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.

368 thoughts on “Canadian Chat”

  1. Bro Trudeau seems to have found some resistance to his good looks. Receiving a rough ride from the anti-vax / anti-mask groups due to party stance. Old fear and uncertainty tactics with the conservatives are not playing as well within the base.

    Will be paying attention to the first debate. To see if any points can sway the more moderate crowd away from more tax and spend.

    Was thinking that it was going to be an easy majority but the other hogs want a position on the trough.

    1. Your analogy is quite accurate. These ‘political animals’ have the ability to hit their own food supply button too. Quite a contradictory and destructive method of ‘governance and management.
      Decades ago we had a group in 4H and all had the duties of learning how to moderate food supplies to one or many animals. Most domesticated animals will easily eat themselves to death in short order. Indeed now a computer can monitor and do it best.
      Really a valid Parable for today. Maybe a computer can do it better without referring to a rewrite of many thousands pages of new handbooks rewritten annually by the animals themselves.

    2. surveys show 75% of CDNs say this election was unnecessary – looks good on the Liberals to have it backfire on them. So a PM who was a trust fund kid and only worked as a drama teacher supported by a Finance Minister who majored in Russian history will hopefully be shown the door (with full govt pensions of course). At least pretty well any other combination of a likely minority govt should be an improvement. Although a lot can happen in 17 days in politics

    3. Conservatives have a history of foot in mouth disease when playing with the other farm animals.

      Campaigns have not found their goat issue to raise the electorate out of its slumber. Anything is still possible.

  2. Bombardier common and prefs got pop up today on speculation BBD will be added back to the TSX index in a few weeks with the next rebalancing. Better to be lucky than smart sometimes as I picked up some up the higher yielding prefs a month or so ago after their relatively good quarterly results.

  3. I posted a comment on Freehold and Rogers Sugar a bit lower in the thread here. I remembered an older website that has been modernized, but went to visit again today: Stockchase,com.
    An interesting posting site for CN brokers regarding everything Canadian. I used to follow PennWest, Baytex, Alta, Crescent Point, etc before the return to C-Corps. I learned about a few others and the big oilys that stuck in my mind since brokers mention all sorts of opinion about their favs.
    Fun site that I am glad to see still is around.

      1. Well, you do have to believe that oil is not gonna go back down there in the near future. We’ll see.

        1. Predicting oil prices is a challenge. More pipeline capacity certainly boost the wellhead price on Canadian crude and up those royalty payments.

      2. Bob, Camroc has been unflappable in his sniffing and continual investing of hydrocarbons through the highs and the lows year after year. Rumor has it he is invited and attends all the Duncan family (EPD) reunions also, ha.

    1. Camroc – At least there is one person that is a friend to the hydrocarbon industry. In Canada drilling for hydrocarbons went out of vogue with governments enhanced interrogation techniques on full display royalties depend on continuous replacement drilling.

      Oil sands long life low decline with minimal maintenance capital assets have been the last oily bastion of hope for operators with existing permits. CNQ/IMO/SU are my three horseman of the apocalypse.

      Math is simple whoever is the lowest cost operator through the economic cycle will eventually own all the assets. Hint – CNQ

      1. Yep. I doubt using oil goes away anytime soon. I remember when frozen (TV) dinners came on aluminum trays. Now they’re all plastic, whose use continues to escalate. My house is full of it. My little fuel-efficient car has about 300 lbs. of plastic in it. Prolly why it’s so fuel-efficient. lol

        And all those developing countries yearning for what we have. That will take reliable power, fueled by hydrocarbons. I doubt they’re impressed by any virtue signaling going on in the developed world.

        I could go on, but it’s Sunday and tomorrow is a hard workin’ day. “Blue Monday, how I hate blue Monday…”

        JMO

        1. Camroc – Not contesting your oil thesis as I believe its true. Its only a matter of time before tragic underinvestment comes home to roost.

        2. Good ‘ole Fats…. I miss him…….. “This Is Fats Domino” was the very first vinyl album I ever bot on my own…… I think I was 11 years old.

      2. Ottawa will gladly sinking almost infinite sums into money loosing businesses that are politically favoured while at the same showing at best benign neglect toward the evil O&G industry, which doesn’t need government largess to thrive.

        Ottawa’s lack of involvement in the Line 5 issue was stunning. Yes, a shut down would have hurt western oil producers but the bigger harm would have fallen on eastern oil consumers. Most of the refined products produced at Ontario and Quebec refineries come from Line 5 crude. It is Ontario and Quebec that elect Mr. Dressup, which is the only reason Ottawa ever got involved. If it were just a western Canadian issue Justin would never have put on his big boy pants.

    2. FRU/FRHLF: Very specific operators. Amazing story that they just keep managing over decades. They make my kind of vitamins. Have been around a long time. Younger brother is Prairie Sky. Both disciplined payout share of royalties with very LOW overhead. Very interesting, very Commonwealth story which is reflected on their website. Worth the read. I’ve talked about them here several times.
      KNOW that they are pay as percentage of 3Xnet, goes up, goes down, but pays true royalties share based on sales.
      I have been accumulating for a long time and sold off a trigger order at US$8 on the F-OTC shares, which recently allowed a relocation to FRU in the IBKR account about 15% lower.
      Close to moving ALL CNs, prefs and commons, over now. That account was a labor born of activities of interacting on THIS SITE at a good time. Thanks for all the leads to those contributors! Resets and Oilys.
      I’ll throw out a flyer here, a CN common that I have followed for a long time, RSI/RSGUF, pure play on sugar, though regulated on exports, which has just jumped on Sugar News and a general commodity rolling enthusiasm. Staid, conservative, hands-in-the-pockets kind of management, divy payers.
      Nuff Said, Eh?

  4. I just looked at the list of SEC Rule 15c2-11 Restricted Securities as published by TD Ameritrade on August 2, 2021 and I am happy that none of my Canadian securities are now on the list, to wit:
    ALTGF (ALA.PR.U) AltaGas
    ERRAF (EMA.PR.C) Emera
    FXFLF (FFH.PR.C). Fairfax Financial

    In fact, I saw no preferred stocks of these companies on the list. Also, I saw no preferred of Enbridge on the list either. However, go to your own sources. I make no warranties or representations as to the accuracy of the info provided by TD Ameritrade.

    For those interested in SLMNP (LyondellBasell Advanced Polymers, Inc. (non-Canadian), it wasn’t on the list either.

  5. Anyone see news on the Brookfield takeover of IPL? Has it happened? Has Brookfield determined if there is going to be a proration between cash and stock?

    1. Randy – Brookfield had to extend offer to Aug 20th as they need 55% vote in favour and only had 52% at Aug 6th original deadline. They upped offer to $20 cash

        1. Brookfield last increased its bid in mid-July to $20 a share in cash to Inter Pipeline shareholders, up from $19.50 a share. Its original hostile bid in February was worth $16.50, which was comprised of a mix of cash and shares.

          Brookfield’s latest revision also allowed Inter Pipeline investors to take some shares at an elevated price instead of cash, offering one-quarter of a Brookfield Infrastructure Corp. share for each Inter Pipeline share. Inter Pipeline’s board ultimately decided to back this offer after rival bidder Pembina Pipeline Corp. bowed out of a bidding war.

          1. I would think that the fat lady has sung. With Pembina gone and just a few more votes to pick up it seems over. Agree?

            1. yes BAM is always going to prevail if it wants to own a company – deep pockets after all with growing cashflow year after year

              1. Please end the long suffering interpipeline shareholders pain with a quick takeover and better management.

  6. Later today, Canada will sign an agreement with Moderna for construction of a vaccine plant somewhere in the great white north. The PM is Justin Trudeau. The “Minister of Innovation” is Francois-Philippe Champagne. The announcement was made in Montreal and first reported by the Montreal La Press.

    Trudeau is expected to call an election for later this year. His Liberal Party is absolutely dependent on the province of Quebec for reelection. So, too, Ontario.

    I’m taking bets on Lethbridge, Alberta.

    1. JT and the Liberals are not scared of the abysmal competition at the taxpayer trough.

      Conservatives have fielded another 2×4 and NDP have reverted back to union first and give away everything politics which appeal to a minority of voters.

      My first thought was we could re-purpose the Edmonton Superlab but its already been demolished as it was expected to be run by Union group.

      https://www.cbc.ca/news/canada/edmonton/whatever-happened-to-the-alberta-superlab-1.5693158#:~:text=It's%20official%3A%20Alberta%20government%20cancels%20Edmonton%20superlab&text=In%20June%2C%20it%20became%20official,project%20had%20already%20been%20spent.

    2. LOL — yes nothing like Junior preparing to send the country into an election nobody wants as their are predictions for a 4th wave of covid thanks to the Delta variant. Junior just follows his PMO office mandarins who are pulling his strings.

      I’m betting on the new Moderna plant going to Quebec using an old Bombardier mothballed facility (they have lots) with lots of gov’t $$ used to grease the wheels.

  7. Saturday morning musings from the great white north after enjoying a Friday night baseball game in London (intercounty minor minor league but still a great night with the grandson).
    — Brookfield needs Bob to vote his shares in favour of their take over of IPL as they still have not reached the required 55% approval level ; so no choice but to extend their offer
    — for yield I put some more $$ into Bombardier prefs this week as they showed continued improvement with latest quarterly results. This is purely a ‘feeling in my gut’ decision as on paper they are still a basketcase but knowing neither the federal or provincial (Quebec) govts would ever let this company go under I figured what the heck.

    1. Have been using CCS.PR.C for my cash account.

      Bombardier and air Canada bailout kings living off Canadian taxpayer oxygen. People get angry at the General Motors bailout but atleast taxpayers recovered something.

      1. For those who think that Bombardier still makes snow mobiles you are stuck in the 60s. The company bought Lear some years ago and they now make jets. Bombardier is kinda the poor mans Gulfstream.

      2. so very true about GM. Co-operators certainly very solid company just a question how the 5% will do if/when interest rates start showing upward trend.

    2. So, do you think Bombardier may be too French to fail?

      Justin delights in sticking it to money making Alberta every time he can while at the same time he has infinite amounts of money to shovel into the cash drain that is Quebec.

      Ils ne laisseront pas Bombardier faire faillite, mais dans les moments difficiles, ils n’aideront pas les actionnaires.

    3. I like minor league baseball. I can watch the Bluerocks from the best seats in the house, be there in 15 minutes, and have a good time, all for very little money.

      Or I can drive to Philly, spend an hour and $50 parking my car on some guy’s lawn and another hour retrieving it at the end of the game, lay out $100 for tickets and another hundred for a couple hotdogs and beers, and sit where I need a telescope to see the game. All while sitting among what must be about the worst “fans” in professional sports.

      For me, it’s not a hard choice.

      1. Bob, you forgot to add the cost of $10 worth of batteries to throw from stands when going to Philly games, ha.. Oh wait, that was at “The Vet” and I think they quit doing that activity anymore, lol..

        1. The Philly “fans” are animals. I would go to a pro wrestling match before I would go to a Flyers game. There are more fights in stands than there are on ice.

  8. Brookfield strikes again.  Following the very successful launch of tracking stocks BEPC, BIPC and BAMR, Brookfield is doing it again.  This time with BBU, Brookfield Business Partners.  BBU is a Bermudian partnership and the tracking stock, BBUC, will be a Canadian corporation.  As with the other Brookfield pairs, BBU and BBUC are designed to be economically equivalent. BBUC will be exchangeable into BBU but not vice versa.

    The difference between the two is tax treatment.  Depending on who you are (individual, institution) and where your are (US, Canada, elsewhere), one will work better than the other.  Institutions generally can’t own partnerships but they can buy the corporation tracking stock, so BBUC is their only option.

    If you are a “U.S. person” for tax purposes, BBU has no withholding and the distributions will be a mix of whatever.  But no UBTI. (BEP is similar and generates almost 100% qualified dividends).

    BBUC will get you 15% withholding and will be a qualified dividend (my guess) or ROC, or possibly a mix.  If you put it in a qualified account the 15% withholding tax goes to zero.

    I don’t own BBU and have never done a deep dive.  It’s a mixed bag of business that don’t fit into the mandate of either BEP or BIP.  It is not as compelling to me as BAM itself or BEP or BIP.  But you may like it.

    BBUC will be distributed to existing BBU holders later this year.  There is no “IPO”.  It will trade NYSE and TSX after that.  Yes, SEC registered.  You can actually trade it.

  9. I know the 31st landed on a Saturday but has anyone received their Toronto Dominion Common Stock dividend yet? I received all my TD rate reset divs but no common stock as of 6:47PM EST

  10. As the resident Canuck on III thought I would pass along a recent article from Globe & Mail to the US investors holding CDN prefs/common shares. Outlook now is for the CDN $ to depreciate over next year as opposed to further gains. Which of course is good for my US$ holdings but -ve for you holding CDN$ securities.

    Also for those following the Interpipeline/ Brookfield/Pempina saga two proxy advisory firms have now come out supporting BAM’s latest offer.

    Scotiabank takes the axe to its Canadian dollar forecasts
    DARCY KEITH
    PUBLISHED 2 DAYS AGO
    UPDATED 1 DAY AGO

    Scotiabank has scaled back its forecasts for how much the loonie will take flight over the next year and a half.

    As part of some “significant changes” to its forex forecasts released late Friday that extend well beyond the Canadian currency, Scotia now believes the loonie will close this year at 1.22 in US. dollars, or 81.96 cents US. Previously, it expected the Canadian dollar to be trading at 84.03 cents U.S. come the end of 2021.

    And by the end of 2022, it now only sees the loonie at 1.25, or 80 cents US – well shy of the 82.64 cents U.S. it had been forecasting previously, and barely above the 79.61 cents it was trading at late Friday.

    A lot of Scotiabank’s rethink has to do with it now believing the U.S. dollar has further to advance against major currencies. “While we think there are still reasons to be cautious on the general outlook for the US dollar (USD), it does appear as if its broad decline has stabilized since June and structural headwinds (rising US deficits) will likely be overlooked for now,” Scotiabank’s chief forex strategist Shaun Osborne said in a note Friday. “The window for the sort of USD losses we have been expecting to play out over the balance of this year has narrowed considerably now that the Fed has set the stage for tapering asset purchases in the coming months, a message that may be reinforced at the Fed’s August Jackson Hole symposium.”

    But the bank’s less bullish view on the loonie also reflects domestic developments and the currency’s inability to capture greater upside in recent weeks.

    “Indeed, we no longer look for the USDCAD to push under 1.20 into H2 2020 and early 2021, per our recent forecasts. The CAD’s weakness through mid-year has run counter to positive underlying fundamentals; the CAD has had a solid opportunity to strengthen against the USD but has not been able to press its advantage. The Canadian economic recovery should pick up speed in the second half of the year and reinforce the relatively more hawkish profile of the Bank of Canada compared to the Fed through the rest of this year and into early 2022. CAD-positive yield spreads and still (generally) firm commodity prices have failed to support the CAD in recent weeks but should still provide some anchoring for the CAD through the latter part of the year, assuming market volatility eases,” Scotiabank said

    “We feel there is some fundamental value in the CAD at current levels which should lift the CAD later in Q3 or in early Q4 when seasonal trends are more CAD-supportive,” he added. “But technical charts suggest that USDCAD holding major, long-term support around the 1.20 point earlier this year represents a significant turning point for the USD decline from the 1.47 peak made in early 2020 and we expect the USD to hold above the 1.20 (83.33 cents US) level moving forward.”

    Scotiabank’s new forecast for the Canadian dollar puts it more in the same camp with some others on Bay Street.

    Katherine Judge and Avery Shenfeld, economists at CIBC World Markets, for instance believe the market’s recalibration of U.S. rate hikes will weigh on the Canadian dollar for the rest of 2021. They expect the dollar will end the year slightly below 79 US cents.

    They believe next year could bring more of the same, as Canadian economic growth and inflation lag U.S. numbers.

    “As a result, look for the Canadian dollar to continue to lose its luster through 2022 on more aggressive policy action from the Fed,” the CIBC economists said in a note earlier this month.

    1. The Battle between BIP and PBA is interesting. BIP clearly doesn’t want to give up. It’s clearly a high conviction play for them.

      I am very leery of Institutional Shareholder Services (and similar outfits). ISS is a private company, unaccountable to anyone, unregulated by anyone, out there giving “advice” on significant transactions. It’s controlled out of Europe and with Canadian roots, too. I don’t listen to them.

      I own both BIP and PBA and would rather see the deal get done with Pembina. I don’t want the cash part of BIP’s offer as that would make the transaction taxable to me. Also, I see far more long term value creation with a PBA deal as there are real, physical synergies to be realized.

      BIP’s strategy appear to be to offer a little bit more than whatever PBA is offering and to outmaneuver PBA in the media war.

      1. thanks for the heads up on those firms Bob – I hold both BAM and Pembina however my miniscule # of shares isn’t too likely to hold much sway

  11. Article in Saturday Globe & Mail regarding the ongoing saga of Inter Pipeline take over (and the lawyers are getting richer and richer)

    Alberta securities regulator hears complaints about bids for Inter Pipeline
    JAREN KERRMERGERS AND ACQUISITIONS REPORTER
    PUBLISHED 1 DAY AGO
    UPDATED JULY 10, 2021
    FOR SUBSCRIBERS

    The board of directors at Inter Pipeline Ltd. said it supported a takeover deal the company signed with Pembina Pipeline Corp., despite an increased offer from Brookfield Infrastructure Partners. That has now led to an unfair tactics dispute with regulatory agency.

    HO/THE CANADIAN PRESS

    Inter Pipeline Ltd. IPL-T
    unfairly favoured Pembina Pipeline Corp. PPL-T
    by agreeing to pay it an onerous break fee if Pembina’s takeover offer does not succeed, rival bidder Brookfield Infrastructure Partners LP BIPC-T
    told a regulatory hearing on Friday, while Inter Pipeline countered that Brookfield’s offer was misleading and deterred other parties from bidding.

    The battle between Brookfield, which lodged a hostile bid for Inter Pipeline in February, and Pembina, which made an improved white knight offer in June, has moved to the Alberta Securities Commission after all parties complained about unfair tactics in the takeover fight. Pembina’s bid is supported by Inter Pipeline’s board of directors.

    Lawyers for Brookfield argued Tuesday that there should not be a $350-million termination fee attached to Pembina’s friendly takeover offer for Inter Pipeline, which is payable if the Pembina deal does not succeed. If the fee is not removed and Brookfield’s bid is supported by Inter Pipeline shareholders, Brookfield will effectively have to pay it.

    Brookfield’s lawyers said the fee is “option chill” that serves as a tax on Inter Pipeline shareholders who could have unlocked value by now, and said Inter Pipeline never consulted with Brookfield about a suitable sum for a break fee.

    Inter Pipeline’s lawyers said the break fee was within a typical range, and necessary to attract Pembina’s friendly bid. They countered that Brookfield’s use of securities known as total return swaps to acquire an ownership stake in Inter Pipeline was misleading because the swaps made Brookfield appear to have nearly 20-per-cent voting control in the company, when it actually has just less than 10 per cent.

    Brookfield owns a 9.75-per-cent stake in Inter Pipeline’s common shares outright, and has another 9.9-per-cent economic interest in Inter Pipeline through its total return swaps with its counterparty, Bank of Montreal.

    Lawyers for Inter Pipeline also referenced court documents that said that BMO would receive a $15-million success fee if Brookfield’s hostile bid won, which, they say, creates a conflict of interest and could sway BMO’s vote as a shareholder of Inter Pipeline.

    Inter Pipeline’s lawyers argue Brookfield has always combined the outright ownership with the total return swaps in its materials, which effectively discouraged other bids for Inter Pipeline.

    Canadian securities laws require shareholders with a stake of more than 10 per cent to publicly disclose their holding. The rule is meant to prevent creeping takeovers, in which a shareholder amasses a large position covertly and can then effectively control the outcome of a takeover battle. Brookfield has remained below the early warning threshold because it owns just 9.75 per cent of Inter Pipeline.

    Brookfield made its takeover offer in February after Inter Pipeline’s stock plummeted because of weak oil prices, along with delays and rising costs at its Heartland Petrochemical Complex northeast of Edmonton. The facility has been under construction for more than three years, and Inter Pipeline struggled to find a partner on the project until Pembina’s offer arrived in June. The facility will convert Alberta propane into polypropylene pellets for manufacturers.

    The ASC panel said it expects to deliver an oral decision on Monday.

      1. The merger vote was set (still is I guess) for Aug 6 and I’m assuming Pembina thought IP shareholders would vote in favor of the BIP offer. You read same or differently?

        If BIP will pay the price they are paying with zero operational synergies they must see big value in IP once the megaplant is complete.

        1. Bob,

          I have two thoughts.
          – Brookfield was willing to keep increasing their offer and PBA did not want to over pay.
          – Likely some institutional holders (beyond ISS) have told them they will vote for Brookfield.

          While it would have been a great combo, the $350 million looks good on their balance sheet.

          1. Looks like Brookfield was going to pay 1 buck more than whatever Pembina was going to offer. Brookfield has more money than Pembina.

            I assume that Pembina was being told that the Aug 6 vote was going to go Brookfield’s way.

            The 350M breakup fee is good for Pembina. Works out to about 65 cents per Pembina share.

            Still, I think this went the wrong way. Institutions will sell you out for a nickel and they have the patience of a two year old.

            Here’s a thought. This could end up down the road with Brookfield acquiring Pembina. The fit is too good for it not to happen one day. BIP calculated they could get the two cheaper buying one at a time than the two combined. I’ll be buying more Pembina.

            1. Bob, I see that Pembina declared a June 2021 dividend of $0.21 (unchanged since Jan 2020 from what I can tell). Yet Yahoo Finance is reporting annual divs of $2.00. Any idea why they shouldn’t be reporting $2.52 instead?

              1. Bur …..

                without looking I think what you see is the currency difference. Pembina is listed on both TSX (as PPL) and NYSE (as PBA) and trades on both in the local currency. 0.21 CA$ per month works out to 2.00 annual in US$.

                Confused yet?

              2. Bur – as per Bob’s comments I got my latest 21 cents (CDN) on July 15th which times 12 equals the $2.52 (CDN) or appx 6.4% yield on common price today

  12. So for anyone looking at a possible cause and effect event – just saw item on CDN biz channel that the annual Calgary Stampede is back on this year after being cancelled last year due to Covid. What does this matter? According to the reporter who covers CDN oil patch a lot of M&A activity gets discussed during the social meet and greets during the Stampede festivities. Ergo – if you like to dabble in smaller cap CDN oil & gas stocks there may be some activity this fall (kind of like the hedge fund that tracks corporate jets to try and figure out potential M&A’s)

    1. Geez, can’t imagine what the gold ol’ boys from Canadian oil have got to talk about this year. Nothing going on in pipelines. No lawsuits flying. No M&A action.

      Been a longggg time since I was at Stampede.

      1. Completely off topic for this board, but one of my fondest memories is of attending the Pendleton Round-up as a kid with my great uncle back in the ’70s.

      2. LOL — Bob the biggest challenge to the Cdn oil patch is the fact that Junior and the Liberal party have 0 seats in Alberta and Saskatchewan so consequently no big urge to offer much assistance. Then you add on our new Minister of Finance (Chrystia Freeland) has a BA in Russian history & literature and was a business journalist before becoming a politician. Poor John Kenneth Galbraith (born about half hour from where I live) would be spinning in his grave.

        1. not to be political.. but have read in a number of places that everything Galbraith put forth and been proved absolutely wrong.

  13. BAM & BAMR ………..

    The story is half Canadian anyway. Out of the box BAMR traded all the way up to 85 when the stock it tracks, BAM, was in the low 50s. Well, reality has caught up with the theory and the two tickers are trading at almost the same figure now, 52 for BAMR vs 51.58 for BAM.

    If you have existing holdings in BAM in a TAXABLE account, I would look at converting to BAMR. But look at cap gains first (this is not a tax free exchange), as it may alter the decision. But going forward, certainly, you should prefer BAMR over BAM. No withholding on BAMR (15% on BAM) and your tax rate on qualified dividends may well be less than the 15% withheld. It may be zero. So, BAMR saves on taxes.

    If you hold your Brookfield in a ROTH I don’t think it matters what you hold as there is no tax and no withholding on either. But be alert for arbitrage opportunities between the two. Sell the pricier one and buy the cheaper one. More shares for less money and since it’s a Roth you don’t have to worry about taxes from trading back and forth.

    For a REGULAR IRA, well, after thought, I decided I wouldn’t personally hold either BAM or BAMR in a regular IRA. The dividend yield is only about 1%, so the current tax savings isn’t much and an IRA (dirty little secret!) converts what would be LTCG into ordinary income when the profits are eventually withdrawn from the IRA. Most of BAM/R’s long term return is going to be cap gains so holding BAM or BAMR in a regular IRA may actually leave you with less money that holding in a taxable account.

    Save your IRA space for something that pays a fat dividend and won’t generate as much in the way of cap gains. ENB, with a 7% dividend yld, comes to mind.

    My take anyway ….

  14. Some of the big oil companies in Canada are looking at significant blowout FCF leverage to oil prices for the long term , even with bouts of reversion to downward pricing in the future. Their business expenses have been wrung out during this last cycle, technology applied and much of the CAPEX needed already in place. The gusher phase is now in their view.
    Just as a general personal prediction, I would not be surprised to see some of the preferreds, now below (some way below) par and yielding decently for the holder for a few years, being redeemed at call from free-cash. Interest rate refi risk may just not be an issue.
    They are also aggressively and realistically going after the Green Questions with very realistic applications.
    Way long after a long study. Been shifting these instruments and commons with call writing into sheltered accounts.
    Too bad govts aren’t run by these forward-looking bad-ass managers! We need a ‘lottery of this type of Unwilling, but uber-competent’ at election time. At one point that was a promise of business/govt partnership, but the undisciplined have to end up somewhere.
    I am going to try to go up into Alb and BC this Summer, but will see what a passport can do at the border.
    PS: All Hail the Canadiens…again?

    1. Joel – CDN energy has a history of feast or famine and we are definitely in the feast phase right now. As energy proxy the I Shares Cdn Capped Energy (XEG on TSX) as of June 30 is YTD +56% and 1 yr +132% but 3 yr – 9% 5 yr -3% and 10 yr -5%. So timing is everything. I follow an energy specialist portfolio mgr (Eric Nuttall) who appears frequently on BNN Bloomberg TV (Cdn business channel). There is a 1 hr show at noon (Market Call) where portfolio mgrs take calls / emails on stocks from viewers. You can find the show on the internet and there are frequent calls from US viewers. Right now Nuttall is looking at smaller cap CDN energy companies having more leverage to higher oil prices. Nuttall’s fund is Ninepoint Energy if you want to see what he is currently holding.

      Les Canadiens have certainly make it exciting for us Canucks this year as Vancouver was the last Cdn team to even make it to the finals and that was 2011 (Montreal last winner 1993 with Patrick Roy in net)

      Happy July 4th by the way !

  15. Underwhelming news of Canadian preferred ……

    Two new issues with OTC tickers:

    GWO.PR.H is available as GRWLF, and
    SLF.PR.D is available as SLFIF.

    Both are strong investment grade FIXED (not reset) rate issues yielding 4.86% and 4.47%, respectively.

    Better than one can get on comparable U.S. issues but that’s a left handed compliment. I’m much preferring Bermudian insurers now, with their higher yields and NO withholding.

    And a rarity! A variable rate issue, BAM.PR.S (aka BMKAF) will self-destruct and turn back into 5-yr reset BAM.PR.R (BAMGF). This is as a result of the once-every-5-year option that resets carry to convert to floating rates, and vice versa.

    The holders of the variable voted for this. They are trading in a variable rate of 2.41% (yld 3.14%) for a rate fixed for the next 5 years of 3.24% (yld 4.22%. Point being that the expectation among those voting was for rates to remain low.

    To my knowledge, this is the first case of a converted variable converting back to a reset.

    And for the second year running the trip to Muskoka is off. Canada will just have to survive without Yankee tourists, and their money. I’m surprised the LCBO in Port Carling has survived, not to mention Silver Stream farms. Between Justin and Joe it’s a race to the bottom.

    1. Bob you need to be wearing a Vegas hockey jersey to get across the border right now. (go Habs go !) I believe the border is going to open July 22nd but Junior & Dougie Ford seem to change the rules every other day. You like BAM I believe and I stumbled across a unique BAM offshoot called Brookfield Select Opportunities Income Fund (BSO.un ticker on TSX). Has about 10% yield and quarterly pay . Threw a few loonies at it out of curiosity.

      1. Junior, you mean the former drama teacher?

        Since I pay taxes to the demented one I’m looking for the new BAMR starting Monday. Gets me rid of that pesky 15% withholding.

        1. yes along with a few other names the drama teacher has been tagged with Junior in deference to his father . Who knows you may be in same boat some day with Don Jr or Ivanka : )

    2. Bob I see that GWO.PR.H is trading on the TSX at $25.03 ex div date was June 1. And the other symbol GRWLF brings up a price and a blank page on the OTC and a listing on Quantum Online of a Preferred that has/had a call date of 9/30/2014.
      Are you sure those symbols are right?

  16. TWIMC, Domtar (UFS) going private, equity up debt down. They have 2 issues, both are long (’42&’44), now trading with ytm of about 6%. Looks like a buying opportunity to me 🤔

    1. Yuriy – anything to add to initial report? I do have a toe hold in the 2044 bond and the recovery was nice but it’s now time to harvest or grow.

      S&P characterizes the recent deal as an acquisition of Domtar (US) by Paper Excellence, a private (but large) Canadian company. Bonds are callable by the company, with make whole, and puttable by the holder in a change of control at 101%. S&P has them at BBB- with neg watch, the neg watch being a consequence of the acquisition.

      Looking at the merger agreement, the plan is to de-list and de-register Domtar securities in both the U.S. and Canada. There may be little if any public financial info about the company post merger.

      Is 6.75% enough in this situation?

      1. Hi, Bob.
        I believe these risks are typical for a private equity company, so each investor himself assesses how critical they are for him. Perhaps I would not get involved with this in other conditions, but today there are practically no interesting points on the market for investing capital. Since I needed to place somewhere the funds received from closing the position in T I took some of these bonds, taking into account the fact that their debt load is relatively small (by today’s standards) and the issue’s amount itself ($ 250 mln) looks like a not so big to create a real problem for the company of this size.
        Anyway this is not a “risk-free” bet and it is better to limit the max position size. Let’s see what further decisions the rating agencies will make, although it is clear that in the short term this issue cannot go significantly lower than 101, regardless of the decision taken.

    2. Yuriy – have you been following the Domtar bonds? There is a tender out for them right now and my quick look says the tender price is way low. Below current market and well below recent prices.

      Am I missing something here? I didn’t read the full offer.

  17. Cdn min rate preferreds, what a preferred ought to be.

    Preferred perfection except for the rich pricing. Table sorted by Column N, time to reset. If you own any coming up to reset soon you have your fingers crossed that they don’t get called. (BIP.PR.C announced intention to call this morning). If you own any that recently reset and was not called you are breathing a sigh of relief.

    For newbies: these reset once each 5 years, can only be called when they reset, cannot drop in coupon but can go up, and have a built-in option to go from fixed to floating rate. The universe is small and shrinking.

    This is a static sheet, meaning figures do not update. Everything is as of close of market last Friday.

    https://docs.google.com/spreadsheets/d/1dC5hVZrElXm8jg7zZivWSUBbLp3p24XcDXkuooHF_4s/edit?usp=sharing

  18. Misc Canadian ………..

    Canadian resets remain at close to a 52-week high (see ZPR) and the CA$ is close to a 5-year high. Not an especially attractive place to put new money from a U.S. perspective. If the (relatively) stronger yields attract you be sure you can live with big draw downs, so you will be around to collect those yields.

    If you have a sizeable position in CA$ preferred (or bonds, or common), you may want to consider selling CA$ futures to lock in that exchange rate. It’s close to cost-less (unless it’s a naked position) and easy to do at IBKR. CA$100k for full contracts and CA$10k for minis. Even if you bought your issues in $US on the OTC your real exposure is in CA$.

    A number of Canadian preferred have redeemed recently and it is likely more will be. Few new issues, some redemptions, and the option for financials to issue something called LRCNs (in lieu of preferred) means a shrinking universe of Canadian preferred in the long term.

    Finally, a word on the Enbridge Line 5 situation: For the benefit of Americans (Canadians will get this) the threatened closure of Line 5 by the State of Michigan is tantamount to a declaration of economic war. No exaggeration. Line 5, in relative terms, is more important to Canada than is the Colonial pipeline to the U.S. And had the Colonial pipeline been offline for months rather than days the U.S. was in for economic calamity. The closure, even for a short time, of LIne 5 would decimate the economies of Ontario and Quebec, and Alberta.

    The U.S. really needs to stop doing these kinds of things. Reminds me of the economic warfare that the U.S. was waging against the Japanese (you read that right) prior to Pearl Harbor. The confiscation of Japanese assets and the economic and shipping blockades of Japan lead directly to Pearl harbor. Sorry, but most of you learned the history backwards.

    Now, Canada is not about to invade the U.S. but the closure of Line 5 would sure be interpreted as an act of hostility. It would not lead to anything good. Geez, maybe I need to re watch Canadian Bacon!

    1. we would not want a repeat of the war of 1812.

      fortunately in 1977 America granted non-interference clause for utilities and pipelines crossing boarders for this very reason.

      1. Where did she graduate in her law class? The lure of political ego can be very strong. Few really control it well.
        Sounds like there is no real senior party planning/advise, on either side of the aisle during this Age of Arrogance. Canada is our last real friend. I lived there and would again. They have real clout here, but may not have the political will to flaunt it.
        Politicians worry about the Unwashed Masses? It’s always a wild-eyed wannabe with no real skill. It takes real, long term consensus and planning to really perform, not a slick picture and a campaign. Exactly what the uber-pros at ENB want to execute! Hell of a way to get attention. Enbridge wants to spend over half a billion dollars of PRIVATE cash on real trickle-down on joint Jobs, Infrastructure and Security and all they get is the raspberry and a threat?How sad.
        Just because you may not live in Michigan does not mean you can not send an email with your public opinion:
        https://www.michigan.gov/whitmer/0,9309,7-387-90498_90663—,00.html

        Long ENB and three prefs.

        1. just to illustrate the connection between Mich & Ont – as noted in NYT at start of covid in 2020 – 1600 nurses and health care workers crossed the border daily from Windsor (population 210,000) to work in Detroit hospitals .

  19. Regarding the fx-currency conversion place concurrently with an order at IBKR.: See below the email response I got from IBKR toady.
    Originally, I had attached margin and used this method upon placing the orders out of USD. When I had margin, it had to do with using the “advanced tab” and choosing, then approving the small lot. Soon I ended up totally in CAD.
    Eventually, I rescinded margin after I had fully invested all that cash allocation. I realized I would keep this a “pure” Canadian account and intend to keep it that way, even if base currency was USD. Of course to send monies out at some point I will have to do a manual currency transaction, and that is easy on the Account Management Screen/Client Portal where it is almost impossible to mess it up. Distribution is a couple years out for me.
    Divs still dump into CAD and are stored that way and no currency transaction needed for reinvesting. (which I just did yesterday with two new sliver additions).
    Like most things I dive into the deep end/explore then retire to a stripped down version of just what I really need. Like Grid, now I want warm water, in the shallow end with an umbrella drink and a ‘nice’ view.

    PS: I am still waiting for IBKR’s “supposed” and “coming-soon” direct investment into Sov. Bonds. No follow through yet, but I am not expecting to see it UNTIL the rates are firmly going against the Pros and THEY need liquidity chumps. For me, THAT will mark the bottom of Central Bank, secular, Global Rate Regime.
    Here’s the email reply: Keep Pushin’! Here’s to coffee! JA

    Our system reflects your account is a Cash account. Only Margin accounts can use an attached FX Hedge order. A Cash account cannot use a FX Hedge attached order because it takes IBKR a fraction of a second to see how much negative cash is in the account after the non-base currency stock order executes. Even though it would only be a short amount of time that the Cash account would be holding a negative cash balance, a loan to the account is not allowed under any circumstances. In a Cash account you will need to first execute a FX currency conversion order and then place an order for a contract denominated in a foreign currency.

    Please note any residual cash balances (less than USD 5 or non USD-equivalent) in non-base currency post currency conversion are converted automatically in base currency (USD for your account) within 2 working days at no cost for clients.

    1. speaking of currency — just FYI — CDN $ vs US$ is now at a 5 year high due to our more hawkish central bank forecast and correlation with oil prices. So good for US investors who are gaining on currency but negative for this Canuck holding US$ investments – but my US$ will allow me to go see the Tigers/Red Wings once borders open up again

      1. Last time I saw Wings in person Gordie Howe was still on the team. You think Ali had a good left hook?

        1. Craig Berube is a Canadian so this fits the forum. Jeremy Roenick said in his rookie season he cheap shotted Berube in a game. Berube said he would get him back. But that was Berube’s last year. Fast forward 12 years later as an asst coach Berube went into Roenick’s locker room after a game and slugged him in the kisser and said “I told you I would get you for that”. Roenick said he deserved it, lol…
          Ottawa Senators are my Canadian love this year. I had $2500 on their 47.5 over as my big season bet. They went on a late season 8-2-1 tear to pull over the mark, and leave the Nucks in the cellar.

        2. the “Gordie Howe hatrick” (as opposed to 3 goals in one game) was a goal, an assist and a fight. Reputed to be the strongest man in hockey in his prime – an amazing athlete and truly humble person

          1. Many an opponent tried to pick off Gordie How only to find themselves lying on the ice with a bloody nose. I don’t recall Gordie starting many fights but he sure did finish them.

  20. Just an idea for resource:
    III, Tim and Yuriy have been a real godsend to pushing into preferred in general, Canadia and IBKR.
    IF? …there is a way to help with a donation to whom ever is the organizer of the Canadian Sheets, as well as Tim’s sheets; I would be a willing subscriber. Keeping the data in an updated is an effort and a job and has really been proven with a “freebie-window” thus far that has PROVEN its merit to me.
    If there is a way that I can participate and contribute, you know how to reach me personally by email.
    Re: CA Resets: I see opp in these issues still. Also, see some close in resets being called in this environment just as in US. Seems that I have been “neutrally rewarded” in following a laddering structure that I began two years ago, but since I am NOT selling or spending today must manage the roll outs (compounding). Hopefully a neutral tactic will continue to serve as an antidote to my desire to apply a crystal-ball approach. Again, having access to this data has been fantastic and very useful.
    Thanks, JA

    1. Joe–have you seen Yuriy around lately? I can post his spreadsheet but not without his/her permission.

      1. Hi!
        I am here all the time, just more in reading mode lately.
        Tonight I will update the spreadsheets, there are several positions for which the rate has already been reset or they was called. I would be happy if they be helpful to the members of community, of course you can publish them as you see fit.

          1. Yuriy, You are gathering very good karma!
            Thanks, I have a small list of changes I will compare a few details this week. I’m trying to learn to do shorter screen times now, but still chicken scratch every corner of the yard. I am thinking we may see a few already suspect issues go down in inv grade in both countries.
            It just so happens I launched a major portfolio and reinvestment deep dive on these again. Been rewarding on market timeliness, interest rate reversion AND currency triad! Trying to wait to see if there are calls instead actual selling below pars. Yields are getting bone dry there too in the face of real inflation.
            THANKS again! JA

    2. Hi, Joel.
      Unfortunately, the number of interesting positions in the Canadian market is also steadily decreasing. I even thought about adding split companies to the spreadsheets, but I’m not sure whether it is a good idea to popularize such risky instruments. I also still hold a lot of Canadian securities (about 1/4 of the overall portfolio, both preferreds and commons), but I haven’t added anything from that market for a long time. Let’s wait, maybe the situation will change in our favor, as it was last year.
      WBR.

  21. Does anyone use a Schwab Global Account to trade Canadian stocks on the Toronto Exchange in Canadian Dollars? I would appreciate your comments. I deal with TD Ameritrade and I can only buy those stocks that have OTC symbols.

    1. David – it can be done at Schwab but it’s awkward at best. This is 2nd hand but I’ve heard the same thing from many people.

      If you really want to buy off the TSX, using TSX tickers, you need to go to IBKR. Executions are actually on the TSX, not OTC, in C$. You can fund the account with US$ but you need to convert to US$ to C$ or else you are taking C$ margin loans every time you make a buy.

      The only exception would be the 5 or 6 TSX issues that are priced and traded in US$.

      1. Bob, thanks for this note: I wrongly assumed that IBKR would automatically convert my USD to CAD when I bought a CAD issue on the TSX (which I haven’t done yet, but looked into with BEP-G (their Ser.7)).

        1. Re: IBKR:You can add an order to automatically transact the FX conversion, on any given order and it asks you to approve that action before placing the order, but it is always an odd lot and a bit of a more cost. Lately, and nicely, it has been good for my account to just plop all my usd into cad since the dollar has been in the crapper…that’s the technical term.
          I segregate all my Canadian holdings now in one account there and it has been a bit of a learning curve, not too bad since I knew exactly what I wanted to do and hold. My advice would be to, right now, sign up for and begin their papertrading account, developing the Watchlists and retrieving reports. Getting in touch with them for broker assistance with ANYthing is teeth grinding, but possible if you have no expectations on service protocols (see…I put that NICE!)
          Use their TWS platform since the online {Client Management Portal) and mobile app is like writing on toilet paper with a magic marker and mailing the order in to them. Only good to do a view in my op.
          Has been a good move for me.

          1. Good info, Joel. I do explicit US$ to CA$ conversions but if it can be automated it removes the risk of accidentally getting into CA$ margin. If you go the explicit exchange route you can do full contracts ($100k) or minis ($10k) at a very slightly higher rate. Institutional rates, so it’s great.

            Keeping all your Canadian “stuff” in one account is a good idea. That’s what I do. One account for all things Canadian; one for all else.

            Learning via the paper trading account is also a good idea. It is 100% totally realistic except that it’s not real money.

            The Webtrader platform is excellent but requires that you have at least a $100k account to access. I use Webtrader for 99% of my IBKR trades and it has become my favorite trading platform not just at IBKR but at all brokerages that I inhabit. Sometime, when I have spare time, I may learn TWS. It is a beast both in complexity and power.

        2. Bur – it’s not automatic but as Joel reports it can be set up to be automatic. News to me but it is good news.

    2. I do it in Cd$ but usually settle in USD. If I had a Cd$ balance in my account I could transact in that currency. Making purchases it isn’t too bad if you call the International Desk to transact, but working through the regular trading desk is a pain. A few issues will let you transact yourself without calling anyone, but very few. Selling, on the other hand, is very easy as you can do that unassisted. I am still waiting for an official response to my request for correcting Cd$ preferred dividends to QDI status. I hope this will come through, but in the meantime my CPA believes I have excellent documentation to justify this characterization in my 2020 returns.

      1. Whoops – my answer is in reference to Fidelity, not Schwab. The latter is on my mind because I moved my preferreds away. I find Fidelity easier on sales but basically the same on most purchases.

  22. I just can across this on Yahoo Finance dated April 21, 2020. It sounds like a new Rate Reset. but I cant find any other information anywhere:

    April 21, 2021·2 min read

    NA-PA.TO
    +0.08%

    NA-PC.TO
    -0.31%

    NA-PE.TO
    +0.53%

    +5
    /NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES./

    MONTREAL, April 21, 2021 /CNW Telbec/ – National Bank of Canada (“National Bank”) today announced the closing of its previously announced offering of $500 million of 4.05% Limited Recourse Capital Notes, Series 2 (Non-Viability Contingent Capital (NVCC)) (Subordinated Indebtedness) (the “Notes”).
    Concurrently with the issuance of the Notes, National Bank has also issued Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares, Series 45 (Non-Viability Contingent Capital (NVCC)) (the “Series 45 Preferred Shares”) to be held by Computershare Trust Company of Canada as trustee for NBC LRCN Limited Recourse Trust (the “Limited Recourse Trust”). In case of non-payment of interest on or principal of the Notes when due, the recourse of each Note holder will be limited to that holder’s proportionate share of the Limited Recourse Trust’s assets in respect of the Notes, which will consist of Series 45 Preferred Shares except in limited circumstances.

    The Notes and the Series 45 Preferred Shares were issued under a prospectus supplement dated April 15, 2021 to National Bank’s short form base shelf prospectus dated August 17, 2020.

    The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended, or under any state securities laws, and may not be offered, sold, directly or indirectly, or delivered within the United States of America and its territories and possessions or to, or for the account or benefit of, United States persons except in certain transactions exempt from the registration requirements of such Act. This press release shall not constitute an offer to sell or a solicitation to buy securities in the United States.

    https://finance.yahoo.com/news/national-bank-canada-announces-closing-140900466.html?.tsrc=applewf

    1. LRCNs are debt that turn into worthless equity if the company ever defaults. They are new, as in the last couple years or so. I would not buy them if you held a gun to my head. NVCC is the same concept.

      Canada, along with much of Europe, now requires financial institutions to issue securities that effectively become worthless if the issuer ever gets into trouble. This is so the government won’t have to bail them out. The risk is totally that of the security holder.

      The concept has not come to the US yet but probably will. 100% that this is under consideration by Yellen.

  23. A Canadian miracle ……

    No, nothing to do with Sainte-Anne-de-Beaupré but rather the Canadian preferred market. Not only did a non-garbage company issue a new preferred, it is a minimum rate issue. This is the first min in something like 3 years and I never expected to see another one in this environment. But here it is:

    https://sedar.com/GetFile.do?lang=EN&docClass=9&issuerNo=00011625&issuerType=03&projectNo=03183684&docId=4918926

    Buyable on the TSE as EMA.PR.J. No OTC ticker that I know of but I would not be surprised to see one pop up at some point. 4.25% for first 5 years. Can reset higher but not lower. The company has one shot at redemption every 5 years. Investors have the option to convert to a floating rate at the same time the company has the option to redeem.

    1. PS: to access the SEDAR filing you will have to do one of those annoying verification things. It’s not me; it’s SEDAR.

    2. thanks for the heads up Bob — Emera is a very sold well diversified utility with the common yielding about 4.5% too . Currently trading at $25.35 using CDN symbol

      1. Bob,

        It might be helpful to remind folks of another minimum rate issue preferred that will be around for at least another 4+ years.

        BEP.PR.G or BRENF in the OTC market has a minimum of 5.5% (based on a price of $25). It’s priced in loonies and pays in loonies.

        The security is Brookfield Renewable Partners L.P. Class A Preferred Limited Partnership Units Series 7 and does not yield a K-1 at tax time.

        FD, I’m very long BEP / BEPC and have some BRENF.

        1. You can play on my team, Greg.

          BRENF is a wonderful issue for a Roth (or Canadian equivalent). 5.5% MINIMUM coupon as Greg said and isn’t callable again for almost 5 years. The payer is a Bermudian partnership, meaning no income tax and no withholding. It all goes to your bottom line.

          At the time I bought it, the YTW was about 8%; now, it would be closer to the 5.5% coupon. I’d like it at a lower price but otherwise it is about the closest thing to “perfect” for a tax qualified account.

          I say the same about BEP and BIP, so long as you are buying the partnership and not the corporations (BIPC and BEPC). The partnerships get you a lower price, higher yield, better tax treatment, and no UBTI.

          Just wait for the next market correction to pile in.

            1. I don’t own it, but the description on QOL says it is debt, so it can’t be QDI and would not throw off a K-1.

              1. See my post of 3:12 PM. QOL is often wrong. Need to check original sources. The prospectus is only several hundred pages and the discussion of taxes is 50 pages at most. Bathroom reading.

            2. My interpretation: The issuer is a Canadian corporation. For Canadian purposes it is treated as debt but for US purposes it is treated as equity.

              What that means, if I am correct, and understand correctly, is a) no withholding deducted on the Canadian side, and b) treated as a QDI preferred for a US holder.

              Apart of my interpretation is the issue of whether your brokerage will get it right.

              This is a Brookfield special, a real oddball designed to test the waters on tax treatment.

              QOL just looks at the “subordinated note” in the title and comes to the conclusion that’s it’s treated as interest.

        2. Greg – just for FYI here is an article on CDN rate reset prefs from a couple days ago. Our Bank of Canada governor (Tiff Macklin) is a bit more hawkish on rising interest rates in next 12 – 18 months which also likely has helped this part of the market.

          What’s driving the surge in rate-reset preferred shares?
          ANDREW ALLENTUCK
          SPECIAL TO THE GLOBE AND MAIL
          PUBLISHED 2 DAYS AGO
          UPDATED MAY 4, 2021

          The prospect of rising bond interest rates combined with a bonus of several percentage points has turned rate-reset preferred shares into glamour stocks.

          Prices of rate-reset preferred shares, which pay dividends at a fixed rate until they’re reset every five years, have been soaring. And as interest rates rise, these shares’ payouts will increase as their rates reset – regardless of what their issuers’ common stocks do on the basis of sales or profits.

          Rate-reset preferred shares make up three-quarters of the S&P/TSX Preferred Share Index, which has risen by 56 per cent since hitting a low on March 16, 2020. Meanwhile, the S&P/TSX Composite Index has risen by about 62 per cent in the same period. Looking ahead, investors are pushing the prices of rate-reset preferred shares even higher in anticipation of further interest rate increases.

          What’s driving the performance of these stocks is their architecture. Every five years, they adjust their payouts to the five-year Government of Canada bond rate plus a hefty bonus of several percentage points. That varies with each issue.

          Thus, a rate-reset preferred share with a typical boost of four percentage points to the recent five-year Government of Canada bond that paid 0.94 per cent on April 26 will have a net return of 4.94 per cent. That’s the rate for five years regardless of how the issuing company does as long as it has the money to pay preferred share dividends.

          Those dividends have to be paid before common shareholders get their dividends. To be sure, dividends on rate-reset preferred shares are only paid when the issuing company has the cash. Yet, they get treated like common stock when it comes to taxes, and therefore have the benefit of the dividend tax credit, making them – depending on the holder’s tax bracket – a much more attractive investment than a fully taxed bond

          In a sense, rate-reset preferred shares are in recovery. When the Bank of Canada overnight rate, which had been at 1.75 per cent since October, 2018, fell to 0.25 per cent in March, 2020, as the COVID-19 crisis began to grip the Canadian economy, it dragged down all long-term interest rates and, in effect, rate-reset preferred shares.

          Now, the tables have turned. The market expects interest rates to rise, although there is disagreement about just when. Nevertheless, the prospect of rising bond interest rates plus a bonus of several percentage points has turned rate-reset preferred shares into glamour stocks.

          For example, Manulife Financial Corp.’s 3.80 per cent Series 17, MFC-PR-M-T +0.51%increase
          rate-reset preferred share traded at more than $22.50 for 2018 and much of 2019, then tumbled with falling interest rates below $12.50 in 2020. It has recently traded at $23.10 on the prospect of the rising five-year Government of Canada bond rate plus 2.30 per cent on the payout reset date of December, 2024.

          The bad news is that all preferred share dividends come after bondholders and other corporate obligations are paid. Moreover, preferred share issuers can call them – or redeem the stocks – on reset dates rather than pay higher dividends in the ensuing five years.

          That risk is evident in the yields of rate-reset preferred shares compared to yields of bonds and stocks. For example, BCE Inc. BCE-T +0.53%increase
          common shares, recently priced at $57.87, pay an annual dividend of $3.50 to yield 6.56 per cent. For preferreds, the BCE 4.26 per cent Series AO preferred share BCE-PR-O-T +0.61%increase
          was recently priced at $24.03 to yield 4.43 per cent. It resets on March 31, 2022. at the Government of Canada five-year bond rate plus 3.09 per cent.

          At the time of writing, the five-year Canada bond pays 0.94 per cent, so if the BCE rate-reset preferred share were reset today, it would pay 4.03 per cent – more than four times the federal bond. Meanwhile, a BCE 7.0 per cent bond was recently priced at $134.34 to yield 3.32 per cent. Clearly, yield rises with risk. But rate-reset preferred shares’ call price restrains how high their prices can go.

          In fact, Alfred Lee, portfolio manager and investment strategist at BMO Global Asset Management in Toronto, notes that 65 per cent of preferred shares are called by issuers, which then pay the usual price of $25 a share. If investors bought the share for more than the call price, they risk a loss. If not called, the shares, which are perpetual, can be outstanding for a great many years.

          In contrast, if investors bought a preferred share for less than $25, a call at $25 offers a capital gain. But even a small loss is mitigated by the fact that preferred dividends get the dividend tax credit, which makes them more appealing than bond payouts taxed as income. Investors have to balance the tax disadvantage, in the case of bonds, with tax-advantaged preferred share yield.

          But there is a catch, says Chris Kresic, head of fixed income and asset allocation for Jarislowsky Fraser Ltd in Toronto.

          “When you buy a preferred [share], you are transferring a call option to the issuer. It can take away the upside,” he says. “The investor has to price the call risk. It’s the difference between the current share price and the call price. That’s one potential loss. The other is that preferred shares, which are equity, tend to follow the prices of their issuers’ common shares. If the price of a common share goes down, the preferred share is likely to follow.”

          Looking five years ahead, James Orlando, senior economist at Toronto-Dominion Bank, says the five-year Government of Canada bond rate could be 1.95 per cent in 2026. That would make a typical preferred with a base interest of 3 per cent pay 4.95 per cent, a fact that would be noticed by issuers who could call at the usual $25 price, depending on whether they could refinance at lower bond rate interest, which would be tax-deductible as a cost of business to the issuer. Dividends for preferred shares, like common dividends, come out of profits. They are not costs.

          For rate-reset preferred share investors, the advantage of being first in line for dividends ahead of common shares needs to be balanced with the risk of the share being called.

          Your Globe

    3. Contacted TD Ameritrade to see if they could buy the stock for me on the TSE and they said “no.” So, I also hope that someone can buy it and get an OTC symbol established.

      1. David

        Are you trying to purchase BRENF (in the OTC market) on TD Ameritrade?

        The only brokerage I’m aware of in the US that will support purchases on the TMX directly is Interactive Brokers. (Which I find bizarre as the TD in TD Ameritrade refers to a bank in Canada.)

  24. Update from Canada ……

    The Globe & Mail (Toronto) runs some pretty good political cartoons. Most are good natured – too good natured by my calculations.

    Recently, in a Zoom meeting of parliament an MP (Member of Parliament, akin to a US Representative) appeared onscreen mine his coat and tie, and everything else. “Pontiac” is not a reference to the car but to the name of the Riding (parliamentary district) of the MP:

    https://docs.google.com/document/d/1FM_5X1142xhLfQu6H4cPo52f_hv9_V5ghG1wCIiWfME/edit?usp=sharing

    The undercurrent, as I see it, is that the cartoonist is using the “incident” to make a broader comment on the state of Canadian politics, perhaps a reference to the incredibly poor job Canada has done on COVID vaccination.

    You take the good with the bad.

    1. Sad but true. However what do CDN expect when our PM’s last job was as a drama teacher

      1. CB – I would have said he was a drama queen, like his mother was. But I will give Justin this: he is about the snappiest dresser you will ever see ruining (meant running, sorry) a country. That’s not just my opinion:

        https://www.amazon.com/Mr-Dress-Up-Justin-Trudeau-Colouring/dp/1696145295/ref=sr_1_1?dchild=1&keywords=mr+dress+up+trudeau&qid=1620078015&sr=8-1

        https://static.boredpanda.com/blog/wp-content/uploads/2017/11/halloween-superman-costume-justin-trudeau-canada-fb__700-png.jpg

        The photo is not a fake.

  25. Does anyone have current info on the IPL situation? By that I mean, has Brookfield raised its offer or has any new company stepped up, or has IPL found a partner to work with them on the new plant? I’ve owned this forever at $23.38. What a disaster! No one to blame but myself.

    1. Randy – last article in Globe & Mail regarding IPL from April 5th – Alberta government providing $400MM grant to IPL to assist with new complex

      Brookfield under pressure to raise takeover bid after Inter Pipeline lands $408-million grant for petrochemical complex
      TIM KILADZE
      EMMA GRANEYENERGY REPORTER
      PUBLISHED APRIL 5, 2021
      UPDATED APRIL 5, 2021

      was set to receive under a different government program.

      The Heartland complex just outside Edmonton lies at the heart of Brookfield’s bid for Inter Pipeline. The plant is overbudget and has faced construction delays, creating uncertainty that has weighed on Inter Pipeline’s share price. Management has been looking for a partner for the plant to split some development costs but so far has been unsuccessful in its search.

      The new cash grant is likely to change Brookfield’s takeover calculus. “We view this as a significant positive for Inter Pipeline as there were previously concerns about the recovery of the credits under the prior grant,” Stifel FirstEnergy analyst Ian Gillies wrote in a note to clients, adding that the updated cash grant translates to 95 cents per Inter Pipeline share. “We expect Brookfield may need to revisit its cash bid of $16.50 to $18.25 per share,” he wrote.

      The grant could also make the project more appealing to a partner by partially offsetting remaining development costs. However, analysts have argued that Brookfield is in the driver’s seat because it holds securities that amount to a 19.65-per-cent stake in Inter Pipeline. They have also argued that its bid range was fairly valued (before the recent grant).

      Yet Brookfield only has voting control over half of its position. The rest gives the company economic exposure to Inter Pipeline through securities known as total return swaps, but it is different from direct ownership. Brookfield declined to comment for this story.

      Should the grant result in a higher bid from Brookfield, it may appear that shareholders are benefiting at taxpayers’ expense. Asked about the timing, the Alberta government said Inter Pipeline’s initial application was made last November and added that the program application focuses on the project itself and does not take ownership into consideration.

      “All projects that meet the eligibility criteria will be eligible for funding under [the Alberta Petrochemicals Incentive Program], regardless of any specific ownership or shareholder situations,” Dale Nally, Alberta’s associate minister of natural gas, wrote in a statement to The Globe and Mail.

      Brookfield originally approached Inter Pipeline’s board about a full takeover last fall but was ultimately rebuffed. Frustrated, Brookfield went public with its intentions in February.

      Brookfield’s formal takeover bid is worth $16.50 a share. At this price, the 80-per-cent position it does not currently own is worth $5.7-billion, and Brookfield is willing to pay a maximum cash consideration of approximately $4.9-billion, with the remainder in shares. The offer values all of Inter Pipeline, including Brookfield’s stake, at $7.1-billion.

      Inter Pipeline’s board originally said very little after the bid was made public, but the directors have since adopted a new approach and launched a strategic review of the company.

      The Heartland facility will convert propane into polypropylene plastic pellets used for scores of products, including children’s toys. Last May, Inter Pipeline disclosed that its construction cost had jumped by half-a-billion dollars to $4-billion. The ready date was also pushed out, and Heartland is now expected to be fully operational in 2022.

      Projects like Heartland fit squarely into Alberta’s new grant program, which is designed to encourage building petrochemical facilities in the province. Alberta has ample supply of natural gas, and propane is a by-product of natural gas production. However, natural gas prices have suffered from growing North American supply over the past decade as technological progress made it much easier for producers to tap vast quantities of shale gas in the United States.

  26. EML.PRA called, a 5.75% issue that would have reset around 6%. since the five year shot up at this reset time. Another drip, another cut, death by Bula-bula.
    Say a prayer if it soothes one. This has been a brutal week of slaughter at the hands of special private, emboldened interests here and in Canadia. What’s the REAL end game and for whom? Pertinent question.
    I suppose non-voting common stock is all that is going to be left? Everything at risk? Capital Gains mined on the Big Rock Candy Mountian?
    Holding down rates artificially is NOT helping middle of the road citizens in ‘free’ countries retain their stability or a balanced social contract. This is NOT some aimless political statement, but our current accurate situation amplifying now into clarity.

    1. EML.PR.A call was a simple case. No reason for a BBB issuer to pay a 6% coupon when the going rate is probably 4 and a half. No great conspiracy here.

      One is unlikely to see many bank or insurance company new issue from Canada owing to ability to issue fake debt. Preferred are a shrinking business in Canada, which is something that should keep prices up over time.

      1. What rates would you get on lending your money to a company if rates were not managed? Eventually, the hand forms to the hammer.

    2. Joel – you could take a look at Cdn Convertible Debentures as another option – appx 100 plus trading on TSX (eg. Cargo Jet 5.25% debenture – CJT.db.d) I have a number of them along with pref shares. They took a real nose dive last year (especially the energy ones) but have all now recovered back to near par and in mean time kept paying good interest. Would have made some nice capital gains if I bought more last spring but was too nervous.

              1. Will read. Overall, less in fixed income is going to “retail” (exchange traded) and even in the institutional market more is going to 144A issues. Significance is that 144A issues can’t be traded by individuals, even at IBKR.

                The retail market is shrinking and the quality is going down! One of the reasons I suggest that individual investors get acquainted with the institutional market.

                1. Bob;

                  Where would I find information on institutional issues? I always enjoy researching new information, just not sure where to start on this topic.

                  Thanks.

                  Mike Havel

                1. Dang, that is crazy, it is now pay walled on my end too. It wasnt when I read it, sorry about that. In summary it was 74% of all high yield bonds are now 144a. 30 years ago it was less than 1%. It basically said what you have, retail investors get the crap offerings. And now small institutional firms cant even get a sniff either of them either. They gave an examples like Carnival Cruise (or one of the big name cruise liners) who offered during early Covid an 11% secured asset bond. It was high yield but little chance of default because assets secured it. Good deals like that where big institutions would gobble those offerings up. It implied it was just going to keep getting worse unless some intervention occurs to make offerings more accessible to public.

                  1. Retail investors are being squeezed out of the high-yield bond market
                    The SEC should reform 144A regulation to prevent Wall Street streaking further ahead
                    ELLEN CARR Add to myFT

                    The secured bond is the best deck chair on a cruise ship — yet it’s the only one you can’t sit in © Jorge Delgado/Reuters

                    Ellen Carr SEPTEMBER 15 2020

                    The writer is a bond portfolio manager at Weaver Barksdale

                    Every pandemic has a silver lining. For high-yield bond investors, one upside of stressed credit markets is attractive new issuance.

                    Many companies have tapped the market for investor-friendly rescue financing. Bankers have priced deals at concessional rates, which have resulted in equity-like returns for those brave enough to buy. A three-year, first lien bond from Carnival Cruise Lines in April, for example, was priced at $99 with an 11.5 per cent coupon. It’s now trading at $112. Even paying $112, an investor would lock in 6 per cent through April 2023 for a security with almost zero loss potential thanks to its collateral protection.

                    But there’s a problem. You cannot buy CCL’s bond, because it is a private placement. Individuals can’t purchase these bonds, also known as 144As after the Securities and Exchange Commission rule that relaxed disclosure for bonds marketed to “sophisticated” investors. Only “qualified institutional buyers” can. QIBs must have at least $100m of assets under management, so even some institutions are excluded.

                    According to JP Morgan, 72 per cent of new high-yield issuance in 2020 is 144A. You might think this share dates back to the Liar’s Poker era of frenzied bond sales in the 1980s. But, as recently as 2005, private placements were only 1 per cent of the high-yield market. To reach the largest pools of debt capital, issuers had to register their bonds with the SEC, or document their intention to do so within a specified period.

                    Today 144As “for life” are 48 per cent of the market and they are likely to continue their growth as companies replace registered debt with 144A issuance. Take Tenet, a hospital company that relies on the high-yield market for much of its financing. It has five registered bonds maturing in 2025 or earlier, but only one of its six bonds with a maturity longer than five years is registered. Tenet’s treasurer, like many others, no longer needs investors like you.

                    This might not seem like a big deal. Shouldn’t individuals leave high-yield debt investing to professionals in light of its higher risk? I am a professional investor, so of course my answer to that question is yes. But here’s the wrinkle: 144A securities are sometimes at pole position in the capital structure.

                    The secured bond is the best deck chair on the Carnival cruise ship — yet it’s the only one you can’t sit in. You’ll find several offerings of CCL unsecured debt available for purchase in your Schwab brokerage account, along with its common stock. You can load up the boat with the riskiest CCL securities, but its safest investment is off limits to you.

                    Should CCL file for bankruptcy, the QIBs who bought the secured bonds will be treated like first-class passengers, rowing for safety in their collateralised life rafts, while the steerage-class unsecured bondholders fight over the company’s shipwrecked remains.

                    This phenomenon in high yield bucks a larger trend aimed at making investments more accessible to individuals. The SEC recently relaxed the accredited investor definition to permit a wider group of individuals to invest in “private capital markets”, including private equity but not 144A bonds. The recent boom in Spacs — a backdoor vehicle for initial public offerings with lower disclosure requirements — has swept up individuals, despite risks to retail investors.

                    It is obvious who benefits from increasing 144A issuance: large high-yield managers. Fund structures are becoming the only way for individuals, and small institutional investors, to invest in high-yield bonds. The SEC should reform 144A regulation to prevent Wall Street from streaking further ahead in this important corner of the capital markets. Why not let individuals invest in private placement bonds? If they’re allowed to sit in the equity deck chair, they should have the chance to upgrade to the 144A cabin.

                    Weaver Barksdale may hold interests in companies mentioned

                    This is using a different app from outline or save to pocket

              2. I have been on the 144A crusade for a decade or more. Truth is you can buy all the 144A issues you want – through a fund. Several 144A funds are almost entirely 144A issues or other issues that individuals can’t buy. Just pay the Piper, and they are safe. It’s a Government-mandated shakedown.

                No sense in that. The SEC is decades behind on securities regulation. It’s almost like the Internet never happened.

                1. There have been a few 144A issues that have sneaked through for public trading such as CBKLP and CBKPP which are now caught in No Man’s land regarding ability to trade once you own them… As I remember some of the brokerage houses that allowed you to buy these CoBank issues now won’t allow you to sell…. I own both and haven’t been interested in selling but I do remember some old discussion on here where there now seems to be no way out…… Anyone tried testing this by attempting to sell?

  27. Cnd preferred ….

    Mins and resets remain close to all time highs. As Peter says below, follow ZPF (EFT) to get a one ticker sense of the market. A number of issues have been called, something that would have been unthinkable not long ago.

    I would not put new money into the market now. Why take 3% on Sun Life or 5% on Enbridge? If anything I would be a buyer of common.

    Personally, I find decisions on sell/hold trickier. I have big cap gains and big currency gains (measured in US$) but I don’t feel compelled to sell and I don’t have offsetting cap losses to cushion the taxes. So, I hold.

    I did, however, in something of a violation of personal policy, hedge out a substantial amount of currency “risk” through currency futures.

    This from the perspective of a US domicile, buy/hold investor, with a big appetite for international diversification. This may not be you.

    1. Would agree with your thinking Bob (but of course the reverse approach for myself as CDN investor). CAD$ dipped down to about 70 cents last March with fears in market and collapse in oil but now around 80 cents which tends to be the upper limit. CDN economists are forecasting our dollar to start declining again as we continue to lag rest of world in vaccinations and uptick in covid rates across the country.

    2. Agree – they are no longer a screaming buy, but relative to what you can find in the FI-like universe, can. Prefs are still cheap. I’m a dane (with a long history as a Fixed income PM), and I had almost 45 pct. of my net worth in can. Reset prefs a month ago. Of course that was aggressive, but having lived with negative rates for 7 yrs, you know how desparate investors will get searching for yield. That will not change. Most min. resets still offer value at par – same thing with dated/retractables @4-4,5 pct. (best credits that is)

    3. Yes, an interesting situation. The bulk of my holdings go long-term in early May through June. I’ve resolved to harvest some capital gains on holdings that are up 50% or more and/or have a current yield below 5%, which is 18 out of 24 holdings; not cashing out but recouping original investment dollars. Nothing goes up forever. I’ll end up parking it in cash but it seems the best course.

  28. Congrats to everyone, that held on to or bought Canadian prefs since march – it sounds kind of crazy, but ZPR (ETF with resets) have outperformed SPY and is very close to QQQ. Most just extrapolated the last 10years of performance instead of looking at valuation and fundamentals….Now everybody is looking for “rate-up” protection and “Value” names. Maybe it’s time to take some chip of the table….

    1. ChinChin! The problem is reinvestment risk, making a string of correct decisions in a row! Yield on ZPR went below 5% a couple weeks ago. The flipping game is great when rates are down and promised to be put-down by govt. Monetization has begun and now in Ring 3 for your entertainment: Inflation. There will be breathers there too. All eyes are moving there. Above pars may go, those HSE>CVEs have been a dream!

      1. I obviously agree with Joel about the importance of inflation expectations and believe that there is more room to growth, especially for the rate-resets. I’m not a buyer at these levels, but sure I will try to keep about 15% of my portfolio in these issues. Apparently no way for me to push the sell button.
        Just see nothing to buy instead of my current holdings, everything in the market looks too expensive to me.

    2. Here is an article in today’s Globe & Mail from investment columnist regarding CDN floating rate prefs for some ideas (note: symbols are the CDN TSX) :

      Rob Carrick: These preferred shares are right at home in a rising rate world
      ROB CARRICKPERSONAL FINANCE COLUMNIST
      PUBLISHED MARCH 30, 2021
      UPDATED 1 HOUR AGO
      The forward momentum in the stock market is so strong that even preferred shares are rising with gusto.

      But there’s one corner of the preferred market that could still be undervalued – floating rate preferreds. If interest rates rise as expected in the years ahead, these floating rate shares would be especially appealing.

      Most preferred shares these days are of the rate reset variety, where the dividend is reset every five years to adjust for changes in the yield on the five-year Government of Canada bond. Floating rate preferreds typically have their dividend rate adjusted every quarter, or even monthly in the case of some BCE Inc. shares. The reference rate for setting the dividend is either the average prime rate at selected big banks or the 90-day treasury bill rate. Investors may get 100 per cent of these rates, or a portion of it.

      The longtime lameness of preferreds is captured well in the annualized 10-year total return to Feb. 28 for the S&P/TSX Preferred Share Index – just 2.4 per cent. But things have changed over the past 12 months, with the index surging 17.4 per cent. Bank and Insurance as well as regular rate reset preferreds have led the charge, and floating rate preferreds have risen as well. Still, these shares typically traded in late March at levels below their $25 issue price.

      John Nagel, preferred share specialist at Leede Jones Gable, says these floating rate preferreds may actually be more suited than some fixed rate resets to the rising interest rate environment widely expected for the years ahead. “I’d much rather have something that adjusts quarterly or monthly than I would every five years,” he said.

      Here’s an example of a floating rate preferred share issue Mr. Nagel likes right now – Brookfield Asset Management Inc. Series 2 (BAM-PR-B-T ), with a yield is 3.67 per cent based on the current prime rate of 2.45 per cent and a share price of $11.68. If prime rises to 2.95 per cent, the implied yield based on today’s share price rises to 4.42 per cent; another increase of a further 0.25 of a percentage point in prime takes the implied yield to 5.17 per cent. The formula for these is 70 per cent of average prime based on a $25 par value.

      Another example is BCE Inc. Series AB (BCE-PR-B-T) where the dividend is reset monthly using a ratcheting formula that gives shareholders a minimum of 50 per cent of prime and a maximum of 100 per cent, depending whether the shares trade just below or just above the par value of $25 (a lower price means you get more of the prime rate). BCE.PR.B now pays 100 per cent of prime and will do so until it trades over $25. The shares traded in late March around $16.05 which gave them a current yield of 3.8 per cent.

      Some other floating rate preferred issues Mr. Nagel likes include

      Fairfax Financial Series F (FFH-PR-F)
      Brookfield Asset Management Series 13 (BAM-PR-K)
      Cenovus Energy Inc. Series 2 (CVE-PR-B)
      TC Energy Corp. Series 2 (TRP-PR-F-T)
      Brookfield Renewable Partners LP Series 2 (BRF-PR-B-T)
      All of these shares have current yields that range between 3 and 4 per cent, and have traded at prices much below their $25 issue price in recent days. If interest rates turn lower because of disappointing economic news, expect these shares to drop in price. If rates go up as expected, Mr. Nagel says you’d very likely get both higher dividends and a corresponding increase in your share price.

      While floating rates have moved higher in price over the past year, Mr. Nagel thinks there’s more to come. “I don’t think anyone’s gotten excited about them yet.”

  29. TCANF – There was discussion recently on III about buying AFINO because it has a long first coupon and will show as yielding over 8% instead of its actual 7.375% coupon yield when it first goes x-div. That got me thinking of the potential for the reverse effect to potentially happen on resets such as TCANF which actually did reset on Jan 30… When TCANF goes x-div later this month, it will have a rate of 1.949% (as confirmed by TC) for the next 5 years, down from 2.263%. Given the 5 year is up from approx .41% to 1.03% now since January and rising, that might come to a shock to holders… So after owning a small 1k amount for over a year and experiencing the volatility it had been thru, I decided to get aggressive and sell this morning at 11.06 average… What the heck, it looks great on paper with TCANF showing as being up 30%+ on the day, and at this level I think current is only about 4.30% or so. It’s been an interesting experiment that turned out fine with a 22% gain… I did manage also to do a couple of trades during that time taking advantage of both buyers and sellers who mixed up translations between USD and CDN prices, but I never did jump into CDNs asI thought I might other than this one (thanks for the ride, Grid!) and EBGEF/EBBNF. I’m sticking with EBGEF.

    1. speaking of pipeline companies — Interesting development overnight with Interpipeline ((IPPLF) the chairman has retired (age 75) amidst the takeover battle with BAM . Still holding onto my shares as take over price even if raised to $18.25 (CDN) too low

  30. Mr Yuriy and others,
    Do you understand via a simple formula the Floaters that have the 50% to 100% variable in the monthly rate calculation?
    I have just spent a half hour with BAM-E as a model and on BAM’s webpage where the term is defined in words. Easy navigation: Using the link on your page then the pdf for Pref E.
    I’m good with math and of course can look it up on TSX, but I can not rationalize why these floaters have moved up so far when Prime has NOT moved at all. Can’t rationalize the 50 – 100% clause. Trying to see what the underlying factor driving these is. May come to US soon too?
    Could it be the conversion feature to the five year reset ‘dragging’ it higher?
    Signed, Perplexed, but usually pretty good at math. JA
    You may want to ignore this small universe, I would understand, but I had found good plow ground looking deeply into the splits and retractables.

    1. “I can not rationalize why these floaters have moved up so far when Prime has NOT moved at all. ”

      Expectations for Prime to move higher in the future. Market has priced in several Fed rate hikes by 2025 and BoC usually follows the Fed, or could actually lead the Fed if energy prices go higher.

    2. Floaters are either tied to 5yr GOC or prime rate. My favourites are the monthly payers two bce issues and the one bam issues.

      Have only bought them at the 10yr lows when everyone thinks yields are going to zero.

  31. TRP.PR..J to be called. Would this be considered a surprise? I just happened to notice because I own a small amount of TCANF.
    https://www.sec.gov/Archives/edgar/data/1232384/000123238421000031/exhibit991tcehybridredempt.htm

    TC Energy announces closing of $500 million subordinated notes offering by TransCanada Trust

    CALGARY, Alberta – March 4, 2021 – News Release – TC Energy Corporation (TSX, NYSE: TRP) (TC Energy or the Company) today announced that TransCanada Trust (the Trust), a wholly-owned financing trust subsidiary of TransCanada PipeLines Limited (TCPL), has closed an offering of $500 million of 4.20% subordinated Trust Notes, Series 2021-A due March 4, 2081 (Trust Notes), guaranteed on a subordinated basis by TCPL. The Trust Notes were offered through a syndicate of underwriters, co-led by BMO Capital Markets and Scotiabank, under the Trust’s short form base shelf prospectus dated February 26, 2021, as supplemented by a prospectus supplement dated March 1, 2021.

    The Company intends to use the proceeds to redeem its issued and outstanding Cumulative Redeemable Minimum Rate Reset First Preferred Shares, Series 13 (TSX:TRP.PR.J) pursuant to their terms, and pending such redemption, to reduce short-term indebtedness as well as for general corporate purposes.

    1. Sad but expected. This is one of the min rate issues that issuers have a strong incentive to be rid of. 5.5% MINIMUM (no upside limit) for an IG issue.

  32. More news from Canadia:
    Brookfield obviously pursuing their hostile takeover of IPL.
    Got Tender Offer letter and vote by email this AM.
    NO…go away…pursue a position on the board if that make sense to your management expertise or maybe a minority partner in Heartland. Fantastic. Step up.
    The robber is usually someone in your own neighborhood.

    1. I’ve owned IPL for a very long time and what a disaster it has been. Finally starting to see some light at the end of the tunnel. No reason for IPL to accept this offer now that Heartland is close to being finished. I would not be surprised if IPL finds another partner or sells out in a bidding war. I’ll be delighted to come out with a small loss or, if I’m lucky, break even.

  33. Here’s a CN common traded on US exchange (yes there are preferred too): PBA. IG, rock steady history of MONTHLY payouts, more entrenched in some ways than ENB, options selling available on US exchanges, at a low still, management that is TOUGH and experienced.
    Minimally, worth a put sell for a return on short term cash with very high expectation of expiration or a roll out, but get no divys. I bot common and will sell OTM calls instead. Take me out…please.
    Tee up that DD, that Ye See!

  34. Look at that bond yield jump! Wow, one helluva percentage one day move. Got one reset based on end of Feb, but like everything…got a few days to go…

  35. As a reply to MA in Sandbox on 2-20:
    MA: If you are going to research Canadians here is a link to Yuriy’s Sheets on Fixed Preferreds there, where he has included the five retractable issues labeled there. Three are IG.
    Also, research these four issues which are found on this sheet too: BPS, PR A,B,C,U. They are older (past call where there was company only retraction) hence, gone past the date where holders can now retract at par with a short notice to the company. They are not labeled as retractables on his sheet.
    Yuriy’s glorious and generous work here also links over to the prospectuses! ZAM! https://docs.google.com/spreadsheets/d/1nJTjD1H3PKvqcuntO7hL3rwI2p5-7AIBa5bplxKky-U/edit#gid=0
    If you get into it, he has produced sheets for Resets, Floats and a all inclusive comprehensive sheets too.
    I am still wondering where the fine print is buried in the ‘ACCEPT ALL TERMS’ for Yuriy’s fee? Just kidding. It has helped me ALOT!

  36. Fidelity has classified all of my 2020 Canadian preferred stock dividends as ordinary income and none of them as qualified dividend income. Based on IRS holding period rules at least a good percentage of my dividends should have qualified! I moved my accounts from Schwab to Fidelity having heard from others here that they did it right. I am very puzzled by this situation given feedback on this issue last March/April.

    Interested in hearing how others succeeded in getting this fixed for themselves! Appreciate any help anyone has to offer. I hate the idea of moving these accounts again!

    1. Tim – I cannot address the Fidelity question because I don’t have an account. I have 4 US brokerages and I have held Canadian and other foreign (“F” suffix) issues in all 4. The results as far as Canadian preferred go:

      Vanguard won’t let you buy many Canadian preferred (maybe about a third of those with OTC tickers) but once you own them they classify the dividends correctly 100% of the time.

      TDA will let you buy darn near anything and they classify dividends correctly but they didn’t do right by me with a Canadian issue that was redeemed, charging me a $50 fee and skimming about 1% on the exchange rate. I had the same issue redeemed out of 3 accounts and no other brokerage pulled this one me. So I’m done with TDA except for a few issues that only they will trade.

      Schwab misclassifies 100% of the dividends and deliberately so, so your chances of getting them to correct the classification is zero. I’ve been done with Schwab for some time.

      IBKR get the classification right without fail. But you have to buy off the TSX (an advantage to me) as they won’t trade any OTC issues with an “F”.

      If I was constrained to buying OTC I would go with Vanguard and live with the limited issue selection. Otherwise, IBKR is the clear choice, especially if you have a significant commitment to Canadian preferred. Just remember to exchange your US$ for CA$ before you buy or else you are taking out CA$ margin loans every time you use US$ to buy CA$ denominated issues. Currency exchange on the IBKR platform takes about 5 seconds once you have it figured out. If you are buying the US$ denominated ENB issues you can do that with US$.

  37. ENB offering $500 Mil US denominated Senior Floating Rate Notes due 2023 NOT to be sold to Canadians… Will be SOFR + 40 basis pts… interestingly it will pay quarterly like a baby bond but funny thing is on a quick scan, I don’t see where they mention what par will actually be… it’s gotta be there somewhere and I’m betting 1k but I don’t see it spelled out. Proceeds to refinance existing indebtedness of the Corporation or its subsidiaries and for general corp purposes. I also noticed they are rated BBB+ by Fitch – don’t know about the other majors.

    https://www.sec.gov/Archives/edgar/data/880285/000110465921024859/tm216594d1_424b2.htm#a_008

        1. Very punny, good laugh! Reminiscent of the old financial shows on PBS in the 70s and 80s when people used ‘Lampoons’.
          ENB has more offerings to consider. I am not an insurance or annuity company with short term annual IG cash set-aside liabilities to compute. I am terminal. That feat is getting more and more interesting (in a Chinese meaning).
          Suppose the Am market looked ripe for this sort of issuance.

    1. ENB new notes …..

      I wasn’t going to mention them but since you did …… these are short term notes, investment grade, at SOFR + 40. SOFR is 6 bps now so a coupon of 46 bps. No bottom stop on SOFR so coupon could, in theory, go to zero. Or negative. Do you mail ENB a check each month or do they take it off the principle? Not sure.

      These are notes, not preferred, so “par” not relevant. They are $1,000 face notes. Non exchange traded.

      Much better places for short term cash for the individual investor. For long term, I’ll take ENB common at 8%.

      1. Bob – I certainly agree there are better places for short term cash for individuals but thought it was relevant ENB chose to issue $500mil US floaters denominated with terms such as these at this time. Seems pretty opportunistic of them…
        However, I don’t understand you saying , “so ‘par’ not relevant” because ‘these are notes…. Of course it’s relevant, yes? As long as they’re callable, and these are callable, or as long as they have a maturity date, and these do, “par” is most definitely relevant. If you put an order in for 100, it sure need to know if you’re buying $100,000 or $2500 and you don’t know the answer if you don’t know what par is. Mysteriously, it seemed difficult to easily figure out from a quick looksee at the language what par is but as mentioned, I thought it had to be 1k as well….. For that matter, technically speaking, its “par” that’s not relevant for a preferred, not a note, isn’t it? Preferreda have “liquididation preferences” not “par.” Am I misunderstanding you? All no more than semantics actually I guess, but still…

        1. Question of proper terminology. They have no “Par” value. They are not equities. They are notes. They have a principal amount. No redemption except for tax event and then you get principal + accrued. No make whole.

          1. Bob, I have to take the other side of the fence here based on my understandings. Its the opposite. Bonds have a par value, as that is the redemption price.
            Preferreds are the ones that the word “par” is totally misused and misunderstood. Par is only a book value accounting term for preferreds. It has basically no meaning to a preferred buyer. This is the where “redemption price” comes in. Preferreds have a “par”, “redemption”, “issue price”, and “liquidation value”. Most times the above 4 are not the same.
            Most preferreds today are issued with a $0.01 or $0.00 par value.. Some old preferreds were issued at $100 and have an official $100 par value, but redemption price wasnt always par either. Many have redemption prices several dollars higher. But liquidation value would not be the same as redemption value either.

              1. Lol, Tim, yes the term has “morphed” into a total unrelated meaning. Most of the time its understood in its intentions but words can have meaning. I generally use it, too, but try if Im not lazy at that moment to wrap quotations around the word though.
                Take MNR-C… Par value is $0.01….Liquidation and Redemption price is $25.
                Take NSARO.. Par value is $100 …Liquidation is $100…Redemption price is $102.80

                1. Grid: What’s the difference between Liquidation and Redemption in this context? I had been using them synonymously and from your exchange above I clearly am wrong.

                  1. Scooting around how the language might change officially were you talking about a bond vs a preferred, I think what Grid’s saying is that not all preferreds (or bonds) a callable (aka redeemable) only at 100% of their liquidation preference amount (par amount) … Some are callable always at a premium such as NSARO while others might be first callable at a premium and eventually find themselves callable at the liquidation preference amount after a given period of time… Ignoring for the sake of this post that it’s a note, not a preferred, the first examples of sliding scale “redemption” prices that come to my mind are many of the Rily issues such as RILYH that begin as being redeemable at 25.75 then eventually decline to 25. Simple stuff I’m sure you already know..

                  2. Bur, I dont think 2WR, hit your question on what you meant. Redemption value is when the company publicly announces they are terminating the preferred at the contractually agreed upon price.
                    Liquidation value is when the company ceases to be an operating entity and closes up shop and sells everything off. Notice this is not meaning being acquired by another company.
                    Liquidation value could also in bankruptcy. I wouldnt hold my breath getting liquidation value in a bankruptcy event. Usually in this situation a thanks for playing pat on the back is most likely than any proceeds.

                    1. The whole issue of nomenclature needs addressing at some point. “Par” should be abandoned as a term.

                      To pick an nit, one should speak of “liquidation preference” not value with preferred. LP is relevant on almost every single preferred as the dividend paid is a stated percentage of the LP (not redemption price, not “par”). Common language from prospectus ….

                      “Dividends on the Series C Preferred Stock, when, as and if declared by our board of directors or a duly authorized committee of the board, will accrue and be payable on the liquidation preference amount of $25.00 per share …”

                      LP in the context of liquidation is rarely relevant. If a company does liquidate there is rarely anything for the preferred.

                      These days, most preferred have the same redemption price as liquidation preference. But many exceptions, especially among older issues. Often, the redemption price declines with time. Almost all Canadian fixed rate preferred are structured this way. As always, read the prospectus. I generally go to the FWPs rather than the 424s linked in QO as they are a much faster read.

                    2. I grok (I think):

                      – ‘Liquidation preference’ is a price set in the prospectus (it’s what many of us mean when we use the term ‘par’). The dividend is expressed as a percentage of this price.
                      – ‘Redemption price’ is what’s actually paid when the issue is called (redeemed). It may or may not equal the liquidation preference, due to further terms set in the prospectus.
                      – And if the company ever had to liquidate, ‘Liquidation price’ (price, not preference) would be what the company would pay when they liquidated the issue (if indeed they paid anything at all).

                      ?

                    3. Bur, I wont debate your knowledge! :). There is an entire underworld of misspeaks we all do in terms of terminology. Its more academic as long as we misspeak in same language, Technically I dont remember off hand seeing a preferred with an “issue price” just the liquidation preference.. As most are shoveled out at different prices anyways.
                      MLP K-1 preferreds dont issue dividends, they distribute “distributions”. All sorts of lingo like that…And dont think the brokerages are up to snuff completely either. Anytime I go hunting in my account to see if interest payments showed up, more times than not with my brokerages its not in the “interest” section where it should be, but in the dividend section.
                      For us, yes Bob, par is not a relevant or correctly used word. But accounting wise for the balance sheet Par MUST be used. Some states regulatory require a par value in the financials. Some allow $0.00, but some (last time I read anyways) require some value, thus companies choose a penny to minimize possible issues and potential litigation stemming from a higher par value.
                      One can see some unusual par values over time. For example Hecla Mining has its common and its convertible preferred as $0.25 par values.
                      Ameren has its par value at the more typical penny. But they own all the common stock of both Ameren MO and Ameren Ill. The former has a $5 par value while the latter has a zero par value.
                      The use of par and researching it several years ago was interesting, but irrelevant.

                    4. Bur – no such thing as liquidation price. In liquidation you are guaranteed NOTHING. You get in line behind all proceeding claims and when they get to your tranche you get a pro rata share of remaining assets based on LP. That could be 100 cents on the dollar, nothing or any number in between. As a practical matter, in most liquidation scenarios, the preferred get little if anything. If you have to actually look at and consider LP you are probably buying one of HDO’s recommended securities and should reconsider. Really.

                      Redemption price (or amount) is exactly as you state.

                      Liquidation preference is set in the prospectus and the dividend is usually expressed as a percent of LP, correct. LP is often often called “par” which it should not be. Despite being the most commonly used term for both preferred and bonds the term “par” is problematic as it leads to misunderstandings.

  38. I had posted my thoughts regarding IPL/BIP yesterday. I mentioned that the responsible and wider governance in Canada is reflected into corporate, even if it is just a polite and business like procedure while being steamrolled:
    Hi Joel,
    Thank you for your email and feedback. It will be passed along directly to our Management team and Board of Directors, who are committed to acting in the best interest of Inter Pipeline and all of its shareholders. Please note that Inter Pipeline did release a news release this morning that can be found on our website at the following link: https://www.interpipeline.com/news/news-releases.cfm?newsReleaseAction=view&releaseId=1376
    At this stage, the Board has concluded that accepting and recommending Brookfield’s confidential and conditional proposals would not be in the best interest of shareholders:
    Inter Pipeline is open to engaging with shareholders and others to explore opportunities to create value and the Board gives due consideration to any credible proposals for the Company. The Board is reminding shareholders that no formal offer has been made by Brookfield, and as such there is no need for shareholders to take action at this time. When a formal offer is made, it will be reviewed by the Board with its legal and financial advisors, and a formal recommendation by the Board will be made to shareholders in due course.

    1. Inter Pipeline rejected a $12+ Billion ( or about $30 CDN share) take over offer from Hong Kong Billionaire Li Kai Shing in Sept 2019 . Shing has a long history of investing in Canada and at one time was on the Board of Directors for CIBC bank. Total appx value of IPL now is only $7.1B. So the Bd of Directors have overseen a drop of $5B+ in value in about 18 months. I was not a happy camper back in 09/2019

  39. Is there something going on with the Manulife preferreds today? I own the M and the N series and they are up big like 10% on strong volume.

    1. LI, Looks like a few issues:
      four of their resets have jumped, one close to reset prob not a call target with an under 2% probable reset,
      three around 4% yield to reset and one at 4.8 to reset,
      all below par,
      low volume, close to xdiv.
      maybe someone sees the value of IG resets here?
      PLEASE do NOT tell anyone else! Everything else in in stratosphere. Consider the garbage that has been coming to the US exchanges.

      1. Thanks for your comments. Was wondering if they announced a call or something but another IG life insurance reset I own SLF-I is also up big. However, FTS-G an IG utility is doing nothing today.

        “ maybe someone sees the value of IG resets here?”

        Not me. I’ve been a seller not a buyer here.

        1. LI, Just logged on and clicked thru my watchlist of resets.
          Seems like there are other impulses up on some IGs regardless of yields.
          I’ll pare back if needed if there is absurdity, but the question is always, “Compared to What?” (By the way, that is a great song if you are looking for a YouTube jazz flashback: ‘Gotta Make it Real, Compared to What?’ I like Mayall’s version, I think the other is Les McCann?)
          Anyway, I am looking out a decade and have cash to allocate. I think the light has now found these resets and no telling what the chasers can do now.

          1. I have access to the futures market, so the alternative for me is adding to something like WFC-L/BAC-L and hedging out the rate risk by shorting the 10 year.

    2. Manulife came out with huge earnings yesterday and also issued A- rated LRCNs. LCRN’s are debt that goes away in a financial crisis. The effect of both is to strengthen the MFC preferred.

      Rates have also been inching up.

      SLF is a similar company so I’m thinking it went up in sympathy.

      1. Bob – yes both companies reported excellent 4th quarter results with common shares up over 1% on large volume today when overall TSX down 0.35%. (Manulife $48B market cap vs Sunlife $36B) . Both CEO’s provided optimistic forecasts for 2021

  40. Resurrecting an old discussion – EBBNF v EBGEF Can anybody explain why not only is EBBNF trading higher than EBGEF right now (19.50 v 19.05), it’s also bid higher as well (19.50 v 18.26)? Assuming I’ve got my facts straight, EBBNF currently has a 4.96% coupon and it resets 9/1/22 at 5 yr US Treas + 3.15. EBGEF has a lower + 5 yr US Treas reset rate of + 2.82 BUT it’s current coupon is 5.3753% AND its current 5.3753% stays in place a year and a half longer than EBBNF. So presently, EBBNF has a current yield of 6.36% v EBGEF, 7.05% and EBGEF is locked in until 3/1/24 while EBBNF, were it to adjust today, would go DOWN from 4.96% to 3.63% coupon a year and 1/2 before EBGEF even changes. How does that make EBBNF worth more than EBGEF???? The only possible rationale I can come up with is the marketplace might be valuing the higher reset rate over Treas that EBBNF has v EBGEF, 3.15% v 2.82%. But if the rally that all these issues has had it based on an accurate belief that we could be entering an era of rising interest rates, wouldn’t that .33% differential be expected to easily be absorbed by the fact that EBBNF resets 1 1/2 years earlier than EBGEF??? That’s my premise anyway – who wants to take the other side?

  41. BEPC –

    Brookfield Renewable Announces Secondary Public Offering

    February 08, 2021

    BROOKFIELD, News, Feb. 08, 2021 (GLOBE NEWSWIRE) — Brookfield Renewable Partners L.P. (the “Partnership”) (NYSE: BEP; TSX: BEP.UN), Brookfield Renewable Corporation (“BEPC” and together with the Partnership, “Brookfield Renewable”) (NYSE/TSX: BEPC) and Brookfield Asset Management Inc. (“Brookfield Asset Management”) (NYSE: BAM; TSX: BAM.A) announced today the commencement of a proposed secondary public offering of 15,000,000 class A exchangeable subordinate voting shares (the “Exchangeable Shares”) of BEPC by subsidiaries of Brookfield Asset Management (the “Selling Shareholders”). The Selling Shareholders expect to grant the underwriters a 30-day option to purchase up to 2,250,000 additional Exchangeable Shares. Brookfield Renewable is not selling any Exchangeable Shares in the offering and will not receive any of the proceeds from the offering. The offering is subject to market and other conditions, and there can be no assurance as to whether or when the offering may be completed.

    Each Exchangeable Share is structured with the intention of providing an economic return equivalent to one non-voting limited partnership unit (a “Unit”) of the Partnership (subject to adjustment to reflect certain capital events). Each Exchangeable Share will be exchangeable at the option of the holder for one Unit (subject to adjustment to reflect certain capital events) or its cash equivalent (the form of payment to be determined at the election of Brookfield Renewable).

    Barclays, J.P. Morgan, Morgan Stanley, and Scotiabank are acting as joint book-running managers for the offering.

    The offering will be made only by means of a prospectus.

    1. Never ceases to amaze me the convoluted deals that BAM puts together with all their subs – but I continue to hold a number of them and just let it ride for the long term

      1. TBH. If investors keep holding BEPC even when it trades at a premium to BEP of 25-30 pct. they are asking for it…It’s not in the interest of BAM to have such a big price difference between 2 share classes, that are economically identical.

        1. There is one difference, Peter. BEPC can be exchanged 1:1 for BEP but not the other way.

          Still, no reason for the big difference. Some, perhaps is the K-1 discount that BEP (as a partnership) generates, but a 20% difference?

          Buy BEP and put in in your Roth (or standard IRA if you haven’t figured out how to do conversions). No withholding, no tax, no UBTI.

          1. In today’s Globe & Mail — Brookfield looking at IPO spin out for $20B – BAM is definitely the CDN leader in financial engineering.

            Canada’s Brookfield Asset Management Inc. is aiming to take Clarios public that could value the car battery maker at $20 billion, Bloomberg News reported on Wednesday, citing people familiar with the matter.

            Brookfield bought Glendale, Wisconsin-based Clarios from Johnson Controls International Plc, a maker of digital solutions for buildings, for $13.2 billion in 2019.

            The Canadian firm is considering an IPO for Clarios later this year, according to a report

            No final decision has been made and Brookfield could opt to keep the business, Bloomberg reported.

            Brookfield and Clarios did not immediately respond to Reuters requests for comment.

            1. Now tonight just announced BIP is making a hostile bid for CDN pipeline company Inter Pipeline which has been struggling trying to build a new petrochemical plant near Edmonton. BIP is trying to lowball taking advantage of IPL current weakness. BAM classic strategy

              1. AHHHH…again…..just when the steadfast management has just entered the light. In this case f BIP!
                Money men do not build anything, they raid like Vikings just when the crops are coming in.
                The management at IPL or IPPLF has done a magnificient job, just to become a target? These guys are ROCK STEADY. Keep the present management.
                I know IPL was looking for a minor partner at Heartland, so encourage them to do just that.
                Here is IPL’s contact info, call and email to REBUFF BIP and support their shareholders: DO THIS!
                https://www.interpipeline.com/contact.cfm
                Unlike The US, they will probably contact you back, even by phone.
                AZP all over again. Nothing left for us bums when the strippers show up.

            2. CB,
              So many things related in the world, have to see what is happening. Batteries can be a dirty low margin business.
              A year ago the market fell out of the battery business. People cut way back on driving so no demand for new batteries, hence no demand for Pb so price for it fell below cost of what the “battery Breakers” needed to get above cost of recycling for the Pb and getting rid of non-recycle material. So no demand low price. Now people are driving more and finding out they need to replace their battery so great time to be selling batteries and good time to get rid of a low margin business.

            3. Typical Brookfield. Buy good assets that aren’t loved at the time, or aren’t well managed, or the seller is distressed or otherwise motivated. Then, wait until it’s loved, fix the management issues, recapitalize, and sell off part at a considerable profit.

              It’s a simple formula but few actually do it. And it isn’t destructive of value like what all the hedge fund people do. BAM isn’t an asset stripper. But they do make money for their shareholders.

              BAM started with 2 guys, some name recognition, and about $10 million in capital.

          2. Agree Bob. Spread should not be zero – maybe 5-10 pct. at most. As I’m danish (and pay high taxes no matter what), I’m really not an expert of all the K1 issues etc., but in general I believe 3 things are driving this:

            1. ETF’s – BIPC/BEPC are included in more indices, resulting in more ETF-buying. Free float in specially BIPC is low relative to BIP.
            2. Retail investors. Sorry, but a lot of inexperienced investors have entered the market and a making “strange” investment decisions. Including putting way to much focus on tax issues etc.
            3. Momentum. If something goes up in a strange line, it attracts more “investors” for the ride.

            I was lucky to put on long BEP&BIP vs. short BIPC/BEPC trades at the start of 2021 (BIP/BIPC @45 pct). Could have gone either way as there are obviously very few grown ups around. But this time I was lucky. Have now closed BEP/BEPC but still holding BIP/BIPC hoping that BAM will sell some of their shares. Only good thing you can say about these markets are, that there are opportunities out there, where you have a decent chance of making money – Without taking too much outright market risk.

      2. Complex they are but to my eye they are complex with a purpose. Creating the two classes of “stock” with BEP/C and BIP/C was brilliant. BAM pay a lot of attention to taxes and to shareholder preferences. They deliberately don’t accrue UBTI because of the problem that creates for qualified accounts.

        Many U.S. MLPs and LPs should study what BAM did but I suspect most will not.

        One more reason for BEP to trade rich relative to BEPC that I didn’t mention in another post has to do with institutional investors and index funds. Most cannot or will not include partnerships, so they have to go for the corporate entities. BEPC is likely to always trade at a premium to BEP but the spread should bot be 20-30%.

        1. Hadn’t seen this post when i replied to your other, but yep. Only mistake they made was that they underestimated the interest for BIPC to begin with. But BAM still holds quite a few BIPC’s. Would be a no-brainer to sell them and buy back BIP. At least to my knowledge – nothing keeps them from doing that.

  42. Thoughts on Canadian preferred as of Feb 6 …..

    I am not a buyer. Prices on min rates, fixed and resets remain at or near 52-week highs and in many cases all time highs. Yields in some cases remain attractive viewed in isolation from price risk but the price risk to the downside is considerable. So, overall, I don’t like the risk-reward proposition.

    Neither am I a seller. For me, it’s a buy and hold portfolio and except for some tax selling I have sold nothing and what I did sell was simultaneously swapped out for other issues. Exposure remained unchanged.

    Currency: since the March meltdown, the CA$ has appreciated almost 14% against the US$. Readers may recall me saying in the past that currency risk is also known as currency diversification. The last 11 months have shown why this is the case.

    Hang tight would be my advice. There will be better buying opportunities for preferred ahead. Canada is doing a terrible job on COVID vaccine and the possibility of another market meltdown is there. Much higher possibility than the U.S. Even the Trudeau loving Globe & Mail has made an issue of the problem:

    https://docs.google.com/document/d/1362A35mRQD9_X6NmEgoyPeI7tBIApHpijNHU-ABE9PQ/edit?usp=sharing

    The fellow depicted is PM Trudeau.

    And don’t forget common shares. Relative to preferred, I would go for the common for most Canadian companies. Especially such dividend stalwarts as ENB, BEP, BIP, the banks, the insurance companies, PPL, etc.

    1. always enjoy reading your insights Bob and concur with your comments on Trudeau’s lack of direction. Luckily CDN are more accepting of wearing masks and limiting social contacts (haven’t seen our grandkids face to face who are only 25 mins away for 8 weeks due to Ontario lockdown). CDN companies in a number of industries have the benefit of being an oligopoly which leads to almost guaranteed profitability. In addition to your excellent choices would add TFII (trucking) and some forestry companies with strong housing markets in both US and CDN.

  43. Bob-in-DE, I read an old post of yours indicating that BEP was going to be issuing a security that would not have a K-1. Was it ever issued? I can’t seem to find anything on it. Thanks

    1. Alan – Are you thinking of BEPC? Same mirror imaging happening with BIP and BIPC.. Both C’s trade at premiums to the Ps because of the structure, but recently, the premium has been narrowing…..

    2. Alan – short answer is BEPC. Economically equivalent to BEP but it’s a corporation so no K-1. But compare the prices. BEPC sells at a much higher price than BEP.

      If you are a US person I would suggest you buy BEP and hold in a qualified account, ideally a Roth. No withholding, no tax, no UBTI, just lots of income/growth. The K-1 doesn’t matter. It’s a forever hold.

      If it’s for a non-qualified account, and you totally hate K-1s, and don’t mind the higher price, buy BEPC. No K-1 but you have 15% withheld, which you can claim as a credit against US tax.

  44. LWSCF, Sienna Senior Living, took a hit possibly because of Covid-19.
    I’v held this security for several years but since I live outside of Canada
    I do not have the latest information.
    Has anyone on this forum researched or own this security?

    Thanks

    1. Jackson – CDN nursing homes have been ground zero for Covid 19 deaths and there has been a huge outcry against for profit nursing homes not adequately protecting the residents. The whole sector has taken a big hit and Sienna would be part of this group. There will be much higher operating costs for PPE and already some class action lawsuits being started by families. A sector I would be cautious on .

  45. I want to express my gratitude to Yuriy for his sharing here and the free tools he has shared. Also, the Canadian Club (pun intended), who know whom they are, that has lent support. Straight, no chaser.
    Ul-TIM-ately, our tireless Instigator of Research here at III for the format and framework to interact freely…with individual responsibility and respect.
    It has made all the difference for me in the thread of my just having turned 63. I have made a point to go back and show my appreciation to a few who were, perhaps unwittingly, important mentors to me along the way. I hope to send out a few good ripples too.
    JA

  46. My Initial opinion of buyout at Atlantic Power: NAY.
    Private money chasing established, contracted green energy projects is entirely in vogue, now that the problems have been resolved and current management has effected a good stabilization with cashflow improving the current balance sheet. I reported this here back about two months ago.
    Now the silver spoon rich boys want to play TakeOver of real assets with their access to paper and equity conversions, below par but a slight permium…That’s not good enough for their bragging rights and payola.
    Sure it’s legal, the Board needs to vote NAY.
    Contact management:
    Investor Relations Contact:
    (617) 977-2700
    info@atlanticpower.com
    The docs are old, merged prospectus and I have not read them yet, but NOTHING will be left for us plebeians soon. The management is doing the WRONG thing. This is Yield RALLY why the rates are allowing assets to be massively privatized…except the equity and the secondhand debt marked at super premiums left for the lower tranches. The common men have no defense left, but are supposed to make it on their own? BS

    1. Didn’t pass my due diligence, it’s just me and everyone has a different risk profile, maybe 20 years ago I would have bitten.

    2. Joel – there is talk on another CDN site I follow about a possible counter offer for Atlantic. It noted some interesting trading going on right now which could signal a higher offer coming. I sold one pref but still holding the common and other prefs . Stay tuned !

      1. Good to hear. I called and emailed. The AZP Board had just pulled out of the tunnel and into the light with good old pragmatic management over the last few years. I own no common though. The reset shot up to the $22 target of course.
        Re: My Study of Splits:
        I suppose this is a good place to mention this regarding my deep dive into Split Shares without a lot of explanation on the underlying mechanisms by the issuers (prospectus exam).
        If I had to make a play, it seems that the sector is the first view. I am a value and reversion kind of guy and have been bullish on oil, so I chose to dive into OSP Brompton’s offering for a study. By the way, I found two gems in the portfolio: Gibson and Parkland that I did not know about!
        After it was all over and I had a good grasp of what the management could put the holder through (and that is important, like re-allocating the income stream!), I came to understand it as a possible tool for owning BOTH, equal number and paired, the common and preferred AFTER a deep value of crash scenario of a POOL of targeted sector assets. No matter how the management reallocates, you win and let them manage the call selling in Canada on a large number of stocks. A fairly conservative approach to great companies.(Basic rationale).
        In OPS case it was a combined pricing I have been monitoring of OSP at $0.76 paying 0% and OSP.PR.A at $6.76 paying 9.5% = $7.52 or 8% yield on combined pair.
        Current combined now = $1.57 + 6.99 = $8.56 to yield = 6.7% with a $1.04 sh term cap gain = 13.8%.
        I took a small position like this because I have found that it makes me really want to study and get the numbers correct. I am overweight and like oilys and CN Oil. I am doing this from memory now, but these are fresh numbers. So more work and seems to be best tactic in a bottoming or crash environment if only their bank/lifeco: LBS/LBS.PR.A pair would crash!
        Not all of the story here. Points to ponder. JA

        1. Thanks for sharing your research, Joel. Went and looked at the OSP chart. Any idea why the spike from $0.50 to $1.95?

          1. Bur and Buck,
            Possibly the CVE merger marking a bottom/confidence?
            Deep value on the good pool of assets where a small volume can create a spike? The largest volume day recently was only about 50,000 shares or $50,000 – $100,000.
            The tough, persistent management of these companies? I would not want to play poker with this crew. I get the feeling that the culture outside of our Cowboy Wall Street has already guided some sensible, generational pragmatism into the management of these companies. To them , it’s a very long term game. My Dad used to ask me, “who ya hanging out with these days?”
            PS: Wall Street was apparently named for a fence that was erected for the driving of herds into the city…for slaughter.

            1. Joel – doing some weekend reading and came across an interesting play if you really like Enbridge as a pipeline company. There is a new “split share” vehicle which just came out in November with a common and preferred option (as per usual with CDN split shares). The common is ENS (ENSRF for US trades I believe) -it is yielding little over 13% and will give a leveraged return to ENB. The preferred shares may only trade on TSX (ENS.Pr.A yielding about 5.75%) . I cannot comment on risk etc but only put this out for higher risk investors with a bullish view on ENB in 2021.

        2. Joel -you have definitely done some great number crunching ! I have common in both Gibson & Parkland and road the CDN oil sector down and did some dollar cost averaging when at the low point. Took some big hits on oil sector convertible debentures (a lesson learned on my part) when I thought they would be less volatile. Good luck!

  47. Well, It’s happening, as I suggested it might.

    Pembina, aka PPL, has announced its intention to redeem 2 min rate issues when they become redeemable, which is soon. The issues are PPL.PR.K and PPL.PR.M. These are issues that investors love, because of the min rate feature, and companies want to be rid of, for the same reason. Both issues have 5.75% min rates. 5.75% minimum coupon from a strong company!

    Back in March/April, when these issues were trading at 14 and change I offered the thought that min rates could be redeemed notwithstanding the fact that most were trading (at the time) well below redemption price. sadly, it’s happening. Hell, Rida should be working for me!

    PPL has 3 other min rate issues outstanding but all have lower min rates and in any event can’t be called for another 2+/- years.

    I’m afraid the ship has already sailed on the min rates. With the exception of 4 BPO issues there is no meat left to pick off the bone. BPO is a spec buy in my mind. It’s Brookfield, almost all trophy properties, but highly leveraged and lots of exposure to offices and retail. Is the 6%+ yield worth the risk? Maybe. But they were much nicer at 10%+ earlier in the year.

    My hands are in my pockets.

    1. Luckily I’ve got one of the later PPL issues, the “G” series. I bought most of my Canadian issues in the 2nd quarter of 2020 and they’ve had an amazing run-up in value, making it difficult to actually purchase more when they’re at 12-month highs. If you ignore that factor, there are still yields over 6% on investment grade companies. I really bought these as a long-term income producing investment, not for capital gains, so am hoping your overall prediction does not prove out.

    2. Bob for what it’s worth you may want to take a look at Aimia pref’s (AIM.pr.A and C ) both are yielding over 8% and Aimia has been a turn around company since Mittleman brothers took over the helm. There is info too on SA under symbol GAPFF. Higher risk but if you have a DB pension like I do I’m comfortable looking at situations like this

        1. Greg those are the ticker symbols on the TSX sorry don’t know the US version symbol if there is one.

      1. CB – since most readers here are U.S. I have chosen not to follow (or discuss) anything unrated, rated lower than BB (sole exception Altagas), or split shares. Aimia is an “interesting” company to be sure.

        1. Gotcha Bob – makes sense re: unrated securities. Also although I’m a retired boomer I believe my risk appetite is higher than most readers.

  48. I’ve been following the discussion here for a while and check in on Prefblog now and then.
    Are there literally never going to be new Canadian Rate Resets ever again? It sure seems that the banks and larger, higher quality issuers of the past have now abandoned them.

    1. New issue Canadian resets ……

      In present market conditions you are almost certainly not going to see any min rate resets and odds of new straight resets are low. Last min rate issued was March, 2019 and last reset was May, 2019.

      Resets and especially min rates came out when it was hard to raise capital and the issuers had to throw in an extra to sell it. Not the case any more and issuers now have other, lower cost options, especially the financials.

      Grab them when they are well priced (which is not now).

      U.S. issues that have adopted the 5-year reset model have done so without either a min rate or the option to convert to a floating rate. Thus they are far less attractive than Canadian issues, which have one or both of these features.

      Above discussion excludes low rated issues, split shares (don’t ever buy spit shares) and a few issuers I don’t follow.

        1. Bur I can comment from my experience as CDN investor.
          Split shares are a creation by investment firm where they buy a pool of companies and then offer the pool as either a common share basket or preferred share basket. (so similar to an ETF with an ongoing management fee) Most CDN financial reviews I’ve read warn against the common share version but if you are looking for income they view the pref version as an alternative to pref ETF’s.
          I’ve had two of the pref version for a number of years and both are still paying over 6% – LFE.pr. B (Cdn insurance co.) and PIC.pr.A ( Cdn banks). They took a big hit in March but are now back to near 52 week highs like a lot of other prefs. Just my two cents worth of info

            1. Bur – for more info on split shares I’ve attached below is a description of the PIC.pr.a stock screen in my brokerage account. PIC.a is the common shares and the dividend is based on capital gains growth over time whereas the PIC.pr.A version I hold is the dividend stripped off the common shares. So basically you’d buy the regular PIC.a if you thought CDN banks were going to go up in value but for steady income I opted for the PIC.pr.A. They expire after 5 yrs but when this happened the company just rolled them over for another 5 yr term.

              Premium Income Corporation is a split share company. The Fund’s investment objectives are to provide preferred shareholders with cumulative preferential quarterly cash distributions of $0.215625 per share; provide Class A shareholders with quarterly cash distributions of $0.20319 per share, and return the original issue price to holders of both preferred shares and Class A shares upon windup of the Fund. It invests approximately 75% of its net asset value (NAV) in common shares of the Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada and The Toronto-Dominion Bank (collectively, the Banks) and may also invest up to 25% of its NAV in common shares of National Bank of Canada. In addition, the Fund may purchase public investment funds, including exchange-traded funds and other Strathbridge Asset Management Inc. (Strathbridge) funds that provide exposure to such common shares. Strathbridge is the investment manager of the Fund.

              1. CB and re: splits in general: (PLEASE! read the prospectus. The large print giveth…)
                – Use call writing
                – Have a convoluted retraction which provides the holder little value, but it sounds great
                – Management can change contract and divy formula at time of reset
                – Pref can end up (and some currently DO) paying the fees of the fund
                – Is good, or better, when the underlying is doing well
                – More details too.

                1. Joel completely agree with you they are very convoluted investments and I didn’t mean to imply I was recommending them (rather just providing some background info). As a DIY investor I try to read up on investments from various sources and this site is EXCELLENT! The CDN pref market is very small with limited options – I read in some CDN finance newsletters about split shares and they were generally not recommended – there was some support for the pref version but as you noted those too have risks. I only touched the split shares pref version (a small holding) based on CDN banks and insurance companies for peace of mind. As you say do your own due diligence to ensure it fits your comfort level

      1. Bob, one just never knows. You were concerned a month or two ago they were not a good buy then, and I just cashed almost 20% on Enbbf for a short hold flip. Its getting harder though isnt it.

        1. Grid – the “advice” has to be generalized given the audience and the number of issues and issuers involved. Those with experience in the Canadian marketplace can and should make their own calls.

          But to generalize again, there just isn’t much room for Canadian preferred as a group to move higher. Most are near 52-week highs, if not all time highs. Lots of room to the downside. To most, I say wait.

          If you are brave the best long term play right now is BPO. BAM is buying up the minority and shares, in time, should trade at comparable yield to BAM. Right now, they are well above. Arguably, free money.

          Short term trades can be good if you stay glued to the trade screen but really require IBKR to get the execution needed for such trades. Itra-day volatility can be high and bid-ask can be wide, even on high volume issues, which is just what you want in a day trading environment.

          1. Im just playing with you Bob….I always appreciate your comments. Even though they dont help much because we already think in a similar manner! Though I agree with you here its from a slightly different angle. To me the problem isnt they are near 52 week highs. As in years past they have been significantly higher than past 52 weeks.
            The problem to me is they are currently in “no mans land”. The 5 yr Tbill trades off the short end of yield curve not the long end. This is an asymmetric advantage given to the issuer, as these are perpetual issuances. If Govt is determined to keep a lid on short end, the 5 year wont move nearly like the 10 or 30 can. One can see that occurring already with the different price movements of 5,10, and 30 in recent weeks (widening spread).
            Start extrapolating a 5 yr reset date in 2021 or 2022 with even a 1% five year, and the reset yield is not that exciting in relative terms for the issues I track anyways.

          2. you are so right Bob and thanks for mentioning BPO prefs earlier this year. My R and I version are up about 14% since Nov 30th after BAM announced bid for BPY. If border ever opens up I will treat you to a “double double” at one of our 3 Tim Hortons in our small town in SW Ont.

          3. I would agree with you Bob. I sold my BPO.A on the announcement, but have not sold others ‘preference share’ that have good gains, but I do have a few open sell limits if I can get some plum-reachers; otherwise I am willing to hold and gather coupon rate. I have open buy limits as well and just wait. Shhh, we’re hunting pwee-ferds!
            I have done a good deep dive into the Splits and see the basic game is to peg the common and the preferred together. The contractual terms for retraction seems appealing but are “rigged” to the management’s terms. One should not bite on these until they have done a large study of the prospectus. There is more to know as the rigging, as I call it above, is a complex variation as a sailboat to a clipper ship. There is only one scenario I could imagine holding these myself, that is narrow and a judgement call to be made on an individual basis.

  49. Mr Yuriy,
    I see that you added a credit rating on INE recently. Nice.
    Along that same line of debt and caution, I might add that that there may be reason for a mental rating on Brookfield Office/Properties as well as their four other American listed securities. The perceived “trouble” that surrounds REITs in general right now IS reflected in the discounts given to the prices in BPO/BPY’s prefs, but there may be more than that, even with their incredible parent and international spread.

  50. ZERO COUPON PREFERREDS? or Fun with Prefs:
    Yep, take a look at BPO and BAM’s floaters at 70% of Prime x $25 par. Prime equals zero and is SUPPOSEDLY set by inter-bank loans? All speculation on interest rates. The instruments are getting volume and have climbed approx 25% this year with no yield. Someone is playing the fish.
    Can prime go negative? How would THAT look.
    Fun, fun times scratching in the chicken yard this morning.

    1. Correction I see now that Prime in Canadia = 2.45%, so 70% of that does offer a yield of 1.7%. I must have been up too early as the computers had deferred to 0% before the posting of the most recent rate at market open. I wondered how that was possible,,,well more coffee first.

      1. Almost choked when I read the first one :-)…. own both BAM and PWF. Carry ok compared to what you can get for IG elsewhere and leverage to higher rates icing on the cake….

    2. “Prime” is an administered rate (bank set). My chart says the lowest ever prime was 2.25%. Time was banks made many loans and issued paper based on prime but not any more. Very few prime adjustable prefs left, most of them Canadian. Rates and therefore prices on prime adjustable are more stable than those based on Canadas (treasuries), which is their appeal.

      Some of the adjustment provisions are a bit wacky, meaning they aren’t as simple as x% of prime. Some have mins and maxes while others involve management discretion. Pays to know what the terms are. SEDAR is the place to go to for the prospectuses.

      1. low prime of 2.25% was April 2009 highest ever was 21.25% in July 1981 (my second yr out of university working for a CDN bank with a 20% car loan and that was “staff rate”

          1. I see this morning Brookfield parent (BAM) is looking to take Brookfield property (BPY or BPY.un) private with appx 14% premium on common and likely redemption of pref’s at $25 (if I read news release properly). Common holders will have option of cash, shares in BAM or shares in a new pref.

            1. WOW – big jump in the BPO pref’s today along with BPY after the BAM take over announcement

              1. BAM does not do things on a small scale. They clearly feel they will have better opportunity to clean things up and move the puck down the ice without minority shareholders. Benefits will accrue more to BAM than to minorities.

                One reason I say you always have to own some of the mother ship. At the end of the day it’s where all the money ends up.

  51. I contacted Ally.com about buying Canadian preferred stock in my account. Their reply: “OTC stocks with 5 letter stock symbols ending in ‘F’ are charged a $50 foreign settlement fee in addition to the normal commission rate.” Just thought you might like to know. Will stick with TDA.

    1. I have an Ally account and that is an improvement from when I inquired a few years ago. They wouldnt allow any 5 ticker F ending purchase,ha. Ally has its warts, but it allows me quicker access to any new issues than TD or Vanguard in my experiences. Plus as long as its not a foreign issue, they will let you buy any obscure illiquid. The only fly in ointment is you have to break purchases into sub $10k increment buys or you have to call in for an override buy from rep to do it.

    2. RE: $50 fee and Ally

      They are reading what’s on the screen. In practice, some buys will attract the $50 fee and others won’t. It has to do with the source of the shares.

      Vanguard at least warns you before the purchase that there will be a fee.

  52. Happy Boxing Day Boys and Girls, eh!
    Seems like the resets have rich markup resets in general. Too bad they are pegged near par right now since they could be strong call candidate five years from now. The strong reset rate might be a real pressure if the 5GofC rate really moves over that time span. I like embedded influences, esp with the guarantee floor. These could hang near par for a CD-like profile.
    Look like long term holds esp if bot in the last couple of years way below par! Opportunity temporarily lost. I did not have them on my radar at that point as I was still trying to wrap my mind around the other permutations of ‘Grandmother-Land’ Markets.

    1. I hope Santa was good to everyone! Out of curiosity I just looked at the 6 month performance of an ETF for Cdn Pref shares (CPD on TSX) as of Nov 30 the 6 month performance was 20.89% (1 yr 5.59%)

      1. CB – the folks should also watch ZPR, which tracks only the resets. I use it as a tracker but always buy individual issues. Individual issues give you more ability to fine tune the strategy and you don’t have to pay the 50 basis points for the ETF.

        ZPR is up about 60% from the March low. I don’t believe it’s tradable in the U.S.

  53. Min rates and calls …..

    Earlier this year it seemed inconceivable that any min rates would be called. But as prices rebounded, calls became a real possibility.

    So far, of those that came up for call, 2 were called and 3 survived. ALA.PR.I (TGAPF) and W.PR.K are going away and BAM.PF.H, BIP.PR.B and CU.PR.I (CDUTF) will survive another 5 years.

    Next on the bubble is BEP.PR.G (BRENF), of which I own a boatload. Last date for a call announcement is January 7. It’s trading right around redemption price and has a 5.5% minimum rate on it. No tax of any kind if held in a qualified account.

    The entire universe of min rate issues is only about 3 dozen in number and they all will be subject to call over the next few years. I expect more will bite the dust.

    1. Bob,

      I’m long BRENF as well. As Brookfield has recently let other mins survive, maybe BRENF will live long and continue to prosper.

      Thanks for letting us know the date for the news.

      1. Greg – Brookfield’s decision making on the finance side is quite centralized so there is reason to think BRENF will live on.

        1. To all interested? been looking for an opportunity to discuss “brookfield” further. In November I asks some questions about BIP & BIP-C a good exchange with several of you commenting, an article from early in the year detailing transactions and various options was posted. The 2 mentioned assets “now” trade at a 46% price difference but “exchange” in one direction only, what a disparity, any further ideas or thoughts?

          1. I will chip in after more thought but clearly the price divergence in BIP and BIPC is stunning. This is B-school case study material.

          2. Haven’t seen any comments in our Cdn business papers about why the divergence. I’m just glad I sold off some BIP to buy BIPC when I got the shares in spin off. Better to be lucky than smart sometimes!

            1. thanks Buck, since your canadian was your motivation for your original move canadian tax law or roll of the dice? I’m awaiting Bob’s “chip”, if it’s a US perspective. I got the share also in the Special Div. am setting tight as of now, would prefer to have the “C” also, but not now @ at a 46% premium. Somebodies profiting with a form of arbitrage.

              1. Mike my understanding was BIPC would be more advantageous for US investors and basically neutral for CDN investors. So thinking the fact US investors would prefer BIPC I should increase my weighting in that stock as the demand would be higher. I still hold both but certainly BIPC way ahead now.

                1. “buck” got it , we both did good, you just did better up north! know what to do on a pullback. Happy New year.

          3. It has to be (at least partly) due to passive flows. ETF’s buying one and not the other. I have seen a lot of crazy stuff in the last year and this one is up there. Thanks for mentioning it – I have started to try and arb it (long BIP, short BIPC)…no one knows how crazy it can get, but I have room to add…

          1. On the buy list for the next downdraft. 7 more min rates for up for call or no call in 2021.

  54. Dick and Grid, I too have read up on the tax treaty with Canada (and also Singapore!). It is law.
    My wife and I both have recent interactions, over and over since before Thxgiving, with TD back of the house operations that make me wonder how many nice and polite, but very junior newbies we have to go over and over things until the are trained. Both issues are still not resolved. Seems Senior Compliance is working overtime to keep their jobs by creating munutia.
    It took three business days to get SESCF set up until it ran away, now I have a distant buy limit somewhere down there. I see Grid’s earlier buy ticks at somewhere besides TD.
    This week I was surprised to see my last two EBBNF and ALTGF OTCs hit a sell limit within three days of each other at my TD account. Everything has been migrated over to IBKR now. I am anticipating the Schwab merger and just keep an eye on one account now. I had already bought the ENB same series and a different ALA series over there, now I am clear.

    1. Joel, I had earlier a few in Vanguard then they shut it down. After that it was all TD. I remember Enbridge and Fortis being ok in tax free. But Emera, Canadian Utilities, and Altagas had it withheld. One guy complained about a half dozen times and got Emera resolved, but subsequently I just sold out.
      I just have a slug of ENB Series J now in taxable.
      It is better for me now to have it there as I always owe money anyways so it will knock the payment down a bit.

      1. J, Sorry for the inserted comment above, info not complete as I was going from memory from a CPA site I read on occasion. Luckily, alot of this detail, accounting and filing is falling off for me after this year!
        Sing and US have a ‘Totalization Agreement’ that is a balancer and holds some filing exclusions, BUT for wage earners. Accuracy IS imp. If there is more, your IRS link should be relied upon. JA

  55. There’s been a lot of talk around withholding tax on Canadian prefs held in IRAs. After several conversations with Schwab, I have learned that they will not withhold on BKFAF/BAM.PR.B if held in a retirement account. They told me it is because the security is DTC eligible. I own these shares myself and they did not withhold on the last dividend I received.

    I bought some additional shares today at $7.30 which gives me a yield of around 4.65%. These float off of the Candian prime rate so I liked these as a hedge against rising interest rates down the line.

    1. How generous of Schwab to say they will adhere to the U.S.-Canada Tax Treaty! Makes me want to reach out and say Hi to Chuck.

      I’ve had more than a few bruising conversations with brokerages on tax treatment of certain issues held in qualified accounts. I’ve won the arguments but at some cost in time and trouble. Asking is easier for sure but not always effective.

      For the information of others, Canadian preferred held in a qualified U.S. brokerage account should never have tax withheld. It’s a matter of tax law; it’s not at the discretion of the brokerage, or the paying agent, or the transfer agent, or anyone else.

    2. Schwab also does not withhold on SLFSF (SLF.PR.B) held in an IRA. The dividend hit my account last night with no withholding.

  56. 1) HSE/CVE merger clears all regulatory hurdles today.
    2) INE downgraded on weight of debt service.
    3) AZP achieving success on broad buyback of prefs and commons at market.

  57. ENB common is probably a better buy than the prefs. right now.
    Definitely a better trading/flipping vehicle after the reset run ups.

    1. I might add: deep value ENB a great cash covered put sell here 2.2% on cash cover by mid-Jan expiration or, if exercised; ENB bot at $32 with (8% annual) 2% div paid mid-Feb.
      Considered conservative methodology.

      1. Joel, I’m long ENB, but wouldn’t mind adding to the position, so this is an interesting idea. I don’t see any $32 puts (via E*Trade) but I do see $32.50. Are you suggesting selling cash-covered 15Jan2021 $32.50’s?

        1. Bur, Yes, imputed from the info I gave, that is correct. This ENB set up is exactly what I look for and wait for this sort of set up or just keep watching a few established, good volume, deeper value income stocks that I might be interested in anyway. PRU has been decent too lately. This is the best part of American Capital Markets, the rest is probably best when used as buy and hold. (I just heard multiple jeers from across SA-land!)
          Once the flow of this thinking gets established, just like looking at prefs, then throwing a bit of twisting, like resets, floats and such. Not too difficult and easy with these fancy, elektornik brokerage accounts!
          There is a good primer here:
          https://www.lynalden.com/treasury-bonds-risks/
          I like this young lady and it gives me a positive spin on the very competent generation behind us.
          Scroll down and on the right column, Experienced Investors: Covered Call and Selling Puts.

          1. Bur, Just an add on after I thought about what I wrote here. Will go to Common Stock Area next time: There alot here!
            Here HOW I watch and wait (in general) using ENB as a topic:
            First just watch:
            -I have seen the industry in which ENB is in, Oil, make the first ‘wave up off a gross bottom. Now I see interest in these deep value and a rotation.
            -Now that the first wave has run up and I can see the survivors and div commitments thru the down cycle, etc. Things like capital raises and inv grade. (EPD a candidate, but options not as rich)
            – 1 option contract = 100 shares/ a round lot.
            – Now sell (you get paid cash premium) cash covered puts if I am interested in owning that stock anyway and will be patient with a new position. Collecting the div helps, esp if it is decent and has proven persistent.
            – If exercised, then I pay cash to own the shares and wait for the div. My Rule: Wait until first div to make any more decision; the first decision has been made, go with it.
            – If not exercised collect the premium and sell puts again, or just by stock. It can run away from you, but often that is FINE.
            – Here’s what takes a bit of mind-warp. Once you own actual shares in 100 lots, you can sell calls (you collect cash again). Now you have been paid three times.
            – If the ex-div date goes by, you get the cash div of record. It does NOT go to the option Buyer unless exercised.
            – If the call is in the money, your shares can be pulled to cover the call AT ANY TIME that the contract is active. This is AMER Options. Euro options can only be called on expiration date. This has happened to me when the share price really zooms up with sold calls into the money OR is a tactic used for the Buyer to exercise (call) and capture the div. and cap gains.
            – Sounds confusing, but write out all info on a sheet and see how the divs and option contract dates overlap, or not. Some scenarios are better odds plays. Especially, write out the Sell to Open and Buy to Close relationship. Pretty easy. You can use this to capture value as a short term cap gain instead of waiting for a terminal date on the contract. I have bought back contracts for a few cents a share when the stock runs away from the contract strike price.
            – Lastly and a bit more esoteric: An ETF can have options and they are often bought to capture big hidden gains within the fund that may be getting ready to get paid out, espec in Dec, end of year. Think: a tech fund this year that may have a big Cap Gain embedded in the price. Of course an American Option can be called on the ex-div date!
            Best to You in your studies! JA

          2. Joel,

            That’s a nice link.
            This year’s most regularly profitable trade for me has been selling put options in my IRA, and I do it a little differently than Ms Alden suggests.

            I do a bullish short term (~4 weeks) bullish put vertical with the higher strike ~8% below the current market price. In option math it typically yields 12-15% per month. The option math uses the net premium in the numerator and the net of the strike prices less the premium in the denominator.

            I have been getting assigned the underlying stock about 10% of the time. Using this method, frees up cash in the account as the margin required is equal to the net of the strike prices and not the full price of the stock.

            1. GG, Nice, will do on paper. That way I visualize it. Always learning any new method until I really get it, esp now with lockdown time! The closeness to strike price is a personal “acquired taste” (read: greed tolerance) for an individual. You still have to buy a put too, an expense.
              I remember my breakthrough was when I learned to effectively enter: Net Debit/Net Credit orders. It just takes time and play.
              The method above, is conservative and a good ‘primer’ way to start to enhance income, esp since all elements are income, with div collection in view and on a stock you might just buy outright and just hold naked.
              IRAs are being offered some limited Margin too now. It used to not be allowed for UBIT or some such in a trust (all IRAs). Of course there are some costs with margin too. I’m a skinflint.
              I am adverse to using margin for very long, except to place low buy limits on more positions than I have cash for, just in case some wonder-sale hits. The other problem is in a preferred heavy portfolio, prefs are ‘usually’ not , or barely, margin-able, I think because of perceived bad liquidity, so avail.margin is limited.
              The wonders of mind-play! JA

              1. If possible, I suggest using the Think Or Swim Platform from TD Ameritrade for your options activity. The Analyze function is great and they provide real time Level 2 quotes on stocks AND options. My screen for the options highlights: number of open options orders (by strike and date), probability in/out of the money, bid and ask and most recent price. It’s Very helpful.

                My typical OTM monthly covered call has a likelihood of being in the money of 10-12% and the bullish put spreads have a likelihood of ~15-20% being assigned.

                I’ve been writing covered calls on high dividend stocks (LUMN, MO) and writing bullish put spreads on stocks with great charts but pricey valuations (NXPI, REAL).

                1. GG, Thanks for the lively chat. I already did some look up some info on combo. strategies and I’ll look into TOS since I have not done that before, or really understood the ‘greeks’. I’m sure I have the experience to go there now. and make good decisions.
                  I’ll report back at some point on Common Stock Category before Tim directs me over there. Hope something here is useful to others! JA

    2. Joel, I have given that thought. I bought an ENB reset less than a month ago and its already up 15%. But its in taxable, and I already owe so much short capital gains, Im just trying to hang on to Jan before selling out and not adding to what I owe Uncle Sam this year.

  58. Mr Yuriy,
    I do not see any of the three IAF prefs on your sheets: B flat fixed, I &G both 5reset.
    I see them active on TSX though.
    Was there some merger from old Industrial Ins to iA Financial you know about, new symbols? JA

      1. You da mahn! After my recent traumatic wipeout of my watchlists; these resources have been used daily!

  59. Bob-in-DE or others, what do you think the likelihood is that CDUTF or CUTLF is called now that they are trading at or above par? Thanks

    1. Zero on CDUTF. Company had to announce the call at least 30 days in advance and the window has closed. One chance every 5 years.

      CULTF is continuously callable on 30 day’s notice. Right now it’s callable at 26, so it’s not going to happen. The stripped price is well below that so you have no call risk in the sense of capital losses.

  60. What I’m doing with Canadian preferred now ……

    In short, waiting. Min rates are up almost 60% from March lows and resets a bit more than 60%. That’s in Canadian $ terms. In US$ terms the gains have been greater, because of exchange rate movements.

    In April, near the lows, I sold my positions in those issues that had dropped the most and bought back similar exposure by buying different, same-issuer preferreds. Keep the exposure, capture the capital loss. I am now able to sell off vastly overpriced U.S. preferred without capital gain liability. This is a good strategy anytime you have substantial losses on issues and the ability to buy back in without triggering the wash sale rule.

    I am not a seller now but neither am I a buyer. Timing is very important with Canadian preferred and the timing is not right now. Better to hold cash and wait for the next market decline. In the meantime, the cash flows like crazy. I do not DRIP.

    1. Bob, I dont disagree with your assessment at all as usual. But ironically you can extrapolate your same thoughts even to US perpetuals from low March points. SR-A for example is up 72% from lows and SJIJ is up almost 90% from March lows. Amazing one can say that about quality utility preferreds and baby bonds isnt it over less than a years time.

      1. Yeah, I’ve sold those 2 and many others bought in that swoon.

        But I’m not waiting in cash for another one. Someone told us all how to fund one in case there’s a repeat. 😉

        1. Camroc, Im already locked and loaded. Hopefully we arent trying to trample over each other at the same time trying to get out the same door, ha!

      2. I have sell orders in on perhaps 2 dozen pref and baby bond issues, including SR-A at 28.50.

        One went this morning at a negative YTFC (first call) and the other was a rotation out of AGM-F to AGM-E.

        NLY-D is going as is TGAPF so the cash piles up.

    2. I did mean to mention, I started toeing back in. Only on a relative value basis to market certainly not absolute value. Bought some ENBBF at $14.69 a week or two ago. First CAD position for me since selling off Fortis 4.9% fixed after it went over par a while back.

      1. Obviously, you have some downside price risk on Enbridge but the 8% yield is nice.

        The fear of midstreams is overdone. COVID and some regulatory/legal decisions certainly separated the men from the boys.

        1. Humor me Bob and play the game we both know….If you had to choose one, would rather ENBBF or ENBA at their respective prices? Such a dichotmy in relative pricing isnt it.

          1. ENBA was at 28 earlier in the year for a YTC of almost nothing, not that Enbridge would call it. Folks don’t seem to appreciate that in less than 3 years the coupon is going to be cut almost in half. It may be a good buy after it goes floating and the price drops to 15.

            1. RE: ENBA – How unusual is the increasing LIBOR + provision in ENBA? Not that I’m advocating for it, but I’ve not seen a provision like ENBA has where the reset rate as amount of points over LIBOR increases fractionally every 5 years. Do other CDN resets have that provision that you know of? I’ve never owned ENBA but have watched it in comparison to EBGEF that I do own, trying to figure out why it seemed to be so high relative to the preferreds. That was the only reason I could think of as as maybe an added plus… Subord note vs preferred shouldn’t make that much difference.

              1. 2wr – it’s not a common provision. The Canadian resets keep the same spread throughout; it does not increase.

                Sub note vs preferred means very little in credit terms.

                The relative pricing is just a market inefficiency. ENBA is easily tradeable; the ENB US$ denominated preferred take a bit of knowledge and work and you may get hit with the pesky foreign trading fee. Clearly, the preferreds are a much better deal than the sub note.

                I trade the ENB prefs at IBKR. Much easier to trade TSX than OTC and no foreign fee.

              2. 2WR, A few have these features. Im sure you read long ago and forgot, NI-B has a modest step up feature way out in the hinterlands unrelated to my needs now.

                1. Grid – Are you calling me forgetful????? What’s your name again? I’ve fogotten….. yeah, you’re right…. I did read it in NI-B and I did forget…Hey I even forgot about the put provision on BRG-A and C until someone brought it back to attention here, and I own that one… Then again, maybe NI-B’s price reconfirms the theory that the market does assign a positive value to the unusual structure because NI-B was another one that always seemed to trade too high in the secondary. I always attributed that more to the US markets just getting used to resets vs Canada where they knew more from experience how to value them but maybe the structure is reflected in price..

                  1. 2wr – you are right about Canadians and resets. Canada went through the reset crash some years ago and understand how far prices can fall. American have not yet. When U.S. issues go to floating or reset at 200-300 basis points lower than present prices will go down. I promise.

                    Look at the two STT issues or NI-B as examples. Sky high prices and huge downward adjustments in store.

                    Anyone holding U.S. F2F or resets should be keeping track of the float rate or the reset rate and doing a delta with current coupon. To generalize, I advocate dumping issues with big downward adjustments baked in and plan to buy them back after they go to float or reset.

                    1. I have a friend who keeps harping on that theme. Besides LIBOR going away which might be a nightmare unto itself…there’s the float date year. With predictions of maybe, just maybe, a return to inflation perhaps that’s why there’s been a bid behind some of these?

                      So Bob In Del what’s your take on YTC w batches of 2023,….2025-6….. and some at 2028 or longer. The longest dated calls seem to be trading poorly. And shorter floats are lower ytc I try not to take specifically about any issue so I’m just asking ‘in general’

                    2. IYP – take STT-D as the example. At present price this 5.90% coupon issue has a stripped yld of 5.24% (not bad but means nothing) and a TYFC of 1.96% in 3.29 years. I’m not really interested in a 1.96% yield for a 3.29 year hold. I can do better.

                      But it may be worse if it doesn’t get called. That 5.90% coupon drops to 3.34% at current LIBOR. And, the price drops. So you now have a 3.34% coupon trading well below redemption price.

                      To generalize, when I look at YTC the longer the time to first call the more the number matters. If it’s 2% YTC in 1 years it’s a 2% 1-year CD. Maybe OK. But if it’s 4 years and 2% YTC it’s a 2% 4-year CD. Not OK.

                      To generalize again, the more the delta between current coupon the the coupon at float or reset, the bigger the problem. If the delta is large I am out. Happy to buy back in after the price has dropped to reflect the new, lower, coupon.

                      Canadian resets are a perfect example. GWO.PR.N is a IG preferred that sold originally for $25 with a 3.65% coupon. It reset to 2.18% 5 years after issue. It now sells for $10.35. Let some other guy take the capital loss.

        2. Bob, It might be time for me to sell already as Enbbf is up almost 11% since I bought about 2 weeks ago.

    3. thanks for your input Bob. Liked your comment on SA about the “State of Ontario” LOL

        1. LOL too funny . Mr Dress Up was a famous CDN kids show back in 70’s thru to 90’s with Ernie Coombs (an American but he enjoyed Canada and was like our Fred Rogers). Justin unfortunately can’t hold a candle to his father even though at times I didn’t agree with Pierre.

    4. Of course there will come a pullback at one point. And prefs have gone up a lot, BUT if you look at valuation (yield/credit risk) I believe that canadian prefs. are the cheapest “fixed income” asset class worldwide. Take a look a US HY, take a look at Europe – everything FI. Take a look at the riskfree arb you can do in BEP/BIP – us vs. Canada listing

      Investing in EIT you can lock in 4,5 pct. for 3-5 years in a High IG issue – no perp risk. Point me to a similar opportunity globally.

      In Europe people where waiting for better entry points when ECB went to zero and then negative. Just saying rates on bonds/prefs can go a lot lower than everyone thinks. Except for some new PVS and some of the CU-I I too stopped bying when everything started popping a month ago, but I find extremely difficult to build a case of why you should sell…but again if everything falls canadian prefs will of course join…