P, then they should be getting reported as return of capital and they should reduce your tax basis in the investment. In no case that I can think of, should these be getting reported as non-qualified.

        “In the opinion of Counsel, subject to the provisions of any particular plan, the Series A Shares, if issued on the date hereof, generally would be qualified investments under the Income Tax Act (Canada) (the “Tax Act”) for certain tax-exempt trusts. See “Eligibility for Investment”. “

      2. I’m a CPA…I’m starting to think that I might have a bright future in defending Schwab clients in IRS audits on dividend classification. LOL

        If you’d like to talk further, my handle on Seeking Alpha is Tex_1.

        1. Thanks, Tex, yes I saw all of that. Unfortunately with respect to US tax treatment of dividends it just said, “AltaGas anticipates that its dividend paid to U.S. investors will be considered to be “qualified dividends” as those terms are defined in the U.S. Internal Revenue Code. If you have any questions regarding the taxation of Canadian dividends in your local jurisdiction, please contact your local tax advisor.” Suggestive but not definitive for a broker/dealer who is resistant to making changes.

          I’ve forwarded your treatise on the subject (which I agree with) to my advisor who will probably send it to Schwab if she needs to. I expect she will. It was interesting to get a glimpse into the Canadian tax system researching the topic today.

          Incidentally, I’m a seasonal tax preparer, enjoying the part-time work.

          Thanks very much.

    3. Thank for posting your question, Tim. I am having the same issue with Schwab. I believe there is often a comment in the prospectus saying that dividends would be qualified, although I didn’t find it in a cursory look at the prospectus for EBBNF.

  43. I scanned this section, but could not find a definitive answer. Are dividends from ERRAF qualified? Fido has shown them as not.

    Thanks.

  44. Here is a nice succinct article on NVCC: https://www.getsmarteraboutmoney.ca/invest/investment-products/complex-investments/understanding-key-features-in-banks-debt-and-preferred-share-offerings/
    I had been wondering why there is not a rate premia for an issue that may totally convert into common shares, where the details of the conversion are not known until somone wants to make it up when a govt insider decides to make it happen. Consider debt and mortgage performance when rates rise.
    I suppose the lower rate discount is that you MAY get SOMETHING, eventually and non-income producing. Small recompense and a request for cultural bias of ‘trust-us’ to the men with big hats at the banks. You will notice that senior debt still stays in place. HMM. How come I can’t buy that when it is issued, right off of my electronic platform?
    Seems to me TBTF is still a big issue if banks have this much destructive potential. Don’t worry, nothing will be changed until this potential fiasco becomes a reality someday. This IS, by FACT, one goverment’s solution. We ain’t got none.

    1. Joel – NVCC applies to only the banks. The chances of a Canadian bank getting to the point the preferred would be converted is small. If it ever happened the preferred would be in trouble without NVCC.

      If you prefer the senior debt at 2%, help yourself.

      BTW, European issuers have the same NVCC concept in their markets.

  45. IBKR and Canadian preferred …..

    Congrats to IBKR for getting it right. Everything that was QDI was so labelled. They even went so far as to split out that that which was non-QDI because of an inadequate holding period (a very small amount because I sold some shares).

    Still working through the quirks of IBKR, and since they do get the QDI right I will invest the time to get IBKR fully figured.

    All payments from IBKR were into non-Qualified accounts, so 15% withheld. I have not tested whether they would get the withholding right in the case of a non-qualified account (meaning zero withholding).

    Have some other thoughts I will post when I have the time.

    In the meantime, I’ll be waiting for Schwab to get it right. I’ll be waiting for that corrected 1099.

    1. I have to admit that I wasn’t very familiar with the QDI holding period qualifications for preferred shares until this issue came up: “For preferred stocks, the shares have to be held for over 90 days during a 181-day period that begins 90 days before the ex-dividend date.” A little mind-bending, I have to think about what that period of time is, exactly.

      This rule doesn’t explain why Schwab has misclassified all my Cd preferred dividends, even on April & June lots, however, or why they gave favorable treatment on Cd preferred dividends paid on issues bought directly on the TSX received in 4Q19. Waiting for a response to inquiries to Schwab.

      1. Tim – How are you buying Canadian preferreds directly on the TSX through Schwab? When I spoke with the global team people, I was told that wasn’t an option. Did I get bad info?

        Also, I don’t think they typically incorporate the holding period rule when filling out your 1099. I believe there is usually a disclaimer that you are required to make adjustments yourself if the holding period rule is not correctly applied.

        1. Yes, I believe you got bad information, I’ve done it probably a half-dozen times without a hitch or pushback and have gotten good, prompt service, usually buying $5-10K USD worth per order. The global desk doesn’t seem that familiar with the Canadian markets, maybe they don’t do much trading there, so I have the TSX information on the stock I’m buying handy when I talk with them (symbol, price, how much I want to spend in Cd$) to make the transaction go smoothly. This is the contact number I have: Schwab Global Investing 800-992-4685. The one weird thing is that when you make a limit order it shows up on Order Status as a market order, but I was warned ahead of time so I wouldn’t panic. Execution doesn’t happen as quickly as you think it should (hours long delays even if offering above the bid price) but you can see individual lots (most orders fill in 100 share lots) purchased and the price improvement function operates normally so I trust it. There is a $4.95/order charge as I recall, it isn’t free.

          Thanks for the additional information on holding periods, I will bear that in mind…and post the results of my attempt to correct when that happens. Thanks, Tex.

  46. Short update on Canadian preferred.

    Not much has changed from last week. Very little movement in interest rates. Mins are fully priced and (for me) just short term plays at this point. I have buy and sell points on each of the issues that reset/become callable within 1 year.

    Fixed are fully priced, too. Watch call risk. Most fixed issues are callable on 30 days notice.

    Resets remain where the action is. The “safest” issues will be those that have recently reset and have almost 5 years ahead of them at known interest rates. ATGAF, FXFLF, and EBGEF are examples. There are a few more that will be joining the ranks of the recently reset soon.

    The best option adjusted yields among the resets are available on the “middle aged” issues, those being issues that reset in (say) 2-3 years. They carry the most interest rate risk, which is why the return is out sized.

    The average stripped yield among resets is 5.72%, and the reset yield just a shade higher at 5.73%.

    Floaters are yielding 6.05% but carry a lot of risk to the downside, in my judgement.

    I am a watcher at this stage. I’m not thrilled about yields available in the U.S. market but I haven’t been adding to my out sized Canadian position recently. Cash accumulates and I have made selective equity buys.

    Everyone who messaged me about hedging CA$ risk has been answered. If I missed you, please message me again.

    1. Bob, I think you are on target with your assessments above. I think you may be give a harsh warning IF you overlayed the US market issues on your assessments. Just a cruise down Tim’s new spreadsheet (Thanks Tim!!) and focus on the Floats and Fix to Floats somewhere out over the next 2-3 years are downright scary. Something will give. You HAVE to BELIEVE that rates will be sideways or down over a very long time. At least the CN’s are worth the look and thorough analysis.
      The buying and selling behaviors are indicative of faith placed somewhere and may not bring results.
      I have closed in on a third, third, third allocation for the IG pref sector for me: 5 Resets decent ladder, 3 floats and fixed. Over time, can it perform as a self performing, re-balancing thingamajig? Some up, some down, some sideways BUT all producing income while ignoring the day to day NAV?
      As a commentary: Seems I am forced into supporting risk assets in someone’s business. Full social exposure and nakedness. May point to zero rates as a POLICY for a long time?! JA

    2. Update on Schwab fixing QDI classifications on our Cd preferred issues. My advisor’s staff member tells me, “After my email below, I contacted Schwab’s tax department and just chose one security for them to focus on at this point to help determine the details of what is occurring. I chose Altagas Ltd. Schwab informed me that they do not initiate these changes, they come from the company themselves. They simply report what the company provides to them.” I think this is BS, and Schwab is mishandling data from a vendor data feed. On the good side, I think if I document the QDI status I can get things fixed. Where is the best place to get this documentation? I don’t think that QuantumOnLine lists the Canadian issues. Is there a central place to go, or do I need to go to each company’s website to find links to the original prospectus? Willing to do leg work, thanks for suggestions.

      1. I wrote to the client advocacy team (clientadvocacyteam@schwab.com). Below is the body of the message I sent. Nothing has been resolved but they tell me they are working on it.
        ==============================================
        I received my 2019 Form 1099 from Schwab and I noticed dividends from the following preferred stocks were classified as non-qualified: IPWLO, FXFLF, FRFZF, FRFGF, and TMSOF.

        IPWLO is a preferred stock from Indianapolis Power & Light which is a subsidiary company of The AES Corporation (ticker symbol: AES). I believe the dividends of IPWLO should be qualified pursuant to IRC Sec. 1(h)(11)(B)(i)(II).

        FXFLF (TSX ticker symbol: FFH.PR.C), FRFZF (TSX ticker symbol: FFH.PR.D), and FRFGF (TSX ticker symbol: FFH.PR.E) are preferred stocks from Fairfax Financial Holdings (TSX ticker symbol: FFH; US OTC symbol: FRFHF). TMSOF (TSX ticker symbol: TRI.PR.B) is a preferred stock from Thomson Reutrers (ticker symbol: TRI). I believe these preferred stock dividends should be qualified pursuant to IRC Sec. 1(h)(11)(B)(i)(II). Fairfax Financial Holdings and Thomson Reuters are Canadian corporations. Table 8-1 of IRS Publication 17 (https://www.irs.gov/publications/p17#en_US_2018_publink1000171596) lists Canada as a country having an income tax treaty with the United States which satisfies requirement 2 under the “Qualified foreign corporation” section of the Publication.

        I have attached IRC Sec. 1(h) for reference. I respectfully request that my 2019 Form 1099 be corrected prior to the unextended filing deadline of April 15, 2020. Please feel free to give me a call at the number below if you wish to discuss.

  47. I just got my 1099-DIV. Schwab reported all my dividends from Canadian preferreds last year as non-qualified. I own the 5 character OTC symbols. Just curious what your statements have shown from other brokers?

    1. I got my Schwab 1099, too. The only Canadian issues I own there are ALTGF, TGAPF and ERRAF. All were handled incorrectly.

    2. Tex – do us both a favor if you have time and call Schwab. I looked at my monthly statements and they list the Cdn pref divis correctly as QUALIFIED. Only on the 1099 do they get it wrong. They just need to do a fix.

      1. I’m probably not going to have time this month as I’m in my busy season at work. Here is the contact info that I have for a manager in the client advocacy team:

        I may be reached Monday-Friday at 1-800-468-3774, extension 48768, between the hours of 11:30 AM and 8:00 PM Eastern or; via email me at clientadvocacyteam@schwab.com.

        Sincerely,

        Dawnn Lone
        Resolution Manager | Client Advocacy Team
        1-800-468-3774 / Fax 1-800-977-0122
        211 Main St
        Mail Stop: PHXPEAK
        San Francisco, CA 94105

        1. If someone else is holding OTC Canadian preferreds through another broker and is sure that they get it right (qualified), I may want to just transfer the holdings to another broker instead. I’d be happy to send my contact info so someone could get a referral bonus.

          1. Tex, It may not be that easy. If they view these resets as typical US pink sheets (which where they trade at) you run a great chance of the brokerage you are moving to disallow any transfers of these issues. This happened to me. Instrad of consolidating from 2 brokerages to 1, I now have 3 brokerage accounts thanks to the pink sheets….A good plan that went bad….

            1. I called Fidelity some time ago and they told me that they would be able to accept some pink sheet issues as transfers. I only asked them about a few that I own but they all sounded like they could be transferred. Did the person I was speaking with know anything? Who could know? But they told me they checked. If I’m not going to get Schwab to give me QDI reporting, then I figure what do I have to lose. I was told that the fee to transfer a basket of securities out of Schwab is $25.

              1. Tex, I suspect you ultimately only will find out once you finish the process. My TD local broker thought they would transfer them. Then a week later he had to give me the bad news that most didnt. Then we appealed a level above and he engaged also. They accepted a couple more mostly to fully move my Roth cleanly as they largely picked it apart already. But got nowhere with the rest of them.
                Plus maybe Fidelity isnt as selective, and they will accommodate you. Maybe if things arent going your way you can power play them and say take them all, or take nothing.

                1. RE: transferring brokerages …

                  I have transferred accounts quite a few times, some of the very simple and some exceptionally complex.

                  In my experience, except for very straight forward accounts, not crossing borders, the receiving brokerage always gives you grief over one thing or another. In quite a few cases I’ve had to liquidate positions that couldn’t be transferred.

                  Even when you ask in advance, even when they have the full list, I have never been able to get an answer from a brokerage that I could rely on 100%. It just seems to be one of those things that brokerages cannot do. The people you deal with are sales orientated but the people who make the decisions are compliance oriented.

      2. Bob – I wonder if Schwab is basing qualified vs. non-qualified off of trading on pink vs. grey market? All 3 of the symbols you mentioned (ALTGF, TGAPF and ERRAF) are grey. In 2019, I received dividends through Schwab from FXFLF, FRFZF, FRFGF, and TMSOF. These were all marked as non-qualified but they are grey market.

        I looked up some of the issues I currently own and several are pink when I look them up on https://www.otcmarkets.com/. These include CUTLF, INFFF, BKFPF, BROXF and others. The only problem is that I haven’t received dividends from these yet that have been reported on a 1099 so I can’t know for sure.

        1. A while back someone posted on here they were told by Schwab that if it’s not listed on an exchange it can’t be QDI. So that may be the position Schwab has taken, although it does not seem to be correct.

          I’ve mentioned on here a few times that the SLMNP divvys have been showing as non-QDI. Although I was hoping it would be corrected on the 1099, it was not 🙁

          Also hoping someone with the time and inclination will take this up with Chuck .

        2. RE: Cdn pref and QDI …..

          From actual experience: Vanguard gets them right (QDI), not that you can buy them any more. TDA gets them right. Schwab gets them wrong. All of them.

          My 1099 from IBKR is due out on Feb 14. That’s the big one for me. They have listed Cdn pref divis as qualified all along, so I’m just waiting to be sure the 1099 treatment is the same. Will let you know.

          My holdings at Schwab are small. This won’t be worth a day of my time to straighten out. I was likely looking at closing my Schwab account this year and this may be the catalyst.

          Cheers from the Lying Dog-faced Pony Soldier State of Delaware

        3. Don’t know, Tex. I don’t know Schwab’s algo for determining QID. But if Vanguard and TDA can get it right then whatever Schwab is doing is not the right thing.

          Getting brokerages to fix errors, even manifest errors, is a lot of work.

          1. Bob, You gotta love Ally brokerage. Bless em they try hard, but rarely hit the mark. They classified all my dividends as QDI even if I didnt hold them long enough to qualify. They got some trust preferreds correct but they also have credited all my AFFT and AFFS payments as qualified dividends. The only small problem is the payments are interest from bonds, ha.

        4. Tex, It could be the problem. I noticed any grey Canadian reset had 15% withheld in tax free and all pink sheets in taxable did not have anything withheld. These are the same issues as their sisters who are pinks sheets. They just get marked a different way and it screws the entire process up.
          But, my grey market Fairfax issues in taxable were correctly treated QDI on my consolidated report.

          1. Grid – Thanks. Which broker did you hold the grey Fairfax issues through?

            Based on what others in this thread have reported, I’m not sure grey vs. pink is the problem at Schwab for Canadians. However, grey vs. pink may matter for why IPWLO and SLMNP are non-qualified at Schwab.

    3. The weird thing is, mine were handled wrong in one account – Altagas, BCE, Emera, Enbridge, Fairfax, Fortis, Northland, and a long list of various ITFs and mutual funds – but the same companies’ dividends were treated correctly in another account. I don’t understand this at all.

        1. Also Schwab. I was confused. Looking closer at the reports they are scheduled as qualified dividends paid in 2019, but then are zeroed out as “Paid/Adjusted in 2020 for 2019” and moved to the schedule of unqualified dividends. ALTGF, NPIWF, BECEF, ERRAF, EBGEF, FXFLF, FTRSF, etc. It’s like they deliberately changed the classification. Too busy today to call Schwab but will do it tomorrow. This is too big to ignore.

          1. Tim – that is exactly how Schwab handled me.

            Please post whatever the discussion and outcome of discussions with Schwab.

            1. Bob,

              I have an independent advisor on some of our accounts, and am going to try going through them first to get things fixed rather than take my chances on the service-line representative accepting what I tell them. The advisor has hundreds of millions of assets placed at Schwab so I figure their leverage in getting attention to the problem should be better than mine. Will let you know how it goes.

    4. I also use Schwab and had the following dividends shown as non-qualified: Schulman SLMNP, Enbridge EBBNF and Alabama Power ALP-Q. I am waiting to see if these are changed in the corrected 1099 that is to come out in a couple of weeks.

      1. I also use Schwab and all the following dividends are shown as non-qualified: SLMNP, CNUTF, ERRAF, EBBNF, EBGEF, FTRSF…but yet the dividends on the common shares of Enbridge ENB are shown as qualified. I have emailed a summary to a Vice President at Schwab who has assured me that he would help resolve. I will post any findings here.

        1. Please do, sman. A whole ton of folks here are in the same boat.

          The reason they got ENB common correct is that it’s traded on the NYSE, SEC registered, the whole 9 yards. It’s the preferred trading OTC that they haven’t gotten right (yet).

        2. Short update on my week and a half battle with Schwab…SLMNP now classified as qualified (2-21-20 revised tax statement), but unfortunately all of my previously listed canadian preferreds still listed as non-qualified. Frustration here is off the charts but will continue to be diligent and hopeful. I have been with Schwab since 1987 and have always received very competent, prompt, and professional customer service. Their response and handling of this is an unprecedented low in my experience.

  48. Thanks Bob for the quick link to CH rates.
    I do not know whether I am just reading form into the clouds, but spending time with the CN resets and searching for pattern, I seem to notice a “risk on” with interest rates higher approaching US election cycle, esp 4 year pres cycle and “risk-off” with lower rates during odd years.
    Same basis build for when Min Rate Issues we brought to market.
    Can I play the smoothing or return to median? Hmmm. Of course, everyone’s desire is to make the smartest play possible or just be convinced of personal genius!
    Strange mental conclusion, but not scientific. May be I need some sunshine and less caffeine?

    1. Joel – Canadian rates tend to follow US rates so to the extent we have a rate cycle related to US presidential elections Canada may have one, too.

      As far as risk-on and risk-off go, some preferred are very much risk on, those being issues like Enbridge, Altagas, etc. Risk off issues would be insurers.
      For resets the most important number I follow is the spread between the BOC-5 and yields (current and reset) on resets. The fellow who does prefblog computes them monthly and published charts, but they are a month behind usually.

  49. Does anyone have symbols that work on IBRK for:
    five year CN bond?
    3 mo t-bill?
    I’ve tried everything as I am still honing a watch (at a glance) list
    Thanks in advance. JA

    1. Joel – I get them at marketwatch. Works just as well and live updates.

      Use “canada 5” or “canada 3” as a search terms (not ticker symbols). “USDCAD” as a ticker symbol will get you the exchange rate. Also live and updating.

        1. Exactly. And they have the same chart for the BOC 3-month.

          I just leave them open and running all day. Along with US treasuries and US$-CA$ exchange rate.

  50. Is anyone out there seriously interested in hedging CA$ exposure? CA$ exposure would include all the Canadian preferred other than the 4 Enbridge and 1 Altagas issues that are U.S.-denominated, and equities. Even if they trade on the NYSE in US$.

    The answer for nearly all of you should be “no”. But if it’s “yes” and you want some direction on hedging, message me on Shrinking Alpha (same nic).

  51. The week in Canada …..

    The BOC-5 year finished up 5.8 bps on the week while the BOC-3 month went essentially unchanged. Inversion is 30 bps.

    Min rates as a group were up 10 cents in price but dropped a few bps in yield. Best short term plays, to my eye, remain BEP.PR.G or CU.PR.I, at 25.20 stripped or below. BEP is a Bermudian partnership, so beware of tax treatment.

    Story is the same with fixed rates. That is this weeks post:

    https://docs.google.com/spreadsheets/d/1KHkmrZPBR7H-c1K6onR7Ko2nB-QmQ-v00hdOuIL-i0Y/edit?usp=sharing

    Watch call risk on those fixed rates.

    Resets showed a lot of volatility but in the end were up 16 cents on average, a good size move. Keep your eye on issues that have very recently repriced or are about to do so as those give you 5 years at a known interest rate. Issues and their new coupons (not yields) include EMA.PR.F (4.202%), ENB.PF.C (3.938%), TD.PF.C (3.876%), and MFC.PR.N (repricing Feb 18).

    Floaters were up 15 cents on the week and remain the place to test one’s bravery in exchange for promises of out sized yields. +7% on ALA, HSE and NPI.

    And finally, a miracle. A new issue, the first in something like a year. IFC is selling a new fixed with a 5.40% coupon. Just above where the 2 existing issues are yielding. But at least the Obituary for Canadian preferred remains on the shelf, for now.

    1. Bob,

      Thanks for all the sharing of your spreadsheets. Your spreadsheets are awesome. As are your insights into this very different market.

    2. Thanks Bob! Here’s my take: you don’t see big outliers in stripped yield so it would seem to make sense to grab the highest quality possible with the longest call protection and highest coupon that’s trading below par.

      CU.PR.H/CUTLF looks like one of the best options available to me. Pfd-2H, cumulative and the longest track record of annual dividend increases on the common of any Canadian publicly traded company (47 years).

      It may be worth getting an OTC symbol created for the new IFC preferred too depending how it trades out of the gate.

      1. Tex – among fixed rate issues the same issuer yields should be very close and are. CU.PR.H trades at a slight premium in yield to the others because it has the highest coupon and would, presumably, be the first called.

        If rates moved and stayed lower call risk could become an issue. From that perspective, the lower coupon issues come with less risk if you are wanting to protect against a lower for longer scenario.

  52. EBGEF vs EBBNF (again)

    Why in the world should EBBNF be worth the same dollar price as EBGEF in today’s market???? My initial inclination on what to do today was to lighten up on my relatively small percentage of holdings of Canadian resets but given I could swap 500 EBBNF into 500 EBGEF at the identical 20.35 price, I decided to swap instead of sell… This has got to be reversible for at least 65 cents some day soon imho…. What made this even more weird was that today vs TSX.com prices and trades, I paid up to buy EBGEF… With EBBNF’s 6.09% current yield only locked in until 9/22 vs. EBGEF’s 6.60% current yield being good until 3/1/24, I’ll easily trade in EBBNF’s higher +3.15% reset premium for EBGEF’s +2.82% reset premium 1 1/2 years later. If I have to go through the folly of trying to predict long term interest rates, I’ll continue to believe rates in general will be lower 9/1/22 than on 3/1/24, enough so to offset the differences in reset premiums and then some… Opinions? BTW, this was done in a taxable account – enough change to not be considered a wash sale?

    1. 2wr (& others) RE: ebbnf and ebgef …..

      Worth noting here that Canadian preferred give investors a remarkable opportunity to vote with their financial feet. Whatever your view of interest rates there is an issue suited to your views. Just looking at ENB, one can pick min rate issues, fixed, resets and floaters. It’s a financial Smorgasbord.

      Withing the reset category one has no less than 18 ENB issues to choose from. All the same issuer and credit, but each one with a different spread and a different reset date. If you think the market has it wrong, or you want to lean in a particular interest rate direction, you have your pick.

      To stick to just the two issues at issue, look at all the metrics. Current yield, reset yield, spread, and time to reset. On current yield EGBEF wins. On reset yield EBBNF comes out on top. If one does a time weighted average of current and reset, or better yet an option adjusted comparison, it’s more revealing than looking at current or reset yield alone.

      I agree with your conclusion, that said. Any way you cut it, at present prices of course, EBGEF is the better issue to buy. If I was putting in new money that’s where it would go. But trade them, in a taxable account? I’m less sure. When you trade in and out in a taxable account you often lose QDI status on the divis and turn LTCG into STCG. Taxes can overwhelm any gain from trading issues.

      Just my thinking!

      PS – the single best ENB reset to buy now is ENB.PR.N. That’s using my option-adjusted pricing approach. Plenty of interest rate risk, but very well compensated risk. No US ticker.

    2. PS – on the wash sale ……….

      Do not take this as authoritative on the matter but it is my understanding that it’s a wash sale only if the two securities have the same CUSIP or ISIN. Or one is an option on the other. Or they are indexed to the same index. I have traded same issuer preferred many times and never once has it shown up on a 1099 as a wash sale.

      I would advise calling your broker but I doubt they will give you a clear answer and in any event they won’t be bound by what they tell you.

      1. Bob, I have read IRS examples of the wash rule…You are a 100% correct. EBGEF selling and buying EBBNF for example would not violate the wash rule.

        1. Many thanks, Bob and Gird, for the valuable input as per usual… I had considered tax consequences in a passing manner before doing this but given there was only 34 cents/share cap gain on EBBNF, I decided in the overall scheme of things that was probably inconsequential even though the holding period on EBBNF was only 46 weeks and I was close to long term status. Historically, I am not as sensitive to tax consequences as I probably should be because I have always had a relatively high percentage of my investible funds in IRAs and was more active in that account but that percentage difference dwindles the older I get thanks to RMD. I’ll also confess to not being as sensitive to or educated about QDI regulations as I should be so thanks for reminding me about that aspect…. I think I’m OK there, though, on QDI status as this is my first transaction on both EBBNF and EBGEF since last March.. Guess I need to educate me more on QDI regs in general.

          1. 2WR, I have studied the wash rule, but only because it interested me academically. In reality like you did, I mostly pay no attention to it. I just go by what the brokerage says it is. I make too many trades to worry over it, and wouldnt track it anyways. Its just one of those “is what it is things”. Either they say I pay or I dont come tax time, and that is what I do.

    1. Look again 🙂 Redeemable any time.

      POW and PWF have said they are looking for cost savings and I believe I recall reading that includes redeeming preferred where appropriate. It’s the past call fixed rate issues trading above redemption price that are vulnerable.

      I can’t see why they would call POW.PR.F but if they did, enjoy the cap gain.

      It’s a low yielder, I’m sure you know.

  53. Currency Risk: Has the last week been an exceptional one for volatility in CDN v USD exchange rates? I just ventured into the Canadian denominated preferreds markets for the first time last Friday by buying one of the CDN denominated issues that also trades in US under an xxxxF symbol. My purchase price at 9.09 USD translated to 12.02 CDN at time of trade. Today, 12.02 CDN = 9.042 USD. That’s more movement than I thought I could expect to be opened to in such a short time… Is this out of the ordinary historically?

    1. CAD can be volatile. Since 2003, the range has been 74-100% of the USD. So we’re at the low end of the range. CAD is particularly susceptible to volatility in oil prices. What also has it down is the inverted yield curve with the expectation that BOC either cuts rates now (hopefully) or cuts more later.

      That said, I like the long term fundamentals of CAD. Their current and projected budget deficits are lower than the US and their overall level of debt is lower as well. Furthermore, there isn’t the risk of a big jump in borrowing due to structural changes to healthcare and healthcare entitlement spending isn’t rising at the same pace. Their financial companies have exceptionally strong balance sheets, mitigating the chance of a financial crisis. Commodity prices should have a tailwind from global monetary easing and CAD is a commodity currency (but has a lot less China exposure than the other commodity currency Aussie).

      On the negative side, if oil demand peaks and goes into decline, that would negatively impact Canadian jobs and the Loonie. I see peak oil demand as the biggest long term risk to the Loonie which is why I like to hedge that risk by making my biggest position NPI-A which is a renewable energy utility.

      Canada’s high tax regime vs. the US is another negative as it causes slow long term growth. However, this is negated by their lower debt levels. Canada’s Debt/GDP peaked in 2016 and has been declining ever since and is projected to decline through 2024.

    2. 2wr – should get acquainted with the chart:

      https://www.marketwatch.com/investing/currency/usdcad/charts

      The higher the number, the weaker the CA$ is relative to the US$.

      If your custom is to mark-to-market in US$ it can be hard to hold CA$ denominated securities, preferred or otherwise. This includes Canadian equities that trade on the NYSE in US$. They may be bought, sold and quoted in US$ but the underlying security is still CA$.

      But I do point out that currency risk is also currency diversification.

      If you want to contemplate hedging CA$ futures are available, I believe in $100,000 notational amounts, with “minis” of $10,000 notational.

      Personally, I do not hedge and don’t plan to do so if the CA$ is within the 1.30-1.35 range. If it moves outside this range I will consider it.

  54. The BOC-5 dropped 11 bps last week to close at 1.277%, the lowest close since early October, 2019. The 3-month held steady, closing at 1.641%, for a 36.4 bps inversion. That’s sizable, and unstable.

    Min rates remained firmly priced. If you are Canadian, or hold CA$ for some reason, several of the min rate issues are good cash subs, like KYN-F was for U.S. residents. There are 5 issues that come up for either repricing or redemption in the next 12 months. In all 5 cases, the min rate is off the table at the current BOC-5 rate, meaning they would reset above the minimum. (All were issued when the BOC-5 was very low.)

    The best of the soon-to-reset bunch, AT FRIDAY’S CLOSING PRICE, is CU.PR.I, aka CDUTF, with a current yield (all yields stripped) of 4.49%, reset yield of 4.96% and selling just a hair over redemption price.

    Fixed rate issues remain richly valued, as one would expect in a falling interest rate environment. If one wants to place a bet on lower interest rates (or hedge against them) fixed rates will do that for you, but so, too will many fixed rate U.S. issues. Just watch the call risk on those issues trading above redemption price.

    The real action this week was in resets. Price finally started to crack, with the average reset I follow dropping $0.19 in price, or about 1%. A somewhat broader “index”, ZPR (an ETF), dropped 1.2% for the week. ZPR is an excellent issue to follow if you have an interest in resets. The chart:

    https://www.marketwatch.com/investing/fund/zpr/charts?countrycode=ca

    It’s useful as a buy-sell indicator if you like to trade in and out, or as a buy indicator if you like to buy and hold. Even more helpful is to do a side-by-side with the BOC 5-year, as it’s the spread between the two that is of greatest interest. The chart:

    https://www.marketwatch.com/investing/bond/tmbmkca-05y/charts?countrycode=bx

    I hold a big chunk of resets, mostly bought in the summer and fall of last year. Except for one issue, which I trimmed, I have not sold anything in spite of the considerable run up in prices. But neither am I buying. I look for the price to crack further, possibly much further, depending on how low the BOC-5 goes, and how panicked the folks up in Canada get.

    If there is a big move down in prices I will be a buyer again. If one were going to be a buyer of resets now, I would focus on issues that have repriced recently, and which have 4-5 years of a known interest rates ahead of them. I would not be buying anything coming up for repricing, unless you enjoy being hit by the financial equivalent of a Mike Tyson left. Pick them out yourself. There aren’t many with OTC tickers.

    https://docs.google.com/spreadsheets/d/1lKjVnZX2BEDk28BNn9S5tbmxDW_boQfRQf6rcN_XCbQ/edit?usp=sharing

    I personally won’t touch floaters now, not with the BOC almost certain to drop the Canadian equivalent of the Fed funds rate soon, which in turn will drop the BOC 3-month on which most floaters float.

    The foregoing is generalized. There are always exceptions to the rules and the rules may not make sense for you. So consider your own situation and portfolio needs.

    1. Bob, Excellent charts. I was unable to create a link for it though check out an overlay of EBGEF v its underlying US 5year which accumulated a remarkable 15% spread from September to January. It was a great hold, though for the differential was too great to justify so sold the lot. Very much looking forward to future reset opportunities, especially if any of these issues overshoot to the downside.

    2. Bob,
      Thanks for the post. I would be cautious with CU.PR.I
      CU has a bunch of others fixed issues and they all have current yield in the range 5.15-5.20% with tells me that CU.PR.I probably will not be called at the reset date.
      For example, the highest CU.PR.H with fixed 5.25% has a x-day on Feb 5 has a last trade price was 25.03
      And comparable CU.PR.D with fixed 4.9% has a current yield 5.16% with the last trade 23.75
      If one believes rates are headed lower then CU.PR.H and CU.PR.D are better choices. At least at this moment.

      1. LTR – I am less sure. Looking at CU.PR.I on a stand alone basis, it’s going to reset above its current 4.5% coupon unless the BOC-5 drops below 0.81% at reset time. That’s not very likely. But if it does, I would expect the price of the issue to go up, above redemption value, and be called. I am happy if it does or not.

        If rates go up from here, I get a higher rate on reset, or it gets called. I am happy either way.

        The absolute worst that can happen to me is it doesn’t get called, the BOC-5 closes right around 0.81% at reset, and I’m “stuck” with a 4.5% yield. Not my definition of a disaster.

        And, if the BOC is very low at time if reset, and CU doesn’t call the issue, I have the option to convert to a floating rate issue with the same 4.5% minimum. All the min rate issues are convertible to floating but to my recall CU.PR.I is the only min rate reset on which the min rate also applies to converted shares.

        I offer CU.PR.I as an option for those holding CA$ looking for a place to park them short term. In that sense, I’m not looking for it to compete with either fixed rate or naked resets.

        An interesting question, perhaps worth of a post of its own, is what will happen when these min rate issues come up for their first reset/redemption opportunity? Most of the min rates were issued when the BOC-5 was very low, as the added inducement of the min rate was the only way to sell an issue. The issuing companies don’t like them and may want them gone.

        CU.PR.I is the very first min rate issue to come up for reset so it may give an indication.

        1. Bob,
          The way I see it, if nothing change CU.PR.I will have a reset at around 4.95%
          CU has a couple more similar fixed issues. CU.PR.E, CU.PR.D (4.9%) and CU.PR.H (5.25%)
          CU.PR.D trades around 23.72 and it looks like market doesn’t believe it has any chance to be called on a respective day Sep 1, 2020 at 25.25 CAD
          I may have missed something, I just failed to see why CU would call CU.PR.I on Dec 1, 2020
          As you say this is the first min reset coming to the redemption period. Maybe floating feature will have a significant impact on the CU decision.

          1. LYR – I have given considerable thought to the call “risk” on the min rates. Is there a good way to play it? High return, low risk of loss? I’ve been through all 28 of the mins that I follow and I’m still unsure.

            One thing I can say is don’t buy BPO.PR.C. At almost 26 per share and with a 6% minimum, you are begging for trouble.

          2. Limit and Bob, I already have a full position in CU.PR.I (CDUTF) and am looking at adding CU.PR.H (CUTLF). Since the ex-div date just passed it is selling a little under par at about 24.5 C$. If I read the prospectus correctly, it can be redeemed on 9/1/2020, but only at a premium of 26 C$. With a 5.25% dividend this seems like a buy. Am I missing something? Thanks

            1. I think it’s a buy. I picked up some additional shares yesterday and today. I also got the OTC symbol set up for it. I posted the following last month:

              Another fixed issue that’s interesting is CU.PR.H (Series EE) from Canadian Utilities. It’s rated Pfd-2H and it’s yielding 5.28% and it’s cumulative. The company has a 48 year streak of paying and raising on their common stock. It has the highest coupon of all the CU issues and it can’t be called for 25 until 2024. While studying these, I’ve noticed that the higher coupons seem to be slightly less volatile as interest rates go up.

              “On or after September 1, 2020, the Corporation may, at its option on not less than 30 nor more than 60 days prior notice, redeem for cash the Series EE Preferred Shares, in whole at any time or in part from time to time, at $26.00 per share if redeemed during the 12 months commencing September 1, 2020, at $25.75 per share if redeemed during the 12 months commencing September 1, 2021, at $25.50 per share if redeemed during the 12 months commencing September 1, 2022, at $25.25 per share if redeemed during the 12 months commencing September 1, 2023, and at $25.00 per share if redeemed on and after September 1, 2024, in each case together with all accrued and unpaid dividends to but excluding the date of redemption.”

              https://www.canadianutilities.com/en-ca/investors/preferred-shares.html

    3. I like charts as a start to a day and keep a watchlist as a place to go first thing. Beats the news. Like a heartbeat and breathing monitor, up-down, in-out. Market rhythms. I think the MACD slopes of BOTH charts are particularly interesting.
      I did nibble some reinvestment into ALA.PR.B a 3+2.66 at $14.86 last Friday. I like cheap for a reason. Popped past 7.25% so some softness may happen. Alta had a recent debt upgrade from DRBS that was posted to Alta’s site so I had begun watching.
      By the way, if I keep the link for your spreadsheet (and never modify the data! I know to download one to play with) does it upgrade over time?

      1. Joel – I like ALA on a risk/return basis and own a lot of it. For the broader audience please know that ALA is among the higher risk issues that I follow. Not just volatile (which doesn’t bother me much), but risk of permanent capital impairment (which bothers me a lot), too. Not a widows and orphans stock, especially the floaters.

        To answer your question, no, my posed spreadsheets do NOT update. Not price, not anything. That’s one of the reasons I don’t let them linger for very long.

  55. I cannot figure out the fixed-rate Canadian marketplace for preferred securities. Let’s use 2 examples both from Sun Life. One of the premier companies in Canada. Right now, with the 5-year Canadian bond at 1.34%, you would think based upon past history that Sun Life could come to market at 5YR GOC+2.5% based upon history. Right now, they are GOC + 3.5%

    Why would they not do this to call in SLF.PR.B (4.8% fixed) and SLF.PR.A(4.75% fixed)? That’s a 1% annual savings per year. In the US marketplace, a higher grade investment-grade company would not pass on this kind of opportunity. It seems like 0.5% per year triggers a new issue.

    Of course, there is a 3.15% underwriting fee. Perhaps the accounting treatment is different on the underwriting fees in Canada?

    Is there any general rule of thumb or spread when a Canadian company decides to call their fixed rate issues in and replace it with a 5 year fixed reset?

    Perhaps the most extreme example is GWO.PR.F (5.9% fixed) at a similar credit rating to SLF. To me, it seems they could reduce costs 2% per year.

    1. RE: SLF ….

      The 5 SLF fixed issues all sell well under redemption price. That, alone, tells you that the company could not call the existing fixed issues and reissue new fixed at lower rates. Remember, the coupon is what the company pays; the yield is what the investor gets (at present price).

      If SLF sought to redeem the fixed rates and reissue as resets, it would not come out ahead. With the resets, you have to look at the reset yield, not current yield. SLF reset yields look lower than they really are, as all are coming up on reset and all will reset higher. The reset yields for SLF are around 5.3%

      If for whatever reason SLF did want to get the fixed rates off the books, they would buy them back in the open market. They have shown zero interest in doing so.

      The BOC would have to drop a lot to push the prices of SLF fixed to the point a redemption would make sense for the company.

      1. Let’s forget about their current fixed rate issues. Pretend they don’t have any at all. They have all been called. They simply want to issue a new preferred issue for general corporate purposes.

        What do they need to price it at?

        MetLife(MET-F) at a lower quality in the US has been issued for 4.75%. I would expect SunLife should be able to do better. But let’s assume they cannot. They need to come to the market at 4.75% also.

        However, they want it to be a 5-year reset rate. We have historical pricing on SunLife’s reset rates. 3 issues at 5yrBOC +1.41, +2.17, and 2.73. Let’s assume they need to go to 5yrBOC+2.75%. Comparable to their highest reset rate. That means for a new issue at 4.75% they would be paying 2.0%+2.75% for the 1st 5 years.

        My understanding of how companies decide the initial 5-year rate is to take the current 5-year BOC rate + reset rate. So, I would expect SunLIfe to come to the market at 1.34%+2.75% or 4.1%.

        My 4.1% rate assumes they need to match MetLife which I believe would be the worst case. The 5YrBOC at 2.75% also seems to be the worst case.

      2. Bob,

        “ With the resets, you have to look at the reset yield, not current yield.”

        But They could buy back their resets in the open market at current yield. Insurance companies largely have liabilities that increase at a fixed rate. Why not match that duration with more fixed rate preferred and fewer resets? The original case for bringing resets to the market many years ago was buyers wanted them as they feared higher rates. While there can still beVolatility with rates clearly the consensus is lower for longer overall.

        1. LI – the facts: SLF has not issued a fixed rate preferred since 2007, 13 years ago. They have not issued a reset since 2011, 9 years ago. They don’t issue preferred any more. (Almost) no one does. Straight debt is much cheaper, and that is what SLF has been issuing.

          But with all their preferred selling well under redemption price, there is no sense to a redemption. Are you going to redeem SFL-G when it sells for less than one-half what it would cost to redeem?

          What makes sense for SLF is to just let sleeping dogs lie. If they did want to get rid of the preferred they will do so via Normal Course Issuer Bid, meaning buy the stock in the open market. Many companies are doing that with their preferred and the pool of preferred shares is shrinking as a result.

          That is part of what is holding the price of preferred up.

          SLF has a NCIB for its common right now. That it does not for preferred is conspicuous. Surely, they have run the numbers and made a decision to leave the preferred as-is. For now.

          If BOC rates ever go to zero, you could see a redemption of the fixed rate issues, but then you’d be siting on a large capital gain.

          If your “fear” is rates going to zero, SLF fixed rate issues would be good for you. But if rates go back up, the fixed rates should drop. No credit risk there so it’s a straight rate play. Pick your poison.

          1. This actually makes perfect sense to me. I am surprised is the US market we see so many new preferreds. Yes, straight debt is cheaper. Doing NCIB to reduce shares is cheaper for companies also. Why redeem at $25 when you can buy and retire at less than $25?

            I am surprised than SunLife is not addressing the 4.8% interest rate via NCIB or straight debt.

            I will say this. In the US, the investment companies will issue new preferreds when then they seem to be able to save 0.5% per year. With the difference in pricing, NCIB is not a viable consideration in the US. But straight debt doesn’t seem to be an option companies are choosing, We have lots of examples of that. That is why I am almost conditioned to expect that a new preferred will be a consideration.

            I am going to chalk this up, as yet another difference between the Canadian marketplace and the US marketplace. It is what it is.

    2. SteveA, Looking at your SLF.PR.B: BBB+ equivalent, below redemption, cur yield 5.2%, QDI and liquid. CU.PR.G is of similar pedigree with 2 1/2 years of call protection. Tough to replace these south of the 49th. With most indicators pointing to lower rates for longer, these are for me good hedges against upcoming FTFs. True one or both could be called, but each would be at a substantial premium to purchase – and in a rising rate environment, one can alway average down while increasing overall yield.

  56. I’m finally above water on EBGEF and having collected a fair amount of dividends along the way has made the ups and downs bearable. Do you think it’s a buy, sell or hold going forward? Any input would be greatly appreciated.
    Ex Date is 2/13.

    1. Jakester – if you’re more of a trader I would say sell and look to buy it back cheaper. Which may not be a lot longer the way rates have been going.

      If you’re more buy and hold I would hold (unless it’s a humongous position) and look to add the other Enbridge US$ denominated issues at better prices. There are 4 in total.

      With Canadian resets, diversification with respect to reset date is a good thing.

  57. Sleep good last night and of clear mind decided to keep culling the Canadian herd I started a couple weeks ago. So I sold some more this morning. At one time I was about 20% of CAD, now at about 5% in total. Not abandoning, just waiting for a good reentry point and let the 5 yr CAD drop soak in a bit on holders and see what happens.

    1. I have reduced from 16% to 11%. Booked some profits in Northland and BCE and closed them out (for now). Reduced numbers of shares in Fortis (breakeven) and took some losses in Emera. I am still holding a 50% position in both Emera and Fortis. They are long term holdings for me.

      Of the 11%,
      7% is fixed rate
      4% is 5 year fixed/reset issues.

      I am looking to potentially add in some fixed rate minimum reset issues from Bob-In-DE’spreadsheet which I downloaded. I’m am not big on-call risk issues by paying above par, so we shall see. It would seem prudent to have this class of preferreds included in my Canadian portfolio but I will not force it by buying something that is not of real interest to me.

      In general, I am a buy and hold investor but more of “an buy/hold adjuster” versus a pure “buy & hold diehard”.

    1. Yes, and the US has headed that way also. We have to deal with the 1T+ deficits at some point. Our politicians used to SCREAM about these kinds of numbers. That changed but it will change back

  58. Bob, Grid, and others.

    Any feedback on INNERGEX Renewable other than what I have below?

    INE.PR.C Innergex Renewable Energy fixed rate 5.75% coupon.  Trading at $23.65CAD.  The current yield is 6.1%.  The 52-week range is $21.08 – $23.72, so it is trading at just about the 52 week high.

    The issue can be redeemed at $25.50CAD.  Next January at $25.25CAD.  In January 2022 or later at $25CAD.  The prospectus was dated December 12th, 2012. 

    When issued, the Credit ratings were BB S&P and BB- equivalent by DBRS with a negative credit watch,  In March 2013, DBRS lowered the rating to PFD-4 High which is B+ equivalent,  S&P held their rating and they still have it as BB rated. However, in Dec 2019, S&P gave them a negative outlook and may lower their credit rating by March 30th, 2020.  The CIBC report where I found this had no rating for DBRS.  I don’t know whether they made an error or DBRS is no longer rating.

    At its 52 week low, this was a 6.8% dividend.  I like renewable energy long term but I also like companies with long term prospects.  This is clearly speculative.

    1. Steve – this is a quasi answer at best.

      I consider myself rather brave where Canadian preferred are concerned but this is not a company I have bought or would buy. I don’t include it in any of the spreadsheets I post as I was not comfortable leading the folks to it. Too many solid companies with good yielding preferred I’d rather be invested in.

      The company has not been rated by DBRS since 2014, which is a very bad sign to me. Strangely, S&P has the company preferred at BB, negative watch. I say strangely because Canadian companies of this size rarely skip the home town DBRS and go straight to S&P. My sense is that they do so because they get a better rating from S&P than they would from DBRS. It’s like forum shopping in legal cases.

      If you like renewables there are some good plays in Canada, starting with Brookfield Renewables (BRF). In energy more broadly, in the higher risk-higher return category, I like PPL, HSE and even ALA.

      But I would like them all a lot more at lower prices. The Canadian market, especially mins and fixed, has had a big run up in the last 6 months. To my eye, things are setting up for prices to come back down.

      Bob

      1. Bob, I sold off most of my Fairfax the past week or two and lightened up on some others. The 5 yr is back near Oct lows but the preferreds havent fell back to that point. I wasnt going to watch them fall back. Though I have lightened a lot I did buy a small 1000 share of TCANF at around $9.20 the other day. I had sold them all at around $10. I may only get a 5.5% or so reset this fall off it. But that is immaterial to the price movement. That would jump on future rate hikes even if the low yield is locked in. That is just how they roll. So presently I only have a small amounts of Fairfax and TCANF, and still full amount of Northland Power.

        1. For those, like Grid, who trade in and out, I can see this. The resets especially have hung tough in the face of a falling BOC-5, but I look for them to break down in time. Canada is looking to be heading for recession and the Canadian version of the Fed funds rate is almost certain to be set lower in the not too distant future.

          I am primarily a buy and hold type and I bought my Canadian issues with that in mind. Even so, I took half my profits in AlA.PR.G this week, after a 16% run up in price since purchase. Didn’t want to do that inasmuch as it will be ST cap gain, but I wanted to preserve the gain.

          Taxes matter and if you are trading in a qualified account you can trade in and out with impunity. In taxable, short holding periods have a substantial cost. You lose the qualified nature of dividends in some cases and convert what could be LT cap gains to ST.

      2. Bob, The CNs may have run up but are still some of the best deals in town especially compared to the likes of NEE-N and NRUC with YTCs in the 2%s. Did though sell an entire CN reset position due to the historically large gap from its underlying, though looking forward re-acquiring it or higher credit issue if current IR trends continue and prices catch-up. Of CN holdings, most happy (today) about CU.PR.G and would be OK buying more here if I didn’t already have a full allocation. Some risks if IRs turn north, but the interim gains versus sitting in 2% are an acceptable offset to that risk for me. And if rates continue lower may be called eventually though its tiered call price for the next few years would offer a nice yield boost.

        1. Agree, Jerry. I’m just “paused” because I have a snoot full of Canadians already and am willing to wait for what I think will be better prices.

          The BOC 5 is at 1.30% this morning (lowest since last October) and there is 33 bps of inversion between the 5-year and the 3-month. Something is going to give.

          If you’re just building a Canadian position I might keep an eye on the min rate issues that reset within a year, looking for issues that are likely to be called (or reset at the minimum rate or higher) and are trading no more than 20 cents (stripped) over redemption amount.

          Fitting the bill:

          BEP.PR.G BRENF (partnership, so watch taxes)
          CU.PR.I CDUTF
          W.PR.M No OTC

          Also, but unlikely to be called:

          ALA.PR.I TGAPF

          BAM.PF.H, which I talked about earlier, has moved up too high in price and YTC has gone too low. I need to say less :).

      3. I share your thoughts about the prices being too high. All the issues I have recently opened are for 100 shares only which is my understanding of the minimum needed to open an issue (Using OTC addition screen which has 100 minimum). I was going to do the same here but I love your point, it may serve to encourage others. I will check out the others you mention.

        Initially, I was interested in BRENF. That’s still my 1st choice. My hesitation is a K1 in Canada. I would hold it in a taxable account. Do you have any experience with K1’s in Canada? Are they subject to 15% holding for US citizens? Do you know if Turbo Tax can handle?

      4. Initially, I was interested in BRENF. That’s still my 1st choice. My hesitation is a K1 in Canada. I would hold it in a taxable account. Do you have any experience with K1’s in Canada? Are they subject to 15% holding for US citizens? Do you know if Turbo Tax can handle?

        1. Steve – re: BRENF, it is a partnership (Bermuda I think), it will be a K-1 with all the K-1 issues. I own a lot of Canadians and a lot of K-1 issuers but don’t want to be owning a Bermudian partnership issued by a Canadian company in a US account. I can foresee problems!

          The BRF issues come without the K-1 issues but there is no min rate among them.

    2. Hey Steve, I cant add anything Bob posted on the issue. For me, I am pretty selective in CAD market. Im only poking around on a few that fill a hole in what Im looking for. And that can be done with 3 or 4 basic companies as they generally as a group move over time in general tandem.
      Two things I am not looking for in CAD. 1) Not looking for credit risk issue because I can play that game down here and not mess with OTC and currency issues. 2) Im also not allured by the higher quality 5% ish fixed perpetuals up there. I can basically get that here also. Plus they seem to have an odd behavior of sinking when resets do. If this happens again, then I will look at those fixed issues.

      1. I have opened up some OTC symbols for financial and insurance issues but only have 100 shares in each. This is what the new OTC symbols when you look at the addition page. I did this so I could buy on a pullback.

        In both the US and Canadian marketplaces, my primary interest is in Utilities, Telecomm, and Renewable Energy. The recession in both the Canadian and US markets is inevitable. Will these issues fall as much as others? Yes, they probably will. Will they go out of business and fail for bankruptcy? Perhaps but far less likely in my opinion then Financials, Insurance, Reits, BDC’s, and Others. Utilities, Telecomm, and Energy are essentials that consumers must-have.

  59. Min rate spreadsheet – corrected.

    Recent post on min rate issues contained obvious errors. I do not know at what point the errors were introduced.

    This posting is correct, both the version on my computer and the version that is posted to Google Sheets.

    I do not believe this sheet is editable by anyone but me but in any event one should not attempt edits. If you want your own sheet it should be downloadable, and then you can edit to your heart’s content.

    https://docs.google.com/spreadsheets/d/1OjgspTnDnOOq6K3AsUAwwaNU4eBRPLMqycTB-wYbXsQ/edit?usp=sharing

    1. I love a good gamble for a small play. I sold out my TCANF near $10 USD a few weeks back and bought them back yesterday at $9.22. Has the hideous adjustment but owning 50% before “par” really compounds the govt yield others would not. And thus the low adjustment coupled with way below par makes this a more volatile issue. Still keeping it a very modest $10k play.

  60. What’s up in Canada?

    At the end of the prior week, the BOC-5 (year) stood at 1.580% and the BOC-3 (month) at 1.642%, for a 6.2 bps inversion. After the BOC (Canada’s Fed) got through with their mid-week meeting, the BOC-5 closed on Friday at 1.387% and the BOC-3 at 1.639%, for a inversion of 25.2 bps. That’s a big change in 1 week.

    The BOC-3 is too high. That’s what the market is saying. The BOC-3, like the Fed funds rate here, is set by the wise people in Ottawa while the 5-year is more market driven, representing the consensus of market participants. (Guess who I trust?)

    Canada is headed for a recession, at least they are much closer to one than we are in the U.S. Oil prices, which are a key driver for the Canadian economy, are down. A few labor strikes here and there (endemic to the Canadian economy) have not helped. The BOC, by not cutting rates last week, has added some push to a recession scenario.

    That’s my take anyway.

    Canadian min rates and fixed rates remain at very elevated prices, due to their pricing structure. It’s just bond math.

    Resets, which until the last few days had been ignoring the drop in the 5-year, started to crack. The average price of the 137 rests that I follow dropped 36 cents last week, or 1.87%. Plus, the volatility returned.

    Floaters, which by-and-large reset off the 3-month rate, held steady.

    So, what does this lead me to do, or to suggest to others?

    Don’t touch anything that floats off the BOC-3; they’re going down. Issues that float off Prime may be a better bet but are not immune to coupon cuts. This includes issues from BAM, BCE, BPO, and a single issue from TRI.

    For resets, I am urging patience. Let the fear come back in the market and drive prices back to where they were in September 2019. If wanting to plow ahead anyway look at 1) issues that have recently repriced, and have a known coupon for the next five years, or 2) issues that are mispriced relative to other issues from the same issuer.

    Examples of the former include ALL.PR.G, BPO.PR.A, EMA.PR.C, EQB.PR.C, FTS.PR.M, HSE.PR.C, MFC.PR.M, and TRP.PR.A.

    Examples of the latter include ALA.PR.E, BAM.PF.A, EMA.PR.C, ENB.PR.N, FTS.PR.G, PPL.PR.E and TRP.PR.A. But know that these pricing anomalies are small (the largest might be 50 bps yield) and they can disappear in a New York second.

    My big interest presently is in the min rate issues. With min rates, we are in unchattered waters as no min rate has ever come up for repricing. There are only 27 min rate issues in the cohort I follow, with 4 of those resetting in the next 12 months, and another 6 resetting in the 12 months after that.

    Many of the mi rates coming up to resets are trading close to par, some above and some below. Most min rates will reset at a higher coupon than the minimum rate at which they were all issued. W.PR.M, as an example, was issued with a 5.2% coupon/minimum coupon. If reset at today’s BOC-5 it would go to 5.91%, or 71 bps higher.

    I’m looking at the min rates as opportunities to potentially park large sums of cash, at decent short-tern returns, with upside if the issues don’t redeem and very little downside if they do. In order to do so, you have to watch the prices very carefully as a 25 cent movement one way of the other makes or breaks the opportunity.

    The issues in question are ALA.PR.I, BAM.PF.F, CU.PR.I, and W.PR.K. The only one I have personally gone for so far is BAM.PF.F. My average cost is 25.14/share and the present coupon 4.95%. If reset today, the coupon would go to 5.56%. If the BOC-5 goes to zero, you still get the minimum 4.95% coupon.

    So, my outcome will depend upon what rates do, and whether the company redeems in December, 2020. In the worst case, the company redeems and I had a 5% 1-year CD. If the company does not redeem, I have a 5-year CD at no less than 4.95%

    Spreadsheet for the min rates located at:

    https://docs.google.com/spreadsheets/d/1Y0FjWjAhAvKmVybKC7AOLYnJO0U_722Uy84VsjY9nJc/edit?usp=sharing

    1. Thanks for the great update, Bob. I have been looking for a Canadian preferred to replace KYN-F and your spreadsheet helps. Could you explain or give me a link that explains the rating system used for Canadian preferreds.

      1. Alan – to me, BAM.PF.H is a KYN-F substitute. The obvious difference being currency.

        Other min rates can serve the same function, at the right price, which is (for me) the price that provides at least a 5% YTC.

        For ratings I use DBRS over S&P. DBRS usually come in at the same as S&P or a half notch lower. Rarely higher.

        Ratings are simple. P1=S&P A, P2=BBB, P3=BB. “H” in DBRS speak = +, and “L” = -. So, P2L is a BBB-.

        1. Thanks, Bob. Yesterday I looked at CUTLF and was considering picking some up, but will look at BAM.PF.H first.

          1. Alan – CULTF is priced right at redemption amount so the call risk is nada. If not redeemed the coupon will be going up, unless the BOC-5 totally collapses. In which case the min rate may not be so bad.

            It’s a 1-year CD with the possibility of a higher rate if the term is extended.

              1. No US ticker for BAM.PF.H. There are 4 min rate issues from other issuers with UOTC tickers, all shown on most recent post. Or you can look lower down in the Canadian chat to find instructions on how to get an OTC ticker for BAM.PF.H through Schwab.

                Other BAM issues have OTC tickers, including 1 fixed rate, 3 resets and 4 floaters. The common is listed on the NYSE.

                BAM.PF.D BROXF

                BAM.PR.R BAMGF
                BAM.PR.T BAMKF
                BAM.PR.Z BKAMF

                BAM.PR.B BKFAF
                BAM.PR.E BKFPF
                BAM.PR.K BXDIF
                BAM.PR.S BMKAF

                  1. All BAM issues are QDI.

                    Some of the BAM offspring are partnerships and would have different tax treatment but any issue starting with BAM is qualified.

    2. While I am waiting, majority of my positions are:
      1. Min reset (BIP.PR.B, TRP.PR.K, BAM.PF.I)
      2. High yield IG (FTS.PR.G, IFC.PR.G ). I don’t mind collect 6.4% with at least 3.5 years away from next reset. High yield will limit share price fall. At least for now.
      3. High quality with mandatory call (EIT.PR.B – 15-Mar-2025, RY.PR.C any time before 2021)
      4. Holder can redeem at any time at 25C$ (BPS.PR.A). Not an IG but I don’t mind current yield 5.63% with downside protection.

      1. Honestly I would hate and probably would not be a preferred investor in Canada. It is a very different marketplace. Combined with US preferreds that continue to be way over priced, it is nice to have Canadian preferreds which continue to be way underpriced for a portion of the portfolio.

        1. Steve – interesting comment. If one bought into the Canadian preferred market at the wrong time one took quite a beating. My thesis is that Canadians are still suffering from shell shock from what happened in 2015-17 and as a result demand excessively high rates on preferred.

          I’ll take the bait, and live well for now. If rates collapse back to 2015-17 levels again then I will take a beating. At least on price. But even so my YTW at prices I bought in at will stay at 400+ bps above the risk free rate.

          1. This is why I have opened up more fixed-rate issues in Canada to the OTC market. Including willingness to take the dividends on PWF.PR.I (OTC symbol POFPF) which is a 6% CD trading around PAR (starting the end of this week until they call it).

            Within the Canadian marketplace, I am 9% in fixed-rate resets or floating rates but 7% in traditional fixed rates.

            Even the fixed rates in Canada are very different than in the US. Not sure what drives that. OTC symbol CUTLF (CU.PR.H) which as you pointed out is essentially a 5.25% CD had dropped last March to $23.30CAD. Its current yield was at that time 5.63%. As a pure fixed rate, not sure why that happened.

            The Canadian preferred market right now seems to march to its own drummer.

      2. That is definitely a limit your risk portfolio!

        Regarding RY (Royal Bank) I’ve not made any mention of mandatory redemptions on certain bank issues but a short bit (soon) may be warranted.

    3. Hi Bob,
      Should the issue in this line of your message be the H?

      “The only one I have personally gone for so far is BAM.PF.F. ”

      Also are the values in some of the columns on the spreadsheet (ab for example) correct?

      I hope so otherwise I’m completely lost.

      1. Jim – you are correct about it being BAM.PF.H, not F.

        Something went wrong in the posting process. The number are right on my side but to post on Google Sheets the spreadsheets go through 2 format conversions and obviously the translation failed in several columns.

        Will look to see where and why.

    4. Bob, Thanks for the updates and shared immersion into the field where spinning things in many dimensions of space is necessary…and fun in many ways. It has taken many many hours to develop an operating system of my own with standard abbreviations. I have made friends with IBRK and their toolbox.
      I agree with your assessment and have been wowed by the 20% retrace down in the five year in 30 days. I do believe that the reset market will eventually present some fair risk reasonable prices. I have open buy orders on a hit list of favorites. I just recently split some of those orders into two tiered buy orders: acceptable I’ll take some and oh hell yeah. My last post may have sounded strange to some but I mentioned two min rate resets and have a sprinkling of others as well. Diversify for damn good reasons that are clearly understood while continuing to keep a trusted managers eye on it…your own!
      If you are indeed willing to accept a new title I am floating “Prince,”
      To Alan below: Google ‘DBRS’, then look thru tabs for preferred share rating scale. Here’s the link if it comes over, it is super long, copy it all in:
      https://www.dbrs.com/document/236755.pdf?Expires=1580263136&Policy=eyJTdGF0ZW1lbnQiOlt7IlJlc291cmNlIjoiaHR0cHM6Ly93d3cuZGJycy5jb20vZG9jdW1lbnQvMjM2NzU1LnBkZiIsIkNvbmRpdGlvbiI6eyJEYXRlTGVzc1RoYW4iOnsiQVdTOkVwb2NoVGltZSI6MTU4MDI2MzEzNn19fV19&Signature=jEVGytFViVgTV1BIRLKV1qdBT5FNH4OAbZASo9NM1d6xHcH0aMIUgCmftrJHTU6EZRZPCd~DY9FphItHVTWHMtsEJKI~rGHl6rll45c7ilS–vwuS0jtP~rfnMFAa7MZnA-f4caywNg2tOxwj84G3zD-EBfKjHLYcex04I6LgNGMrszgax2hW~YUMVJJ2zDKmkM~wCQW8W-OVmMcuRS13TQ1btoA6zhcfu8qlIBuyLh~vVRClE-oWsXY5-Y1jI0KkHQPei1SlAto55hA6TNZQxKbim~Hh-4fzJoN9DdGTJnjBWjWbWylgxP5~y2D19rmQU7GwZRkQGEo2z12YbcJxS6slTdma8aGS~ygkLVO4rYHCVyTiX6RNvrpFYVi6~kwzlDWU-4sp24o1xo6gjSiyq-DAQMHNE-38q7jfi2rxKgKWYfC1HhFLwFu0YXOaIbya3-7HG-XCk6AbRTfE4YnxsyioY6K7lev3UUqI1eQJku98AmjsuEvcDuOMNF1lKMVqWD~69A35p-fs2OhwCOgxrp2AYpoXJXEdMWDyg3V1YBcoHPzmTM9ziRvI2cvSOzvCKmmOSPWXRKfXIp6P-Jbp0JmwyCS7AnFO0gsDMKaF~2hBMh~2pDm8973Jbti0Ez14jrm7Wy3fsqS7gabFfMf1f1I9YF5gJu8Jd9YihXPIos_&Key-Pair-Id=APKAI2JJS4PJDGONDEZQ

  61. The BOC met on Wednesday and left the overnight rate (same as Fed funds rate) unchanged at 1.75%, but hinted at a rate cut on the next go. The BOC 5-year, which isn’t set directly by the bank, immediately dropped.

    In the last 10 trading sessions, the BOC 5-year has doped by 20 basis points, from 1.62 to 1.42, while the BOC 3-month rate has been largely unchanged. There is presently a 22 bps inversion between 3-month and 5-year. Not stable.

    Despite the drop, Canadian preferred haven’t dropped much in price. But I see cracks in pricing starting to appear, which has the potential to lead to lower prices. A little economic bad news could get the job done.

    Perhaps to post something after markets have closed.

    1. Noticed the same. Some cracks are starting. It also seems (to me) that the drop in US yields is impacting the Canadian bond market. Their yields seem to move in the same direction as the US yields. At least for the 3-4 months since I have been focusing on bond yields in Canada

    2. A technical question: BCE.PR.Y or BCEFF (OTC) shows a dividend of .08229 each month on TSX. For the life of me, I cannot replicate this amount. My attempt.. Prime rate of 3.65 times 80 % plus adjustment of 4% of Prime (per Prospectus as trades low) = .03066 %…. applied agains $25 par and divided by 12 (it pays monthly) = $.06288 C. What am I missing.. not feeling too smart.. Thanks

        1. Thanks for reply on BCE.PR.Y. Yes, you are right- prime is 3.95 and it pays at 100%. I have an inquiry in to BCE to ask why prospectus is 80% of prime plus an adjustment of 4% of Prime and not just 100% of Prime. Will let you know. Again thanks

      1. Logic – as Steve indicated Prime is now at 3.95%.

        If you go through the prospectus, and it’s weird pricing mechanism, you find that the issue is effectively pinned to 100% of prime for now. 0.08229 per month is exactly correct.

        The yields on the BCE floaters are very rich.

        1. Again thanks.. with prompt help from company, I understand that the adjustment factor is applied each month to the previous month’s rate ..so the adjustment builds until rate maxes out at Prime. You are right.. it is pinned to Prime.

    3. The Canadian market is pricing in a policy mistake. BOC should have cut and now they have a very significant yield curve inversion on their hands. The longer the curve is inverted, the greater the risk of a BOC-induced economic slowdown. They need to get off their behinds and make a course correction to get the yield curve uninverted. BOC rate is above the US rate and they need to be below it.

  62. BOC held rates steady yesterday which the market didn’t like, inverting the yield curve even more and sending the 5 year to 1.40. Haven’t seen that level for a while. No real impact on reset preferreds yet.

  63. Are Canadian preferreds cheap or expensive? “Compared to what” you say? How about compared to themselves?

    There are a couple ways to gain some insights here. One is to compare the “spread” between the BOC 5-year and 5-year resets over time. The former is currently 1.58% and the latter is 5.61%, a difference of 403 bps.

    The 5.61% is the stripped yield, based on current dividend rate, of the cohort of 137 resets that I currently follow. It’s not the whole market. The reset rate on the cohort is 18 bps above the current nominal rate, meaning the “real” spread is a bit more than the 403 bps indicated.

    How does 403 compare to history? Going back 10 years, to late 2009, the reset-BOC 5 spread has been as small as about 100 bps and as wide as about 475 basis points. Right now, as I said, it’s about 400 bps, which makes the spread wide relative to its 10-year average.

    “Wide” equals fat yields, which is good for investors.

    Another way to get a feel for the market is to look at the rate of new issuances compared to redemptions. If issuers are pumping out new issue like mad it’s because prices are good for them, not you. On the flip side, if issuers are redeeeming like mad, it suggests that prices are good for investors.

    In 2019, there were a total of 9 new Canadian preferred issued, 6 bank issues, 2 Brookfield issues, and 1 electric utility issue. (I’m ignoring split corps and other screwy stuff.) That compares with about 180 or so outstanding reset issues. The total number of Canadian preferred, including min rates, fixed, and floating, is 400+. Put another way, the rate of new issuances is down to a trickle. It’s like the birth rate in western Europe.

    So let’s look at redemptions. In 2019, there were few, if any, redemptions. But many among you will understand that that is because most of the resets are so far under water that no preferred issuer in their right mind would redeem their issues.

    However, issuers have been buying their own preferred in the open market hand over fist, under so-called “normal course issuer bids”. That’s Canada speak for share buy backs. The number of preferred shares outstanding is actually shrinking.

    The reason is not because Canadian firms have gone to an internally-funded model. They just find preferred “expensive” relative to the alternatives of issuing stock or selling debt. I see the same thing in the U.S. market.

    Preferred are often described as being either expensive debt or cheap equity. It seems, right now, in both the U.S. and Canada, that would-be issuers find preferred to be too expensive as debt and not cheap enough as equity. Would-be issuers are choosing to avoid new preferred issues. Investors are being pushed to accept either lower yielding debt or higher risk equity.

    No advice here. Do what you will do based on your own situation. I own a snoot full of Canadian preferred, mostly resets, almost all bought in cheaper markets than what we see today. I’m not maxed out but I’m much closer to it that most of you, I’m sure. I’m a selective buyer today and always on the lookout for the next crisis, whenever and from where ever it may come. There is always a next crisis.

  64. Canadian withholding tax on preferred shares …… do you pay more in total tax because of it? The answer is it depends on your U.S. Federal tax rate, as I explain.

    To get an answer to the question I used tax software and constructed 2 hypothetical couples, both married/filing jointly. The first had taxable income of $126,000 (2018 return, line 10) and the second had $226,000 on line 10. I did each couple, with and without US$15,000 in Canadian preferred dividend income, withheld at 15% or US$2,250. The Canadian income was substituted for an identical amount of U.S.-source income so as not to change the total taxable income for either couple.

    The question then became how much of the Canadian withholding did the two couples “lose” on their U.S. returns because of the Canadian withholding?

    In the case of the $110,000 couple, the loss was $824 out of the $2,250 withheld, and in the case of the $226,000 couple it was $2.

    The reason, upon reflection, is intuitive: Canada is going to withhold you at a 15% rate no matter your U.S. tax situation. If your effective U.S. Federal tax rate is less than 15%, then the U.S. is not going to make up the difference for you. And neither is Canada. So the difference, if any, between the 15% Canadian withholding and your effective U.S. Federal tax rate, goes bye-bye. The lower your U.S. Federal tax rate the greater the loss. At higher incomes (anything above a 15% rate) the loss asymptotically approaches zero.

    So what does it mean? For the $126,000 couple, they “lost” $824 on approximately a US$250,000 portfolio of Canadian preferred (this is the portfolio that would be required to generate $15,000 in dividend income and $2,250 of withholding, assuming a 6% average yield on cost). That $824 loss works out to be a 0.33 percentage point loss in return. For the $126,000 income couple, that is the cost of “buying Canadian”.

    For the $226,000 couple, there is no loss of return.

    In my case, I compare the QDI preferred opportunities in both the U.S. and Canada, considered the taxes, and went from there. My portfolio of Canadian preferred was acquired at a simple average YTW (stripped, at time of purchase) of 6.16%. The weighted average would be a little higher. The average credit would be about BBB-, with none lower than BB.

    I did not see those kinds of returns available in the U.S. market at the time and still don’t. Not for quality product, on a buy-and-hold basis, without call risk, and without having to nibble on the edges of the market.

    The above discussion pertains solely to QDI preferred (almost all Canadian issues are QDI) held in NON-QUALIFIED U.S. accounts (meaning they are not IRAs, 401Ks or similar).

      1. Yes. If you use software the Form 1116 is generated automatically from 1099 data entered.

        Last year, I had foreign source income across 7-8 accounts and it was easily consolidated into a single Form 1116.

        1. Bob – what does the software say if there is $50k of wages and $15k in Canadian dividends withheld at 15%?

    1. Good summary Bob. We should probably add one distinction for couples with $600 or less withheld, which equates to $4,000 or less (singles $300/$2,000) in CN distributions. That couple should utilize 1040, Schedule 3, Line 1. A (super-simple) single entry provides 100% credit of the withheld amount. Qualifying criteria on page 2 here: https://apps.irs.gov/app/vita/content/globalmedia/4491_foreign_tax_credit.pdf

      Also: most couples with $600 or less withheld should not use Form 1116, as reduction of the credit is a near certainty. An exception would be if rolling over prior years’ disallowed amounts.

      1. Thanks for this added input, alpha. Do you know if tax software will recognize the lower amount and put it on Schedule 3, line 1 or does it put it on Form 1116 and you have to override it?

        1. HR Block’s tax cut program automatically puts it in the right spot. I have claimed the Foreign Tax Credit for years and never completed Form 1116. My amount is small enough that it is just a one line entry on the 1040 form

  65. Transalta raised their common stock dividend. This is after increasing their FCF guidance last month. Certainly good news for the preferreds which trade at 7%+ yields.

    Debt/EBITDA of 4x for a power generation utility is quite reasonable and leverage is on its way down. The main downside leading to their low credit rating is their coal fueled generation. The market for coal generation is weak and they’re unable to obtain long term contracts for that. However, they are reducing coal ops and replacing them with gas. My guess is coal stays in use longer than people are expecting but it’s not surprising that no one wants to commit to buying coal electricity long term.

  66. I’m perplexed. I’ve been successfully both buying and selling a number of Canadian preferred issues using the over the counter symbols on Schwab.
    For some reason I’v run into trouble with NPIWF. I am unable to execute a sell order. I’ve been trying for a couple of days. I’ve gone through the process of checking bid and ask prices for NPI.PR.C done the math and have various asks in place that should have executed. Any ideas?

    1. Jim – issue shows good volume and current bid of C$19.79, US$15.14.

      I do all my trading on the TSX but others have reported having OTC bids getting “stuck”, even when they should execute.

      You can lower your ask, and see if that triggers, but at risk of selling cheap.

      Or wait.

      What I think is that these OTC bids require human intervention, and if a bid or ask is right at the money, the human doesn’t bother. You have to go outside the bid/ask to wake them up.

      Just a guess.

      1. I’ve tried going out of the range. Nothing has happened with the over the counter symbol for a week it appears in spite of reasonable volume for NPI.PR.C . It looks like schwab is showing volume for C as the NPIWF volume. By the way, the bid and ask numbers at Schwab are right on the money based on the Toronto exchange numbers for the C. Schwab’s trading platform , Streetsmart edge shows nothing with regard to current price or bid/ask. So I’m guessing the “human” would be in Toronto, perhaps napping.

      2. Well I think this is the impetus that I need to open an account with Interactive Brokers. Is that deal that you mentioned a few weeks ago still available

        1. Jim – on IBKR I last looked about a week ago and the referral page was still live.

          In order to submit a referral I need a first and last name, an email, and a phone number. Once I submit it’s in IBKR’s hands.

          Send to me as a PM through Shrinking Alpha. Same nic as here.

    2. I own NPIWF through Schwab. Sometimes with OTC Canadian preferreds through Schwab, I need to up the bid about $0.05 above what I see in ask price on TMXMONEY. It then often executes within a few cents of that ask price

    3. Jim,

      I’ve had a lot of problems buying issues using OTC symbols. But I’m not willing to put in a bid 5 cents above the ask and just hope for the best.

      Also, I think NPI-A is a little better than the C series. I like that it will reset on 9/1/2020, locking in what should be a good rate for five years. Based on VIX futures, the market is pricing in a potentially highly volatile event in November. I like resets that price prior to that event. NPI-A is my single largest Canadian position and top 5 overall.

      1. Jim – I would concur on preferring the A over the C, depending on your view of interest rates and what the rest of your reset ladder looks like.

        But 5 cents? My position in NPI.PR.A was purchased at 14.49, versus present 16.10. Somewhere along the way 5 cents loses importance to me.

      2. LI,
        Slow on the uptake. Highly volatile event. Made me laugh. I need to get beyond the limitations of the OTC system.

    4. Last trade was on jan 10.close at $14.86 U>S>
      I own shares in my TDA account.
      When I want to trade OTC issues
      I always enter the buy or sell at
      10 cents over or under the bid and ask and TDA usually splits the difference. If the price moves I move accordingly.
      I do not care about the pennies difference, but understand many investors do.
      If I wanted to sell Tuesday I would enter $14.75 and see what happens for the rest of the day.
      I am a hold.
      You can always call and see if the broker can force the trade through for you with the online commission if your broker charges one.
      Howard

      1. Thanks for that info Howard. I did try a variety of different sell orders. It’s odd that there were no shares traded for a week given the the equivalent Canadian symbol had reasonable volume during that period. Anyway I’m on my way to an Interactive Broker account which should make things a lot more simple. Bob-in DE helped me with this and the process with IB has been very sweet.

    1. EMA.PR.F reset yesterday. Like the issuer, like the issuer, just so-so on the price. Yield is 5.84% at the reset rate.

      I was a buyer of this issue months ago but no now.

      EMA.PR.G is unlikely to ever issue.

  67. https://tax.kpmg.us/content/dam/tax/en/pdfs/2019/global-withholding-taxes-guide-kpmg-2018.pdf

    Pretty interesting document re: worldwide taxes and treaties, etc. Does this portion detailing Canada shed any light on issues some of you are having with your brokerages witholding monies you think they should not be?

    Don’t shoot the messenger. Just posting in case this may help someone. I personally, don’t have any witholding issues w/CAN holdings.

    Seems like a pretty cool document to help with deciding whether to buy some other foreign securities like the Greek based shippers and such.

  68. Comments on BAM floating rate issues ….

    I restrict this discussion to the 4 BAM issues that are based on Prime, BAM.PR.B, BAM.PR.C, BAM.PR.E and BAM.PF.K.

    The issues are identical in the sense that that are all the same credit, are all callable “any”, and all float based on Prime. Where they differ is the percentage of prime. The B, C and K issues all float at 70% of prime. The E issue, effectively, is pinned to 100% of prime (yes, it’s a bit more complex than I made it out).

    As one would expect, the B, C and K issues trade at essentially identical yields of 5.71% to 5.77% at today’s close. No reason they should differ.

    The E issue closed today to yield 6.13% , almost 40 bps higher. In my judgement, the difference is not justified. Even if one assumes a cut in prime, the E still gives a higher yield at present prices. A higher yield for no more risk = free money.

    BAM.PR.S floats off the BOC 3-month rate, so is not comparable to the other 3.

    If I were to purchase one of the BAM floaters, at present price, it would be the E.

    BAM may or may not be appropriate for you. Floaters, based on Prime or otherwise, may not be appropriate for you.

    1. Okay. My starter position order was completed for BAM.PR.E. An OTC symbol should appear in the next day or so. I will publish it when I get it for anybody else interested in buying it.

          1. Got it, thanks. I was trying to see what broker TSX reported for a sale through Schwab. There was a 300 share trade at 10:27 through TD but not you.

            My trades on IBKR show up as “Anonymous”.

            1. This may sound nuts but I felt my trade in CU.PR.H never showed up. But it could have been broken up into smaller trades. My guess was if it was it was CIBC

  69. Gentlemen, sorry to say but I’m puzzled with a DBRS rankings.
    According to the manual from their site all issues having Pfd-3 grade are IG:

    “Pfd-3
    Preferred shares rated Pfd-3 are generally of adequate credit quality. While protection of dividends and
    principal is still considered acceptable, the issuing entity is more susceptible to adverse changes in
    financial and economic conditions, and there may be other adverse conditions present which detract from
    debt protection. Pfd-3 ratings generally correspond with issuers with a BBB category or higher reference
    point.”
    But I often read in the comments that only pfd-2 and above are considered investment grade.
    So I will be very appreciate if someone will explain me this distinction.

  70. The future of Bombardier Inc. is being called into question after the company said it was actively considering alternatives to reduce its staggering debt.

    After exiting the commercial aircraft business, selling its aerostructures unit and unloading a large tract of land in Toronto, the company said it is working to reduce debt and “solve its capital structure.” Bombardier’s long-term debt stood at more than US$9 billion as of Dec. 31, 2018.

    Do not own, just passing along

    https://app.tmxmoney.com/news/cpnews/article?locale=EN&newsid=pcw98445&mobile=false

    1. Steve & others – I have never included Bombardier in any of the spreadsheets I have posted. For good reason.

      I consider it uninvestible. If it were not in Canada, and more specifically in Quebec, it would have died long ago.

      If you want to live on the wild side, with a reasonable hope of getting your money back, look at Dundee Corp.

      Another issuer with a colorful past.

      1. There are a lot of moving pieces with these Canadian preferreds. So far, I’ve tried to get the highest quality companies I can to try to minimize the level of risk. If you added bankruptcy risk to the inherent currency and interest rate risk, it would probably make my head explode.

      2. Pass on both. Ran across bombardier on tmxmoney as lead story. I knew they had some preferreds, so I posted it to alert others.

    2. Bombardier / AirCanada- Stay clear.

      (https://www.fraserinstitute.org/article/bombardier-and-canadas-corporate-welfare-trap)
      Bombardier’s corporate welfare began, at least federally, in 1966 when it received its first disbursement of $35 million from the federal department, Industry Canada. In the decades since, various Bombardier iterations received over $1.1 billion (all figures adjusted for inflation) in 48 separate disbursements from just Industry Canada. That includes two 2009 cheques worth $233 million.

      (https://www.fraserinstitute.org/article/air-canada-still-flying-high-on-ottawas-corporate-welfare)
      (https://dealbook.nytimes.com/2009/07/30/air-canada-gets-bailout-from-ottawa/)
      Air Canada has secured a 1.02 billion Canadian dollar ($922 million) lifeline with some help from the federal government, giving the carrier a crucial infusion of cash to help it survive the recession and avoid another trip through bankruptcy protection, The Globe and Mail reported.

  71. New Canadian OTC Symbols. All of these are fixed-rate, callable, but trading under Par. Current yield 5.2%. Credit ratings S&P equivalent is BBB (Canada DBRS ratings of PFD-2),

    MFC.PR.B is MNQFF
    Manulife Finl Corp CL A SER 2 Preferred Stock (Canada)

    MFC.PR.C is MNUFF
    Manulife Finl Corp CL A SER 3 Preferred Stock (Canada)

    SLF.PR.B is SLFSF
    Sun Life Financial Inc. CL A SER 2 Preferred Stock (Canada)

    On the new symbols, using the Schwab platform, I use the all-in-one-ticket to buy or sell these.

    1. I am going to open up my last two fixed-rate Canadian issues for 2020 tomorrow.

      They will be PWF.PR.Z and PWF.PR.L

      Will post OTC symbols tomorrow night

      1. Steve – what about BAM.PR.E? Currently yielding 6.18%. Curious what others think of this one. I’m not sure if the fact that it is tied to the prime rate should be somewhat advantageous compared to the 3 month. The info below gave me flashbacks to my college calculus classes.

        https://bam.brookfield.com/~/media/Files/B/BrookField-BAM-IR-V2/preferred-shares/2019-pref/Provisions-ClassAPrefShare-Series8.pdf

        The holders of the Series 8 Preferred Shares are entitled to receive monthly floating cumulative preferential cash dividends, accruing daily, as and when declared by the board of directors on the 12th day of each month in an amount per share equal to the product of C$25.00 per share and one-twelfth of the annual floating dividend rate applicable to the month being the average Prime Rate for the month multiplied by a Designated Percentage as provided in the share conditions. The Designated Percentage established for November 2001 was 85%. Thereafter, the Designated Percentage has been adjusted each month based on the average trading price of the Series 8 Preferred Shares, to a maximum of 100% and a minimum of 50%.

        The adjustment factor applied to the Designated Percentage is calculated as follows:

        If the Calculated Trading Price for the preceding month is The Adjustment Factor as a percentage of Prime shall be

        $25.50 or more -4.00%
        $25.375 and less than $25.50 -3.00%
        $25.25 and less than $25.375 -2.00%
        $25.125 and less than $25.25 -1.00%
        Greater than $24.875 and less than $25.125 nil
        Greater than $24.75 to $24.875 1.00%
        Greater than $24.625 to $24.75 2.00%
        Greater than $24.50 to $24.625 3.00%
        $24.50 or less 4.00%

        The maximum Adjustment Factor for any month will be +/- 4.00%.

        1. I like being tied to the prime rate, as a general concept, because we are not going negative on this rate.

          I am basically at my self imposed reset or floating rate limit of 10% for Canadian preferreds (at 9% right now) but may buy more of TD.PF.D (TDBKF that you opened up) if I can get a better price.

          I have two similar issues of a lesser quality preferred Canada Bell (PFD-3) current yield is 6.3%. BCE.PR.H (BECEF OTC symbol) and BCE.PR.Y (BCEFF).
          I like the Telecomm space if the economy pulls back similar to my UZA (non investment grade) holding.

          I am a pass on this one but not for the concept. I like the concept and idea of prime rate floating

    2. SLF was upgraded to BBB+ on DBRS. Flagship of the industry.

      You had 3 of the 4 additions on FINRA dailies yesterday. Must be some kind of record.

      1. thanks for upgrade info on DBRS for SLF.

        I am going to hold off on any more OTC symbols for PWF. I put my funds into PWF.PR.I at 6% instead. Paid a little above PAR for PWF.PR.I but I sold GWL.PR.F for a small capital gain that covers the risk exposure. Playing with the house’s money. Holding WFC-T (sold today) and COF-P has worked for me. It’s another one of my short term trades that exceed money market rated that last until the call actually occurs. Except, of course, there is some currency risk to this one,

Leave a Reply

Your email address will not be published. Required fields are marked *