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.

373 thoughts on “Canadian Chat”

  1. Folks, I just wanted to say that I did not abandon the spreadsheets for Canadian prefs and the reset dates are kept up to date. This month, TRP, SLF, PPL, HSE, BAM and BIP rates was reseted and actual rates are listed in the spreadsheet: https://docs.google.com/spreadsheets/d/1UB3TVsCo_bPDD4tkYu88tQxEO1KrybbY429PoObEYS0/edit?usp=sharing
    You can also download searchable spreadsheet, it is updated too: https://docs.google.com/spreadsheets/d/1b0JLqAUoV1bRDWLMwqzD32ERNCHTS9DvdyvNzv–Rsk/edit?usp=sharing

  2. I want to buy TD Bank preferred’s. I am seeing them listed on the Toronto exchange. Can you suggest which series is a good one at current prices? Also, where can I find more details on the different series (interest rate, when can they be called, ex-div date etc)

    Is there something listed on OTC in US?

      1. Thanks Grid. Not sure I found it in the prospectus (it may be embedded somewhere), which Gov of Canada Yield rate is used for adjusting the rate 5yr, or 10yr ?

        Also, if you can make it a bit easier for me, if you were you were to buy today which series would you at.

        1. Sorry Jay, just saw your post. It resets of 5 yr Canadian. Sorry, but I havent looked at any of these preferreds to give you any actionable info.

          1. Thanks Grid. I will try and research more on this. In principle I like the idea of safe canadian banks.

            If anyone knows some additional websites to research Canadian Bank preferreds please do guide me

            1. The spreadsheets above, together with company websites with their current financials, and S&P/Moody’s websites for ratings (free if you register) have given me what I’m looking for to pick my Cd preferred investments. Currency exchange rate variations and movements in secular Canadian 5-year interest rates will impact the market values of anything you buy, at any given point in time. I feel the higher yields for stronger credits offsets the exchange rate uncertainties but only time will tell if I’m right.

  3. Today is the XD date for many Canadian issues. If inclined I’d be looking for some isolated sell offs.

    This includes most of BAM and related entities, FFH, PPL, EFN, IFC, GW, AQN, SJR.

    1. Have been a reader for about 6 months and find this site a wealth of knowledge. As a Canadian investor been using it for US$ fixed income investments as have appx 35% of my investments in US$. Wondering what others who are buying CDN$ preferred think of a couple prefs issued by Aimia Inc. (AIM on TSX and GAPFF on OTC) There is a very interesting history to this company which was primarily a company that handled air miles rewards until appx 6 months ago when the Mittleman brothers managed to take control and it has now morphed into an investment company. There are two preferred issues trading on TSX as AIM.PR.a (8.89%) and AIM.PR.c (8.99%) . I’m thinking the security of the company is much stronger now with the new focus and may not be recognized yet by the general market. Be interested to hear from other investors with their take.

      1. Canuck, you got some solid outfits up North, but I keep a rather limited scope of interest in preferreds up north in a few solid utes and a couple financials.

        1. thank you to all for the replies. Much appreciated! Although retired have a pension so am not adverse to taking on some risk if there appears to be a rationale for mispricing which I’m thinking may apply to Aimia. The Cdn preferred market is so small compared to US I find liquidity to be a real issue. Stay safe and good luck with your investing!

          1. Canuck, I notice the specific issue offerings may pale to the US market, but the ones that do issue, seem to serve out big portion issuance sizes though. The Utes and banks issues generally are decent sized floats that come to market up there and have decent volume.

            1. agree Grid for the larger issuers they do have liquidity. However in lot of cases I’m already holding common shares in those same companies and trying not to get overweighted by owning a lot of their prefs too.

  4. Grid and Bob, may I ask your thoughts on EMA?
    I own a olt of their prefs (most of them I bought in April, so today I can sell them with good profit but I think about a long time hold), and I noticed that none of you mention this company as an investment object. What is wrong with them in your opinion?

    1. Yuriy, I would love to own a plus 5% fixed Emera QDI preferred. I really like the company. In fact ERRAF was my first Canadian preferred bought several years ago. Made good money on it…Thought I was smart and bought again and found out predictive interest rate movements were not my speciality, ha. And found out the hard way 3-4 years of interest rate protection means zip to CA reset preferreds as they trade like they will reset today.
      So, anyways, being I can only buy on OTC, there are no fixed Emera preferreds. So its nothing against Emera its they dont offer any issues I can buy that fit what I want. Fortis is largely US and mostly T&D which I like so it works just as well. I would flip trade between the two if I had access of fixed preferreds between both companies.

    2. Nothing to fault Emera on except the relatively low yield. But it’s stil 50-75 bps above a comparable US ute.

      The H issue has a 4.90% min coupon on it.

  5. I have not posted here in a while – too little time and not enough to say – but I plan a few short posts over the next couple of weeks.

    To update on the big picture, all the Canadian prefs I follow fell like an anvil in March. (Almost?) every one of the roughly 400 issues that I follow blew past it’s 10-year low, some by 10-20 percentage points. It was astonishing to see issues from world-class companies drop 10-20% in a DAY.

    The recovery was equally astonishing in most cases, with many issues now 30-40% above their March lows. Many issues have fully recovered from COVID, but some sectors still lag. Anything petroleum related is still down, just as it is in the U.S.

    But not a dividend was cut or suspended, and the Canadian dollar has strengthened relative to the U.S. dollar by 6-7% in the last few month. So, if you bought in March and continue to hold, you are smart, lucky or both.

    If you are a buy and hold type, and are inclined to put new money into Canadian pref, I would point you toward min rate issues (average stripped yield +6%, with downside protection on rates), or at resets that have reset recently, so that you have a 5-year rate runway in front of you.

    To name some names from the latter group: BAM.PF.G, BIP.PR.A, BRF.PR.A, ENB.PF.E, FFH.PR.E (or M), FTS.PR.H, HSE.PR.G, MF.PR.N, PPL.PR.G, RY.PR.J, TRP.PR.B.

    For an American, living his life in U.S. dollars, none of these is a widow and orphan stock. They require a strong stomach at times and if rates go and stay low forever the resets, in time, will follow rates down.

    If COVID-19 turns into COVID-20, I expect these will tank again. But I expect the same of U.S. issues, too.

    But, for now, they pump out divis like there is no tomorrow.

    1. Bob,

      Welcome Back!

      Your earlier spreadsheets have been very helpful and I am interested in the minimum interest rate issues you’re mentioning.

      Is there a reliable register of OTC symbols for use with Canadian preferred shares? I’m using TD Ameritrade for my and they will (un-reliably) process OTC symbols.

      Thanks in advance.

      1. Greg – one has to build a data base. otcmarkets.com will give you the names of Canadian preferred trading OTC if you do a sort with the correct parameters.

        There are 6 minimum rate issues with OTC tickers: TGAPF, BRENF, BROOF, BINFF, CDUTF, PMMBF. The 3 Brookfield issues are actually Bermudian partnerships. U.S. residents will get a K-1 but they are perfect for IRAs. Except that most brokerages will get the taxes wrong.

        I own all the issuers although not these issues in all cases.

        1. Thanks.

          Have a small position in BRENF and trying to add a position in TGAPF.
          (Your earlier spreadsheets have been very helpful in my due diligence.)

    2. Thank you! Can I ask where you are getting the information on the newly resetting issues? I still have a few ’22s and ’23s that I’m looking to roll out. Are you aware of any Intact Financial issues that reset in ’24 or ’25?

      1. Tim – the longest reset of the three IFC reset issues goes out to June, 2023.

        The dates are from a prop data base but one can chase them down on the companies’ websites.

        If you like non-bank financials, you have half a dozen good companies to look at.

        1. I have been entering Canadian issues, albeit only at the fixed level, ute only. Started yesterday a little and bought even more today. Canadian Utilities and Fortis only. This is about as far as I will venture anymore. I made good money the last time I was in CU preferreds, so its time again for a meeting behind the woodshed, lol. I cant get 5.5% IG in US issues below par, so here I go again…

          1. So where were you in March when the CU and EMA mins were trading 30% below current level?

            Probably wasting your time with PCG.

            🙂

            1. Bob, I was in full flipping mode back then. Down 30% in March? I made 60% in 2 hours with SR-A in March. Of course I lost money to make money, ha. No, it was all hands on deck back in March. Too hard to do that blindly through OTC as the friction costs are too much. Definitely did better staying home side. And yes, PCG, (all of the series’s at one time or another were being flipped) too, though now everybody has jumped in on arbitrage so that is done, and the prices are full in my mind. But Im still keeping the full allotment Series A helping.
              Im done with fixed minimums and resets in CA unless they collapse. I can trade the fixed issues better or hold for higher current income. I consistently make money on CA fixed issues over time. And the others? Well I consistently gave back any money I made with them. For now, I will leave them with more astute investors. A man gotta know his limitations, and I found mine from beating my head against the wall with them, ha.

              1. 60% in two hours, but can you keep it up?

                The Canadian pref make good short term traders but you have to pay them very close attention. More time than I have right now. 5% price swings in a day are quite common.

                1. It was that crazy day in March. Bought at 16.30 sold at over 25 2 hours later. The was a crazy trading day.

    1. I did not find their profiles in the sedar database, nor Purpose Investments Inc. nor Big Banc Split Corp.
      Theoretically, this may be interesting, but I do not know whether the same rules exist in Canada regarding the level of mandatory coverage of issued prefs (assume that the issuer is CEF).

      1. Purpose Investments has a big site with lots of funds. I assume the other entity is something that was formed as a CEF.

        If you own shares in any of the big Canadian banks like I do then you received a notice that you could participate in buying the A shares or preferreds if you are a Canadian citizen. Today was the last day to opt in so I guess it will show up soon when it starts trading. I am not really familiar with how the Canadians do it, but this sounds very interesting to me.

    2. Easy enough to buy preferred shares in these big banks directly via TSX, I think I’d avoid the frictional costs of a fund.

      1. The fund is issuing the preferreds. It just invests in the banks. As mentioned above, not sure what coverage ratio, if any, Canada requires on these.

        1. True, but the structure still adds a layer of costs to the investor; it’s taking a haircut off the dividends paid to them by the banks.

    3. I will keep this simple. Buying shares in a split corp is not the same as buying what the split corp owns.

      Splitcorps, with one exception, are an unmitigated disaster.

      I would not recommend a split cop to my worst enemy.

  6. Mr Yuriy,
    On your Resets Sheet there is ALSO a ENB.PR.C, as well as the PF.C issue which you have there.
    I have noticed this on IBRK too: When I opened up an ex-div column on the Watchlist and then hover, it shows (pop-up) four projected upcomiong divs. This ‘pop-up sheet’ seems to incorporate the potential near term reset and adjusts the ‘projections’ in some manner. Just FYI, but DO THE MATH and use your own projection.
    Still believing in a buffer from application of Resets! Thanks for facilitating the assist research! JA

    1. Dhope, I see PR.C over there on the Float Sheet with 3 month rate on Reset.
      Some knives are sharper than others!
      Kudos! JA

      1. Hi. Yes, the PR.C is floating and PF.C is the 5y-reset.
        Theoretically, it can be done so that for reset issues the amount of the annual dividend is calculated taking into account the reset, but this will be a preliminary figure in any case (since no one knows what the rate will be on the day of the reset). And it may happen that there will be even more distortion.

  7. v the $US, $CN up over 5% in 30 days, or close to 9% in last 2 months or so, turbo-charging the price recovery of CN issues.

  8. The table of ex-dividend dates is ready. It shows issues that go on ex-dividend within 30 days from the current (today) date.
    I collected data on ex-dates either on the websites of issuers or on the TMX website. Most issuers come out on an ex-dividend date regularly, but there are some issuers (such as Manulife) in which they hang out in significant amounts. Therefore, be sure to check the dates on the TMX website (a link to dividend data is attached to all issues).
    If the standard ex-dividend date falls on a weekend, the displayed date goes one (if Saturday) or two (if Sunday) days ago. Holidays are not counted, keep in mind. Only standard weekends.
    Another bug that I could not defeat and which is related to how Google perceives the date format – at selection, the next month for some reason is always placed higher than the current. That is, for example, in the middle of June at the top of the table there will be rows containing July, and after them, the rest of June.
    https://docs.google.com/spreadsheets/d/1xssa5BCQjhged5IanF3XO3EyIQgasVSP6VOwJt1Lr-0/edit?usp=sharing

    1. Yuriy – one cannot write a foolproof algo for XD dates. You can guess them right 90% of the time but the XD dates are not prescribed by prospectus or otherwise. The payment date usually is but not the XD date. Sometimes they are early, sometimes late.

      I pick them up from TSX.

  9. Yuriy,
    I have been away for a time and just revisited your spreadsheet. Now I see that I could have had just as good a time just studying your spreadsheets! It is THAT good! A ‘tour de force’.
    I extend my thanks for sharing your diligent and very competent work. Your generosity to all of us at this site is obvious! Thanks! JA

    1. Thanks for the feedback, Joel. Just due to the quarantine, I had a lot of free time, which had to be used somehow.
      Really I am very glad that these spreadsheets were useful for the community members.
      I am currently working on another spreadsheet, which will display ex-dividend dates as well as payment dates.
      There is a small problem in order to skip non-working days, but I think that soon I will post it here.
      Thanks again for yours feedback!

      1. Yuriy, I’m sure there are many others like Joel A and me who have admired the work and are grateful for the effort. It’s hard to find people/comments here to track subjects.

  10. Morgan Stanley – anyone have experience with them re: Canadian preferreds, trading, tax treatment, etc.? I have an image of them as expensive, advisor oriented, not a good place for a self-trader. Don’t know if that is right.

    They bought E-Trade – reasonable trading platform? I am getting set to move my preferreds away from Schwab and the IBKR trading screens look like a nightmare to navigate. I have a friend at MS but don’t want to approach her unless I scope out things ahead of times. Thanks for your information.

    1. Tim W. : Like I said about six weeks ago, on IBRK they have a paper trading with full capabilities that is worth the break in. I use only the Workstation Basic (Stable?). Really, once you get the few solid basic moves that are needed to use over and over, it’s not that difficult.
      If you do go there, open with SMALL real Cash, not a transfer in of positions, then you will be forced to learn the basics. Balancing the currency accounts was confusing but right there to see once your eye is trained.
      Re-read the note I sent you a few weeks ago with attention to doing the currency automatic transactions that go along with each trade. Call their broker and keep drilling them to teach you their tricks…it took me about ten calls to get a working sense of their methods.
      If you can understand the CNs and do your own research elsewhere, you can do this. Good Skills! JA

  11. Granted, we are in crazy times with having to balance perceptions with decision.
    Sometimes the “ward” we are consigned to or the one we volunteer to serve in ( our conditioned behavior) dictates the extension of hope in the Musical Chairs Crazy Dance.
    Right now, the Canadian pref markets, based on PRICE, PAYOUT, ABILITY to pay, and RATINGS = better VALUE than US.
    For me, this is an easy choice. Price and price alone; then Value trump (not the proper noun) Drama and Hope.

  12. Looks like the USDCAD is returning to the pre-crisis level. 5 days in a row, it was trading below the 50D MA and now it is clearly striving for a 200D MA (1.345).
    We’ll see, for now I really like this chart (and my gains too, lol)

  13. I have a small position (all at a loss) in the following (US tickers and prices):
    ALTGF AltaGas Ltd Preference Shrs Ser C 14.74 , cost 18.98
    ERRAF Emera Inc Cum Pfd 5yr rate reset Ser C 10.60, cost 14.54
    FXFLF Fairfax Fin’l Holding Pref Shrs Cum Ser C 9.90, cost 13.59
    EBGEF Enbridge Ser 5. 14.25, cost 19.90

    Would you continue to hold, sell some or all or add to any? Appreciate your advice.

    1. As far as their reports can be trusted (I see no reason to mistrust), all these companies are in a good financial condition and their dividends are safe.
      So I don’t understand why sell them at a loss? Although if you see something so interesting on the horizon that it can cover losses from closing positions and bring in more profit, then it may make sense to sell.

    2. I also hold all of the above. I am doing nothing with FXFLF and EBGEF, but am selling ALTGF & rolling funds forward to the Series G issue, and selling ERRAF & rolling forward to their Series F issue. Harvesting losses and getting later reset dates.

    3. David P, Depending on the size of the position relative to your allocation targets and your confidence in the issues, you may want to add shares to average-down your basis.

    4. DavidP – All are solid holds. Altagas has the most warts but with recent common dividend cut the payout is on relative solid footing. Would consider dollar cost averaging down on the remaining.

      1. Altagas Series I with a minimum looks attractive to me here. The OTC is TGAPF and yields are ~6.3%.

  14. Am I correct in recalling that Canadian preferreds are rated one click lower than the parent company common? Parent at R-2mid = preferred, R-2 low, etc parent at R-3 = preferred at R-4?

    The Cd utilities and big banks look pretty interesting at current prices.

    1. Tim, I think you misspoke on comparison vehicles. Rated preffereds will be slotted off the senior unsecured debt, not the commons. As a general rule preferreds will be slotted 2 pegs lower than the senior unsecured.
      As an example, I will walk through one…Canadian Utilities…Their senior unsecured is rated (Im using S&P) BBB+…. Their preferred is rated P-2. This needs to be translated back into American terminology… So a flat P-2 is in between P-2 High and P-2 low. P-2 Hi is BBB+/BBB, while P-2 low is BBB-… So there really isnt a true translation, but you have to assume around BBB/BBB-.
      In America when you have BBB+ senior unsecured its almost invariably going to be slotted BBB-….The small individual ticks shouldnt be over analyzed as the ratings are part art and science anyways.

      1. Thanks, Gridbird, this is a helpful clarification – I’d seen a stray comment or two here or there, and since I’ve been ramping up Cd purchases due to the relative yield and favorable exchange rate, need to improve my understanding on credit strength. The link to debt rather than equity clearly key and makes sense to me.

        1. Alpha, your data is correct, but I was going by S&P which rates them differently. DBRS also has the senior secured rated higher which in effect pulls the preferred rating up also. I was going by Canadian Utilities own website of debt and preferred info…If you look at below link you will notice both DBRS and S&P there.
          https://www.canadianutilities.com/en-ca/investors/credit-ratings.html
          CU has always had great credit ratings but they have a relative arse load of debt and D/E if memory serves doesnt inspire me as much as American utes. So there must be a lot of built in protection assumptions that makes them feel comfortable with the high quality ratings.

          1. Grid, Have to confess to being surprised S&P is reflecting the lower rating as I’ve always perceived DBRS as being more rigorous rater. Might have chalked it up to timing though S&P is dated July 2019 and DBRS August 2019.

            Might add here that based on risk/return, an issue like CNUTF appears far superior to its US equivalents – and I have an over-sized position. Similar discussion regarding SLFSF and holding another full sled of that one.

            Not recalling with 100% confidence, though I think it’s Steve A we have to thank for the SLFSF ticker. Anyone interested in these just watch your fx conversions.

            For example, last price on CNUTF: https://web.tmxmoney.com/quote.php?qm_symbol=CU.PR.G

            and latest CANUSD conversion: https://finance.yahoo.com/quote/cadusd=X/

            Meaning CNUTF would trade around US$14.65.

            1. I gotta confess too, Alpha. I saw the DBRS stuff but was too lazy to type all that stuff in too, so I kept it easy with just S&P, ha.
              If memory serves it is just as respected as a rating agency as S&P is.

                  1. Sorry alpha8 – you ended up in pending – I approved. I think it was the number of links that held it.

                    1. Thank you Tim. When posted there was a banner indicating it needed to be reviewed. Good security to keep your site safe.

                  2. Thanks, this was great. I’d tried searching in the past but came upon dead ends. Appreciate the help.

                    1. Absolutely Tim. For me, the rating (also as a proxy for the balance sheet and inherent risks) is a cornerstone and starting point for each investment.

  15. Does anyone know what happened to Pembina? Their prefs are literally crushed at the late hours.
    I’ve never seen something like this before, 6 out of 10 of today’s fall “leaders” is the same company – Pembina:
    PPL.PF.E -10.33%
    BCE.PR.A -9.73%
    PPL.PR.E -9.17%
    PPL.PR.A -8.95%
    BBD.PR.B -8.46%
    BAM.PR.X -8.14%
    PPL.PF.C -8.07%
    BCE.PR.L -7.81%
    PPL.PR.G -7.14%
    PPL.PF.A -7.02%

    1. Recently pembina purchased the remaining assets of KMI in Canada which leveraged up their balance sheet.

      At the same time producer volumes have dropped sharply due to producer shutting in production.

      Short term energy volumes will be down long term volumes will increase.

  16. Yuriy,
    Have had a bit of time to review your marvelous work.
    I do not see any of the six CPX (an Edmonton Utility) shown. There are six and all normal CN types with some conversion feature, three with minimums, etc. They are not on the original copies I made back about a year ago of Raymond James or CIBC stuff either. ???
    The corporate site has a page dedicated to these prefs and from what I can see debt is rated at BBB- .
    Just what you may want…more inputs?
    PS: looks like the data updates on a new log in? I don’t see it continuous or periodic delay.
    Thanks again. JA

    1. The data in the table is updated in real time. Sometimes it happens that the table may freeze in other browsers except Chrome, just update it forcibly through the refresh button.

    2. How does one access the Canadian preferred spreadsheet ? I did so from the link in the comment below but that will of course disappear in time. Thanks.

      1. Hey. There are 4 spreadsheets:
        1 spreadsheet-database that you need to save as a copy on your google drive (you need an account in google)
        https://docs.google.com/spreadsheets/d/1b0JLqAUoV1bRDWLMwqzD32ERNCHTS9DvdyvNzv–Rsk/edit?usp=sharing

        2,3,4 these are simple tables, they work online but their functionality is very limited
        https://docs.google.com/spreadsheets/d/1nJTjD1H3PKvqcuntO7hL3rwI2p5-7AIBa5bplxKky-U/edit?usp=sharing
        https://docs.google.com/spreadsheets/d/11vDz_swj2Z8-VQjl7nKgnlSRURz3k8Y8YLqCDMwC-II/edit?usp=sharing
        https://docs.google.com/spreadsheets/d/1UB3TVsCo_bPDD4tkYu88tQxEO1KrybbY429PoObEYS0/edit?usp=sharing

        The first table contains almost all currently preferred shares traded on the TSE; 2,3,4 each of them contains only shares of its type (fixed
        fixed coupon, floating and fixed reset).

        Access for all spreadsheets via the links is open and will be open constantly, for both copying or simple reading.

    1. Yuriy – Enjoyed your sheet. Took a copy. Inside MainDb table used empty AB column to extract reset spread rates.

      =(REGEXEXTRACT(Y2,”[0-9]*\.[0-9]+[0-9]+”))

      Modified By Yield Type table formula

      =QUERY(MainDB!A2:AF366,”SELECT C, N, D, Z, H, L, I, U, W, A, O, Q, X, AB WHERE N contains ‘”&C2&”‘ AND U >= “&O1&” ORDER BY “&O2&” “&A1&””, 0)

      After this modification I sort using “Reset Terms, 6, Reset” the first 12 rows return strange data. Everything past first 12 rows works perfectly.

      Also find reset by date table very useful.

      1. micahc, my 2 cents worth about 1 cent: because of the restrictive 2-dimensional ranking and blocking of data under sort, have also found it useful to use Conditional Formatting to identify a cell or cells identified as meeting a string of criteria. It’s like adding a third search axis through the data, ergo 3-D. As an example, in selected cells within sorted data use the AND function with any number of criteria. The cell illuminates if all criteria have been met. Provides an instant visual, eliminates need to parse data and for me guards against any tendency to equivocate on decisions that were made earlier without time constraints. With a market data feed; real-time data, and real time “pre-determined” decisions.

        1. Yes, initially I had an idea to make one sheet with a lot of criteria to set together. But after testing on unprepared users, I refused it, because users were confused in this set of hard-set criteria and the table looked overloaded.
          Probably I will nevertheless add such a sheet to the next version, for more sophisticated users who will not be scared by 5-6 additional cells with specified conditions. Thus they can delete the sheets they do not need and work in one table.

        2. alpha8 – have built an extremely ugly ranking system for my favourite issues based upon pre-determined criteria to bubble most interesting issues to the top.

          Wanted to see with Yuriy DB containing everything what would happen on a simple query.

          In my system I score securities based upon criteria to bubble them up in rank. The only problem is the system is static. For example buying more FEB yield I need to perform a manual sort of the whole table.

          (200 points max for strip yield)
          =IF((X3*24*100)=0,(X3*24*100),0)),200)
          (200 points max for YTC)
          =IF((Y3*7*100)=0,(Y3*7*100),0)),200)
          (140 points for credit score)
          =(vlookup(F3, TABLE!$F$27:$H$42, 3, FALSE))
          (120 points for reset score)
          =(IF(AND(AB3>=0,AB3=1,AB3=2,AB3=3,AB3=4,AB3<6), 60,))))))*2
          =Perfect score 600

      2. Yes, 7 issues with (N/A) undefined conditions (≥80% of 5YR GoC Yld) are displayed at the start (or at the end) of the general sort. We won’t do anything with it, it should be so.
        And the next 5 are Enbridge and Altagas issues nominated in USD. The idea is good that they are displayed separately, but why is this so is a mystery to me …
        With the exception of these non-standard issues, everything else in your modification works correctly.

      1. Thanks. The idea to create such a sheet came to my mind at the end of March, when the CAD fell to 1.44 and I was buying Canadian prefs on a massive scale. Then I realized that in a hurry and because of the large number of issues of the same company, I made several mistakes that would not have happened if I had a complete picture of the entire market. I hope this sheet will be useful during the next selloff, lol

  17. Anybody looking to RESEARCH a Canadian listing (actually located as a corp in Dedham, MA) AZP prefs deserve a deeper look. Rated NR currently, this utility is a wholesaler with long contracts. ( I had done work on Innergex also and bot a sliver there a while ago). Heavy green assets. I have followed them for awhile and have seen concerted and focused, tough board decisions over the last 4-5 years. It is working. Their disciplined approach to the next four to five years is built on that work, BUT they are ‘working their plan’. Gotten credit upgrades in the recent past.
    Three prefs, a common that is being repurchased (CA:ATP, no div) at a low price and debt that is being steadily paid down from cash flow to meet future maturity. Interesting and the kind of plodding approach made by conservative capital allocators. They are also selling chosen assets and decommissioning some other brown assets.
    Of course, continued expedition of any plan is modified along the future path, but I would rate the prefs a buy at these prices and do own.
    PS: one OTC: APRRF

    1. Took a look at recent investor presentation and it appears they have had a decent slog recently with the fire/incident rate. Its amazing they survived while adding $10M ebitda y-o-y.

      For NR 9.41% there is almost no point to dumpster dive when you have superior credits and almost equivalent yield. TSE:FTS-G 8.17%, TSE:ALA-G 8.66%, TSE:CPX-E 9.56%

      1. Micah, Got some of those. For me 1/4 of 1% of entire portfolio in each of those mentioned above, different govt jurisdiction and util diversification. You are correct an element of speculation with NR (my own judgement) and long term on reset. Thanks for the challenge. That is what I like best bout this site. JA

  18. Somebody go look on Bob’s desk and see if he left a note.
    Maybe he’s up in the Laurentians Spring cleaning the cabin.
    Haven’t seen him in a while…he’s up to something…

  19. TSX symbols – it seems that some preferred issues have a .pr between the symbol and the series, and others have a .pf there. Does the difference signify something?

    1. Tim W: Good catch! That had been brought up here before and is a distinction to be aware in Canadia (that’s what I call Canada).
      IT IS ONLY a SYMBOL and a DIFFERENT SECURITY. Each will trade that way and watchlist on IBRK for instance. No other differentiations. It is easy to buy the wrong one though.
      I pondered why, but was making something up that can probably not be discovered, eh?

  20. Folks, please help with Brookfield’s corporate structure.
    Is Brookfield Office Properties Inc. (BPO) an some kind of independent non-public entity (since their common shares do not seem to exist) or is it a subsidiary of someone else’s public company?

    1. Brookfield Office Properties Inc. (BPO) original name used.

      Current name Brookfield Property Partners. Common Stock tickers BPY-UN.TO (BPY/BPYU)

  21. Hi. As the people showed interest in my previous spreadsheets, I decided to continue work in this direction. The result is a spreadsheet that is more powerful than the previous ones. I will briefly describe its contents:
    firstly its main page; it contains a lot of summary data about the market, such as capitalization, results by sector and individual companies. It also has a search by ticker, which you can select from the menu or simply copy-paste from the cell you are interested in (you can also enter it just by hand but use only capital letters);
    then there are 4 sheets in which you can make a selection by sector, DBRS rating, month of payment and type of the yield (or just display all positions if you clear the search cell);
    and the last user sheet is just 4 goverment’ rates.

    The spreadsheet is made by the type of database, that is, it has 3 auxiliary sheets with data, from which data is output to user sheets using queries.

    To fully use it, you need to make your own copy (so you need a Google account): go to the “file” -> “create copy” and then open your personal copy at yours Google Drive and work with it. So, here we go:
    https://docs.google.com/spreadsheets/d/1JquBJYkvTITTZHEV3e9gqgwQBdc8RN9X_WvGNqof-V8/edit?usp=sharing

    P.S. If you find some error please let me know here in comments (including spelling, as my English is very basic).
    P.P.S. Tim, maybe you could add this link to the main post (or make your copy and add a link to it). It seems that it can be helpful, especially to beginners who first time coming to the site as a result of searches for canadian prefs. Not now but maybe later, when the spreadsheet will be tested by users.

  22. How about some thoughts on current opportunities in the Canadian space. I’ve got some cash that I could deploy.
    Thanks in advance.

    1. Issues to investigate in the reset space:

      TSE:MFC-K – Type: Reset – No OTC – Rating: P-1L 9/19/2023 Call – Strip Yield 8.12% – Payment Quarterly (Feb)

      TSE:RY-Z – Type: Reset – No OTC – Rating: P-1L 5/24/2024 Call – Strip Yield 6.85% – Payment Quarterly (Jan)

      TSE:FFH-E – Type: Reset – OTC FRFGF- Rating: P-3H 3/31/2025 Call – Strip Yield 8.35% – Payment Quarterly (Mar)

      TSE:TRP-D – Type: Reset – No OTC – Rating: P-2L 5/1/2024 Call – Strip Yield 7.57% – Payment Quarterly (Mar)

      Issues to investigate in the fixed space.

      TSE:SLF-D
      TSE:CCS-C

      Issues in the floating rate space.

      Widow and orphans monthly payer
      TSE:BCE-H OTC: BECEF Yield: 5.48%

      1. micah, Been waiting for more cash from other sources to reinvest /put to work and these delays in business are slowly seeing pricing in the markets slip higher. ARRRGGH! I only pray that the good angels are keeping me from rushing in when in retrospect I will understand. I have actually been trying NOT to look. You’re killin me over here with posts like this!

        1. Joel – Monday is another week anything can happen. You will discover if you track enough asset classes there is always the next deal.

          Don’t feel pressure to buy its best to be selective. Only if I could have got back half of the issues sold.

    2. Set up your personal parameters and use the sheets above to screen. This is a must.
      1) IBRK seems to be a mandatory tool/brokerage to really navigate. More details and work! This includes a bit of knowledge in the taxation/filing arena too.
      2) Must know basic function of three types of preferreds. I say three because I do not think ‘splits’ are a true preferred. I really do not even look at them.
      As an opp, I think the CN market has a lot MORE than the US, meaning good IG prefs in a bargain bin.
      Giver it time, read back postings here too. Lots of good stuff here.

  23. so BNS.PR.D, BNS.PR.Y got redeemed. no notice. My curiosity spiked due to the yield being abysmal.

    For Canadian banking Non-. Viable Contingent Capital (NVCC) non-compliant preferred after 2022-1-31 Office of the Superintendent of Financial Institutions (OSFI) deadline will no longer be counted as Tier 1 Capital.

    Remaining issues are BNS.PR.Z, BMO.PR.Q, RY.PR.A, RY.PR.C, RY.PR.E, RY.PR.F and RY.PR.G.

    As this is the first time I am hearing about this problem for Canadian Banks do you think more calls are coming?

    1. Notice was given on Mar 19 and redemption took place on Apr 26; that was proper notice.

      Certain bank issues, those which are non-NVCC, are (arguably) required to be redeemed fairly soon. It’s the same issue as Tier 1 capital in the U.S. By Basel agreement, they need to be retired.

      Check the name of the issue. If it has NVCC issue in the names it won’t be redeemed. Those that are subject to redemption will be priced very close to par. There aren’t many of them.

      BNS redeemed the two issues in question when the market went very wacky mid-March. They were trying to prevent an abusive market situation with “necessary” sellers getting screwed. It was a good call.

  24. Value of the Foreign Tax Credit (Form 1116) for Canadian preferred …

    The following applied to Canadian preferred held in a non-qualified account (e.g. non IRA or 401-k or similar). Assuming you are a U.S. resident for tax purposes, you will have 15% of dividends withheld. Period, no way around it. The operative question then becomes is that 15% “wasted”, meaning are you paying more in tax because those divis are Canadian?

    The answer depends on your individual tax situation, specifically your marginal tax rate on QDI dividends. If your marginal tax rate on such dividends is zero (lucky you), then the total withholding is effectively money out the window.

    However, if your marginal tax rate on the QDI divis is 15% (or higher), you will get most of the withholding back. This does not mean that you’re not paying tax on the Canadian preferred divis – you are – only that you are paying no more on the Canadian source divis than you would if they were U.S. source divis.

    Having just completed my tax return (Oh, joy!) I am “wasting” about 20% of the 15% withholding. In other words, my credit is only 80% of the amount withheld. Averaged over my portfolio this works out to a haircut of about 20 bps in yield.

    With tax software there are not too difficult calculations to make.

    1. Bob, Turbo tax was a few second breeze wasnt it. I got the full credit applied for my situation. But it wasnt good enough to avoid owing money and a very small penalty for late payment. Im just not doing that quarterly tax mail in stuff.

      1. Grid – turbotax (I use taxact actually) will pick up 100% of the “pure” foreign dividends with ease. In the case of a few funds I own an extra step was needed.

        If only a part of a fund’s income (and divis) are foreign, you have to split the income between foreign and domestic in order to complete Form 1116.

        iShares were easy as Blackrock provides that information for all of its funds on a single PDF. Just a simple, albeit manual, calculation required before entering the figures on the 1116.

        Vanguard, on the other hand, doesn’t provide the information and when asked about it said, in substance, go pound sand. I would have a better chance of getting the information by making my request through the IRS or SEC or FINRA.

        1. Bob, I pulled off the total Canadian dividends from Vanguards summary tax form. I directly imported to Turbo all the Vanguard forms and it read it correctly and applied it after I entered the accumulated dividend amount for the year. And of course Vanguard had all Canadian dividends as QDI, so it was a breeze. This will be the last year for Vanguard and Canadian issues as all of mine are at TD now, and Vanguard will not allow you to buy them anymore.
          I rant and rave about some of this stuff. But I am much happier trading for free and dealing with all of this garbage of brokerage ineptitude than having to deal with the by gone days of stock brokers with very little knowledge just trying to sell the mandated corporate handout sheet to pump to customers.
          BTW, what brokerage do you find more suitable for your needs?

          1. Grid – to put it in perspective, the first stock market buy I ever made cost me about 10% of the trade. That was 45 years ago. We are spoiled rotten today, even as we complain about the poor service and policies. Let’s not become the snowflakes of the investment world.

            Right now, I plan to keep U.S. 3 brokerages, those being IBK, TDA and Vanguard. IBK gives me access to Canadians and to certain U.S. fixed income that no other U.S. broker does. TDA has the best access to U.S. OTC issues, many of which which can’t be bought at IBK or Vanguard.

            Vanguard is mostly inertia, especially for accounts that I don’t own but have trading authority over. In spite of their failures Vanguard is still the most honest “broker” out there. It’s an anchor.

            Schwab has no place in the lineup and will be gone soon.

            1. From what I read about Schwab, gods help us if TD goes to Schwab without adopting their platforms and technology! There is still a lingering arrogance that ‘the American Market is good enough for you, so just keep your place…or use an ETF’.
              Maybe anti-trust can step in? Another drama.

  25. Hi, folks. For those are interested about canadian prefs, I just have finished my updated spreadsheets.
    You can see them here and if there is some error please let me know:

    Resets https://docs.google.com/spreadsheets/d/1UB3TVsCo_bPDD4tkYu88tQxEO1KrybbY429PoObEYS0/edit#gid=0
    Fixed https://docs.google.com/spreadsheets/d/1nJTjD1H3PKvqcuntO7hL3rwI2p5-7AIBa5bplxKky-U/edit#gid=0
    Floating https://docs.google.com/spreadsheets/d/11vDz_swj2Z8-VQjl7nKgnlSRURz3k8Y8YLqCDMwC-II/edit#gid=0

    1. Thanks! Will pour over them!
      There are good odds for an eventual forced inflation. This is seen now from the very top down all over the world. Supply is and will be “controlled”. by MANY forces and contracts.
      I am retaining my original allocations to resets and the small number of float / fix to float. I decided to constatly remind myself that I need to stick to my plan which is laid out for the next 30? years. These are good balancers to a pref portfolio, like heart, lungs and brain all working together. I don’t have to be right today, just over a trending timeline.
      There is fear that all businesses are going to hoard cash forever, cut all divys and shut down a third of all their business lines. Choosing the tough survivors is more of a study and diversification process for me than the day to day dramas. Canada is tough minded. That has been my experience.
      I lived and worked in Canada (and had an OHIP health ins card!) and lived right at the border for about five years. The Canucks are good steady, rational cousins to America, in some ways more ‘adult’ than our general tone of frat party (except when it comes to hockey).
      Hope to be up there this summer again!

      1. Indeed, when everyone on the market stands in one direction, sooner or later a reversal occurs.
        So it is now, when everyone expects zero or even negative rates in the future, I personally trying to hedge myself from raising them. And Canadian resets at today’s prices, in my opinion, are a one of the proper hedging tool. Sure I’m not ready to put all my eggs in one basket, but if where will be good drawdowns I will increase their share of the my portfolio.

        1. The Canadian dollar strengthening against the USD would also provide a pretty good addition return that you don’t see on US preferreds.

          1. I believe that the USDCAD will return to his mean rate at about 1.30 in the coming months as soon as oil prices normalize.

    2. Yuriy. Great work. I may have missed it but I could not find USD denominated Enbridge prefs (ENB.PF.U,ENB.PR.V,ENB.PR.U,ENB.PF.V) and four fixed splits from Brookfield Properties (BPS.PR.A,BPS.PR.U,BPS.PR.C,BPS.PR.B)
      Thanks again.

      1. Hi and thank you for thr feedback!
        USD issues of ENB and ALA are at the bottom of the table. I placed them under the separator because I plan to add three buttons (Non-cumulative, Cumulative and USD-denominated) to the header of the table, which will immediately lead to the desired section.
        It’s possible I have missed some Brookfield issues, will check it asap. Thanks for the heads-up!

    3. VERY nice job and looks like they update! You must have had experience in business with spreadsheets since this looks like beyond-a-hobby work.
      Also, I have restudied the companies up north and it looks like the management’s jaws are clenched for another commodity survival cycle. They were just beginning to get plans and hope to budget free cashflow to new projects and maintenance. Now slashing costs, rescinding this year’s schedules, pay cuts, some common divy reductions and expanding revolvers are all over. Not losing confidence since many were functioning out of free cash flow already. Now reductions to top line income is striping the middle of the balance sheets, commitment to retention of credit ratings and other short action orders.
      HSE, the one showing on the top of your Yuriy’s sheets today is a good site to go to to read up on the actions and responses being taken. I see a lot more transparency with CN companies. Too bad these folks aren’t attracted to government management!

  26. A new way to play the largest infrastructure company in the world …..

    Brookfield Infrastructure Partners (BIP) holds most of the infrastructure assets of Brookfield Asset Management (BAM). BAM is a Canadian corporation but BIP is a Bermudian partnership. BIP is listed on both the TSX and the NYSE and is registered both with the SEC and Canadian equivalent. This is no grey market issue.

    Recently, BIP did a spin-off of sorts, creating Brookfield Infrastructure Corporation. Like BIP, the new corporation will be listed on both the TSX and NYSE (ticker BIPC) and will be registered in both countries. BIPC is a Canadian corporation (not Bermudian and not a partnership). To confuse you further BIPC will keep its books and declare its dividends in US$.

    The two entities – BIP and BIPC – will be “economically identical”. That is key to the spin-off.

    So, if you like the company, and I do, you can pick your poison. BIP will get you a K-1 (no UBTI), but no withholding. Bermuda doesn’t withhold. As a U.S. taxpayer, taxes will be whatever they will be, just like any other partnership issuing a K-1.

    BIPC will get you a 1099, with 15% withholding if it’s in a non-qualified account or no withholding if your broker gets it right. The dividends are QDI, not that you can ever expect Schwab to figure that out.

    Logically, one would put BIP in a taxable account and BIPC in a qualified account.

    At the right price I am a big buyer.

    As an aside, BIP also has 6 preferred issues outstanding, 5 mins and one straight reset. All are issues of the Bermudian partnership and thus will come with a K-1 but no withholding. All BBB- by S&P.

    https://bip.brookfield.com/press-releases/2020/03-31-2020-120202244

  27. Arnold Palmer’s 1960 U.S. open aside, Canadian preferred staged one of the great comebacks of all time. Mins are up as a group 37% from their late March lows, fixed up 24% (they hadn’t dropped as far), and resets up 31%. All are well below their 52-week highs but they didn’t stay in the basement for very long.

    In relative terms the min rate issues are the best buy. Stripped yield of 6.53% and rates that can go up but not down.

    Where they go from here I can’t know. It’s an income play for me but I may put aside a few loonies for short term trades. Hey, I might become the Gridbird of Canadian preferred.

    Hope to have a surprise announcement early next week.

    1. Rip Van Winkle Investing. Wait a month or two, (or like Rip, 20 years). Buy good value at a good price and take a nap. That’s really all we can do. We really know when we are being foolhardy, so why play a weak game? Nod off under a tree for a while, sounds good to me.
      The Tao say,s the same thing “do your work, then step aside.”
      Damn that was easier than CNBC!

  28. Hugely disappointed by Schwab’s weasely response. I asked my advisor where this SEC repository of foreign issuers statements is to be found and if the results are online. I expect no response. Classic bureaucracy defending its mistakes instead of correcting them! Pathetic in the extreme.

    OK – IBKR – being able to buy & sell directly on the TSC sounds great, I don’t really care if I own them with an OTC symbol or not. What should I know before I set up accounts and move my Cd preferreds there?

    What is the best way to go about it? Any charge for trading? Is any research on the Cd issues accessible? It’s a real frustration with current tools.

    Can I transfer money back and forth with my bank account easily? Will IBKR account activities download into Quicken easily? What will I hate about them after I work with them awhile?

    The tax differential on the sums invested is too big to ignore. I hate the complication, though. So nice to have everything in one place.

    1. Tim W.: The large print giveth, the small print taketh away.
      I my opinion there is a bit to know before moving to IBRK, but luckily, none of it is rocket science. You have to know what you are doing and want to achieve with the CNs first. Mostly, the idiosyncrasies of their site AND SCREENS (views). Also, being able to do some basic mental flipping of ideas around which you may already be familiar if you have been a student of the three basic CN pref issue types.
      Here is a short list of things I wish I had known in advance that I have had to pull out of my experience there:
      – CN Prefs, no margin even if you have approval. They told me it would be determined and possibly changed on a minute to minute basis by their computer algorithm. I was NEVER allowed a scrap of margin. Would have been nice as a practical tool in this last down turn!
      – MOST OF ALL! IBRK DOES NOT ACCEPT YOUR OTC SYMBOLS, NOR DO THEY CONVERT THEM! At the onset a broker told me it was a five dollar charge for each one, but indeed they rejected the transfer. I retained my OTC symbols at TD and moved cash only then began an allocation process fresh.
      – Transfer of CND into USD and back, there is a way, automatically, to do this WHEN YOU MAKE THE TRADE into a CN issue, if you hold account cash in USD! (FX) You can flop money back and forth manually, and it shows up clearly on the screen, if you choose to and do a bit of currency playing. I do not as that is not the purpose of this account for me.
      – Subscriptions are needed for real time and accurate Bid/Ask or use TSX at same time, but have been ‘shistered’ and gotten lame-o excuses.
      – Getting ANY banking-out transfers has been a real obstacle and is still not set up. Moving money in is a SNAP!! I have heard EVERY lame-a** excuse and at this time am waiting until they will actually answer the phone, return a call (callback: which is part of their phone protocol, but not followed through even a day or two later) and/or the volume during this downturn allows for this to be addressed.

      These are a few things to consider. I would suggest opening up a ‘Paper Trading Account’ and getting very familiar. I did not spend enough time here and had…well a few frustrations and little help from the few good brokers. Generally, unless I pressed them to the mat and held them there it has been a challenge. My personal experience is that most of their brokers are really not really not too adept and do not extend themselves toward you at all. I hang up and just call back and try to get a different and experienced broker who knows their platform. My first question is, “How long have you been at Interactive?”
      This is my honest experience. Would I do it again? Yes, knowing this and what questions to ask. I am at the point now where I do NOT want to relearn, revisit and master more in this industry or another website. I do NOT need the excitement or another mountain to climb. Have I achieved my goals with IBRK?
      About 75%. JA

      1. Thanks for the additional information. Going to discuss with my accountant to get a feeling for what he would want to buck Schwab’s classifications.

  29. Bought some CAD (3% of my portfolio) since I believe now is a good exchange rate to entry back into Canadian market.
    Prices also looks pretty to me.
    What are you thinking, gents?

    1. Exchange rate boost mixed with extremely low prices for investment grade issues.

      We are either the smartest people or soon to be proven otherwise.

  30. Update on Canadian preferred …..

    Prices went crashing through the floor in late March. I believe every single issue went below its 10-YEAR low, some by 20-30%. From peak to trough (roughly end of Feb to end of Mar) mins dropped 39%, fixed by 27% and resets by 41%.

    Prices have rebounded by 15-25% but remain well below earlier highs.

    No advice but I will share my outlook. As in the U.S., it’s either the best buying opportunity of the decade or a fool’s paradise, and I can’t say which. It all comes down to COVID-19. If I had a crystal ball I’d know to buy hand over fist or sell it all, but I don’t. If COVID goes away as an issue I believe all the other issues go away, too.

    I have not sold a single shares through this. In retrospect I would have been better off had I done so but my approach, from the outset, was to be buy-and-hold and so I have. To the contrary, I used what discretionary funds I had at IBKR to buy when things were at the bottom. I bought mainly high-quality financials at yields that were once unthinkable.

    I did not add to what was already a sizable exposure in midstream. The yields were enormous but I already had a snout full. I did revisit the financials and other information for ALA, TRP, ENB, PPL, and HSE, to be sure I wanted to stay in.

    With the partial exception of ALA, these are all midstream, all have strong earnings histories, strong balance sheets, defensible business models and strong managements. They have access to credit and they have large and largely DISCRETIONARY capital budgets that can be cut to conserve cash, Dividends are cumulative.

    How they will fare comes back to COVID. If it goes on indefinitely nothing is safe. In a Planet of the Apes scenario nothing survives. Otherwise, I feel good about the Canadian mid streams (again, iffy on ALA).

    Dividends are rolling in at a rate of about 8% of present price, and I am accumulating for the time when the lows get tested again.

    1. I have purchased a 75% position in SLFSF at 6.1% current yield. High quality Canadian company with a fixed rate about 25% under PAR in the unlikely event it gets called.

      With an exchange rate of $0.71 cents on the dollar, it’s a good buy in my view.

      1. If Sun Life ever goes BK it will be a Planet of the Apes scenario. We will all be wishing we’d bought a cellar full of freeze dried food packets from the local survivalist outlet.

        1. When I had schwab open this OTC (coupon is 4.8%), I figured maybe I could get a yield of 5.5% or 5.75% if I was very lucky.

          For a firm of this quality, 6.1% is a big current yield. Nice for the conservative investors.

          1. Steve, Thanks for the reminder. Im not a fan of insurers (ok, Im not a fan of much, period) but the credit ratings are just steller. Basically the preferreds are A3/BBB+ depending on rating agency. I put out an equal opportunity first come first serve 500 share bid on Series 1 and 2 this morning for a 6.1% yield and SLFYF the Series 1 was the winner.
            This one chart wise appears to track the Canadian Utilities fixed issue. I bought two of them recently when they tanked and they are on the upswing nicely. I still own small amount of resets but they are down and a tick on my rear.

    2. I have followed a similar path with CN prefs and revisited all the companies that you mention above.
      ENB, like ALA now with WGL, does have a substantial ‘utility’ business. I am remembering 4MM+ customers, I believe they are in the top few of largest NA utilities by number of customers, decent vertical integration by both. The rest of their business is sterling.
      All these companies have been through many tests-of-fire and apparent extinction, they have tough, experienced managers, hedging programs, stripped down and mean. The kind of guys you go for a month in the muskeg wilderness with. They’ll make it by my look. I’m packed and already down the trail with them!
      I got some Roth funds in too early in the global commodity commons for the same reasons as above, the commons are high paying right now. Balance sheets are burned clean. We will see. This dollar management is a suck deal for them, but things, as always, WILL change.
      Do some grilling and open a nice red everyone! JA

      1. Joel – I share your assessment. The big unknown here is the COVID thing. If it is bad enough nothing survives. Otherwise, getting prime cuts at mezzanine prices.

        Time will tell.

        Cellar is well stocked. I’m good through at least the summer.

  31. Taxes on Canadian preferred at IBKR …….

    If you buy Canadian preferred through IBKR be aware that you are effectively dealing with a Canadian brokerage. That may not be apparent to you but it is the case.

    At the end of the year, you will a Canadian tax form, the likes of which you can see here:

    https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/nr4/nr4-19e.pdf

    It will show total payments received and tax withheld. Tax withheld, if it’s not a qualified account (e.g. IRA), will be 15%. Exactly 15%, to the penny.

    So, what do you do with the N4? Nothing. You have no further obligation to the Canadian tax authorities (assuming you aren’t a Canadian resident). No more taxes, no forms. Nothing. And unlike Schwab, I’ll cite my authorities without lying to you for months on end first. From revenue Canada: https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/non-residents-canada.html

    It states, in relevant part

    “If you receive Canadian income that is subject to Part XIII tax: Canadian payers, including financial institutions, must deduct Part XIII tax when the income is paid or credited to you. The Part XIII tax deducted is your final tax obligation to Canada on this income (if the correct amount is deducted). The usual Part XIII tax rate is 25% (unless a tax treaty between Canada and your home country reduces the rate). Part XIII tax is not refundable. Therefore, do not file a Canadian tax return to report the income unless you elect to file a return because you receive either: Canadian rental income from real or immovable properties or timber royalties (see T4144, Income Tax Guide for Electing Under Section 216) certain Canadian pension income (Electing under section 217).

    The full skinny:

    https://www.canada.ca/content/dam/cra-arc/formspubs/pub/t4058/t4058-19e.pdf

  32. Schwab has now demonstrated that that are not honest and that they do not act in the best interests of their customers.

    The not honest part has been amply demonstrated here by the many posters who reported they were given various untrue reasons why dividends had been classified as unqualified. In a fair world there would be some penalty to pay for such dishonesty.

    As for the merits of Schwab’s position I provide some background. The concept of “qualified” dividends and the reduced tax rate thereon were introduced in The Jobs and Growth Tax Relief Reconciliation Act of 2003. If you want to have a look here it is:

    https://www.congress.gov/108/plaws/publ27/PLAW-108publ27.pdf

    The post that the Schwab woman sent is “guidance” put out in the form of a Press Release by Treasury in 2003 (yes, 17 years ago) with the byline TREASURY AND IRS ISSUE GUIDANCE ON QUALIFICATION FOR NEW REDUCED TAX RATE ON DIVIDENDS.

    It is guidance, it is not the law, it is not a regulation, it is not even a proposed regulation. Apparently, and in spite of what the author of the statement indicates, Treasury never did follow up with regulations.

    If you want to look at the in-force regulations governing the matter look here:

    https://www.law.cornell.edu/cfr/text/26/1.6042-2

    This “guidance” is not binding on Schwab, and they know it. However, admitting they are wrong could come at a great price to Schwab inasmuch as they have presumably been making this same interpretation for many years and there are a great many customers’ dollars involved.

    From Treasury’s own web site: “Unless expressly authorized by law, guidance documents are not meant to bind the public in any way.”

    Practical paths forward:

    1) For me, I have no desire to do business with Schwab any more. I opened an account with them because I was having trouble buying new issues through Vanguard. That didn’t really work out and I never grew the account to any great size. I now do all my buying of Canadian preferred at IBK or Vanguard (for issues they allow) and have no need of Schwab.

    2) Write a letter to one or more high ups at Schwab. Remind them of their motto, right from their corporate website:

    “Always put the client first.”
    – Chuck Schwab

    Since day one, we’ve set out to challenge the status quo, looking for ways to offer our clients more value and a better experience. We’re confident our approach can help people take ownership of their financial futures.

    3) File a compliant with FINRA. Sadly, the only way to get a company’s attention is through legal process. I have looked into the process in the past and it’s not that onerous. But like any legal process you have to be well prepared to win. If there is a group that wants to actively work together in preparing a case and funding it I would likely be in.

      1. Bob, Its funny how taxes work out. This past year, Im paying a lot of taxes on gains as unfortunately the cookie crumbled where my good gains were in taxable. This year the worm has turned. Basically even on the year but have a lot of nice gains in Roth and HSA and sitting on some nice losses in taxable. So I should pretty much be able to owe nothing on my dividends next year as I can off set those with a tax loss while pocketing my gains in the tax free accounts..

    1. Bob,
      I am glad you brought up the subject again. I am seeing the complaints here about Schwab and I am anticipating the day they merge with TD. Been very happy with TD except for the small interest they pay on holding cash. I did open a account with Schwab and was going to fund it, but after doing this I am being constantly bombarded in my e-mail by them to finish signing up for mobile verification. I don’t trust that Voice ID feature and was told it will be mandatory for all accounts in 6 months.
      Could I get everyone’s input here ? Investopidia has a great article from March 31st of a 6 month trial they did having accounts at different brokers
      What they like and don’t like about the various brokers.
      I am thinking of Fidelity as it seems close to TD, the only thing I see is they don’t offer real time updates on stock price, you have to manually refresh.

      1. Charles – there is no perfect broker, I am certain of that. If I look at my criteria list there is no one broker that does it all. But I absolutely draw the line at Schwab’s not getting dividends right. And lying about it.

        Once I dump Schwab that will leave me with TDA, Vanguard and IBKR. Between the 3 I can get done pretty much all I want done. I hope Schwab leaves the TDA platform alone, or I’ll be exiting there, too.

        IBKR is the only broker I know of that allows direct purchases off the TSX and also (surprise) direct access to institutional preferred. With an actual bid-ask spreads, not a take-it-or-leave-it prices from a bond dealer.

        IBKR also lets you do a completely realistic paper money account. One can get accustomed to the somewhat quirky platform without fear of making mistakes.

        IBKR should be paying me an endorsement fee, but they aren’t.

  33. My apologies for the delay in this posting.

    I received a phone call on Weds. from Ms. Smith with Schwab. Amy has posted the general response I assume everyone has received in their message center.

    The underlying issue is not the profitability of the corporations. Rather, the IRS guidelines (the link which is posted) . There is a general test to ensure these foreign corporation preferreds are qualified: a public statement filed with the SEC that states the security is considered classified as equity rather than debt for US tax purposes.

    It is this matter that is the problem/issue. None of the CAN corporations filed this with the SEC.

    Ms. Smith stated Schwab is aware other brokerage firms did classify the preferred as qualfied. She said Schwab elects to take a “conservative” position on this as it believes the IRS if questioning the classifications would point to this matter.

    I suppose the only recourse is to request the CAN corporations to file this with the SEC. I have no idea with the current economic situation if any corporation would give this attention.

    I for one, have sold what little CAN I have and if I choose (in 30 days) to reinvest will do so with IBKR.

    Sorry the news is not better. But, at least we understand what happened. And, Ms. Smith said Schwab has noted its customer service teams gave differing and incorrect information to customers. She said the matter will be addressed in corporate training, etc.

    1. TNT, thank you for your response.

      My question for all of you Schwab clients who are holding these preferreds….and for anyone else (non-Schwab clients please chime in!):

      Are you going to override Schwab‘s 1099….i.e….’manually’ move the values from the Ordinary bucket to the QDI bucket…..with the plan to state your case for these dividends being qualified, if you are audited?

      What is the worst that can happen? They disallow it…..make me pay the higher tax + interest and a possible penalty…..

      It’s not like I’m trying to be sneaky. And it’s not like we don’t have three brokerage firms (Vanguard, TD Ameritrade, and Fidelity, to the best of my knowledge) stating that they are qualified. That must count for something!

      I have a large chunk of change at stake here. If we were just talking a few hundred dollars, I would pay the ordinary tax and then sell the positions and move on but I’m not so inclined to pay the higher tax rate on the amount of money I have received from these issues.

      Any and all comments are very welcomed!

      1. Also, can anyone explain why two of my TNP preferreds (F and B) are being classified as Ordianry but the C issue is classified as QDI? It’s not like TNP filed with the SEC for only a single preferred but not all of them.

        1. I just looked at my 2018 1099. I held TNP C, B, E, and F and all were classified as QDI but this year they classified only C as QDI and F and B as ordinary.

          So the question is – did TNP file the proper paperwork with the SEC in 2018 for F & B, but not for 2019?? I find it very hard to believe that they would’ve filed the paperwork for C, but not F & B.

      2. Amy, I think your response from Schwab is your answer. They state they are not tax advisors. And in fact what they say doesnt even matter provided its supported. In fact reading their response I can interpret it to mean, we are lazy, hard headed and stubborn and arent changing anything but you can feel free to do so if you want.
        The tax laws arent set up to not benefit from them. They are set up to rightfully deduct what is yours. Have your tax advisor note it on the returns as such as you mentioned. Dont give away what is rightfully and legally yours just because some lazies or low IQs who dont want to do their jobs correctly.
        I would also get ahold of superior and say you are moving your assets to a brokerage that isnt intent on screwing me over…Maybe that might light their butts up to do the right thing.

      3. Amy – I have done a similar thing for K-1s for many years. Partnerships often mischaracterize their distributions and I have “corrected” them and attached to my return a) the original K-1, b) my “corrected” version of the K-1, and c) and explanation.

        I have never not had my corrected copy stand or been audited or assessed any penalty or even been contacted by IRS because of this.

        The same approach may or may not work for 1099s and qualified dividends.

    2. Thanks TNT. I also received a call from Ms. Smith with the same information that you shared.
      I also have some Canadian preferreds in my IRA and Schwab is withholding 15% foreign tax on the dividends. I asked her about that and she said they hadn’t looked into it yet, but will. It was my understanding that according to the US-Canada tax treaty that the tax should not be withheld in deferred accounts. When she gets back to me, I’ll post their response.

      1. Hi Alan,

        May I ask what you will be doing with your tax return this year with respect to the mischaracterization of CN pfd dividends? No need to answer if you’re not comfortable doing so but I am going to take Gridbird’s comments to heart and get with my accountant and adjust the figures accordingly.

        Also, I will be posting about my TNP pfds elsewhere since this chat are is for CN issues only….. but to close out that subject I will note that in 2018 TNP F and B were classified as QDI but this year they are classified as ordinary.

        Both years, TNP-C were classified as QDI.

        Grid, thanks for your comments – much appreciated.

        1. Amy, I was planing on going with Schwab’s classification until I read that some override them. I am pretty new to Canadian preferreds and only had one, EBBNF, long enough to be considered qualified.
          I actually have several in my IRA account, so right now I am more concerned that they are withholding 15% on all of those. I would be interested to know if anyone else has Canadian preferreds in a deferred account and if the 15% tax is being withheld.

          1. I have Canadian preferred as OTC issues in 2 different Vanguard Roths. I put them there, recently to see how vanguard would handle them. First divi is paid end of May, so won’t know until then.

            1. Bob, how did you buy Canadian preferreds through Vanguard recently? They blocked it last year and I just tried and it was blocked. Are these US issues from Canadian companies on OTC?

              1. Grid – they are allowing some. The ones I bought recently were BRENF and EBBGF. If Vanguard handles the divis right I may buy more for the Roths.

                Vanguard is not handling the OTC issues consistently. Issues that should be allowed under the policy (Pink, current reporting) are sometimes allowed and sometimes blocked. I’m not going to try to open up improperly blocked issues until I see how the divis are handled. BRENF pays on 4-31, so I should know at that time.

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

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

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

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

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

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

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

    April 2, 2020

    Dear,

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

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

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

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

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

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

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

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

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

    Sincerely,

    Dawnn Lone

    Resolution Manager

    Client Advocacy Team

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

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

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

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

      Tomorrow I will provide detailed information in this venue

      Working on project that is critical time line

    3. Amy – why not just move the account to another brokerage? I have been through all of my brokerage statements (about a dozen accounts from 4 brokerages) and the only one that made a single mistake on dividend treatment was Schwab.

      It’s unfortunate that the one outfit that made it so easy to procure and trade OTC tickers for Canadian preferred is the one that can’t get the tax law right but that’s the case.

      1. Hi Bob,

        First of all, thank you for all that you have posted on this subject. It has been very helpful.

        Next, I am seriously considering moving to another brokerage. As you know, that is not a quick and easy thing to do but I am still considering it.

        Question: Do you (or anyone else) know if Fidelity characterized the dividends corretly as QDI? I understand that Vanguard, TDA, and IBRK characterized them correctly but I am wondering about Fidelity.

    4. I missed this thread before.
      Canadian securities are a nightmare for qualified dividend status.
      here is why.
      There are three rules for qualified dividends.
      1. Trade on a US exchange
      2. or Be domiciled in a country with a US tax treaty
      3. Be publicly traded corporation in your home country

      Canadian issues that don’t trade on a US exchange. (NYSE, NASDAQ etc) (Pink Sheets/OTC are not considered a recognized US exchange)
      As far as the second and 3rd tests, here is where it gets dicey.

      So obviously Canada has a treaty with the the US, but it is the “corporation” part where the determination has to be made by the foreign issuer, since not all common and preferred securities in Canada are considered corporations under US law and therefore eligible to issue qualified dividends. So Schwab is right to request the Canadian issuer determine the tax status for qualified dividends.

      Riocan gives a good description about it.
      https://investor.riocan.com/investor-relations/distribution-info/United-States-Unitholders/default.aspx

      1. Justin – sorry but this is totally wrong. Canadian CORPORATIONS pay QUALIFIED dividends.

        RoiCan, which you cited, is a REIT. It does NOT pay qualified dividends any more than a U.S. REIT would. Same would apply in the case of a partnership, like BEP. Partnerships don’t pay qualified dividends either.

        1. And who is responsible for determining whether they are a corporation or not? I do this for a living, and it is not straightforward who is a corporation and who isn’t.
          Riocan CAN pay qualified dividend income, even as a REIT. They don’t take the necessary step to do so. From their IR section I linked.
          “and therefore would potentially qualify as “qualified dividend income” for U.S. income tax purposes”

          Enbridge is a qualifying foreign corporation and tells you as such.
          https://www.enbridge.com/Investment-Center/Stock-and-Dividend-Information/Dividend-Tax-Info.aspx

          “Enbridge Inc. is considered to be “a qualified foreign corporation” and the dividends paid on its common shares are considered to be “qualified dividends” as those terms are defined in the U.S. Internal Revenue Code”. ”

          So MCAN Mortgage Corporation pays qualified dividends? It has Corporation right in the name! I am being tongue in cheek with this, just to point out Canadian issues especially can be problematic.
          The answer would be no. They are a passthrough corporation called a CMIC in Canada, and actually pay interest through on their shares, since they are passing through the income of underlying mortgages they own.

          1. Justin – it’s actually very simple. If it would be a qualified dividend coming from a US company it is a qualified dividend from a Canadian company.

            Excluded, no matter where the company is based, are REITs and partnerships.

            Almost 100% of Canadian preferreds pay qualified dividends. There are very few Canadian preferred from REITs or partnerships. Even if Schwab can’t figure it out. A couple exceptions are Artis Real Estate (REIT) and Brookfield Renewable (partnership), both being non-QDI.

            Not talking here about split corps. I have no idea of their tax status and in any event would never recommend the purchase of a split corp.

      2. Justin, it doesnt work that cleanly though in reality… Take Sun Life preferreds. They trade pink sheet and grey depending on issue. However the parent does trade NYSE….And of course you have US “violators” that will be QDI. Take Indianapolis Power and Light preferreds. They are pure pink sheet and grey also but they will be QDI. They dont even have tradeable common stock stock as it is owned by AES.
        I dont dispute the regulations you cite, however you state the company says they may potentially be qualified, but that simply means to me they are punting to me. I have no problem catching the punt and determining it QDI, as its pretty easy to determine the spirit of the QDI rules.

        1. The exchange requirement will make a non-treaty country’s common/preferreds into qualified.
          It doesn’t apply to US preferreds.
          That is why I said Canadian issues (and to a lesser extent other countries) qualified determination can be tricky.
          So it is a multi-part test.
          1. US Common or preferreds of a C-corporation that is not a REIT or RIC-Qualified
          2. foreign corporations- The preferred or common trade on an established US exchange- Qualified
          3. Foreign corporations, that do not trade on a US exchange-Are they considered a regular corporation (a qualifying foreign corporation, which means they are generally in their home country and does the US have a tax treaty with their home country. -Qualified
          4. Foreign corporations, do not trade on a US exchange, but the country has a tax treaty, may be considered a qualifying foreign corporation, if they qualify under the tests laid out in the treaty.
          REIT’s are a special case because they have to make an election to be treated as a corporation instead of a REIT to move themselves into a different treaty article. This is where the election comes in.
          Riocan never made the election, but could have, since they would otherwise qualify.
          here is the notice that outlines it.
          https://www.irs.gov/pub/irs-drop/n-11-64.pdf

          1. Thanks for your input, Justin. What is your understanding on Canadian preferreds held in an IRA? I have been arguing with Schwab, without success, that they should not withhold the 15% foreign tax on dividends in a deferred account. I have several Canadian preferreds in my IRA and they withhold the tax on all of them.

            1. Alan,
              I’m with Merrill, primarily. They NEVER deduct the 15% as long as the Canadian security is in an IRA. If they did, and wouldn’t fix it – I’d be finding another broker. I’ve held numerous Canadian holdings, both on the fixed and common sides and never had any issues with the witholding in the IRA’s.

              1. Thanks A4I. Recently, Schwab agreed to look at this again. If they don’t change their policy, I’ll consider changing. I have several accounts, so would rather not, but will see what they say this time.

            2. Alan, to add to A4I’s point. The withholding in an IRA isnt a legal tax issue, its a “your getting screwed through incompetence and finger pointing” issue. Its hard to fight city hall. I just moved mine out of brokerage that was the offender. Im not taking a needless 15% haircut.

            3. Treaty exempts it, but they have to tell the custodian on record date that the account is an IRA.
              There’s the rub. Some legacy payment systems like Schwabs can’t identify accounts as IRA’s and treat everyone the same and withhold the 15% across the board.
              Schwab isn’t alone in this regard, but is probably the largest by far where it occurs.
              I also think other brokers have a problem when it comes to Canadian traded shares but not the pink sheets.

              1. Thanks Bob, Justin and Grid. Do you have any suggestions on brokerage houses that you know don’t tax Canadian preferreds in an IRA?

                1. Alan, I have 3 brokerages. Vanguard shut them down from trading with me. Ally never allowed F ending foreign securities to ever be bought (though they will let you buy supposedly illegal 144a preferreds, go figure). So mine are all in TD, and guess who is taking them over? Hopefully Schwab will learn from them instead of other way around.

                2. I recently put two such issues into Roths at Vanguard. I will know how they treat them on April 30, when BRENF pays its next divi.

                  I’m betting they get it right.

            4. Alan – there should be zero withholding on Canadian dividends (pref or common) in a qualified account. That said, some brokerages get it wrong. Some require a form to be completed.

              If your broker can’t get it right I would move the account. That is my plan with respect to Vanguard.

              The withholding issue is addressed in the US-Canada tax treaty.

        2. Grid – as you know most major Canadian companies, the ones big enough to access the preferred market, have bona fide NYSE listings. They are SEC reporters as far as the common goes. They rarely SEC register their preferred.

          Those that don’t have NYSE listings are TSX listed and file with SEDAR (Canada’s EDGAR). These are not backwater companies. In Canada, the standard to sell preferred shares that are exchange listed is much higher than in the U.S.

          Split corps are the one big exception. Total garbage. Don’t ever touch them.

          1. Bob, I probably in general should be culling the herd now instead of adding based on how most of mine are now acting like its January instead of Corona time. But…I just cant help thinking in the long run this Sun Life A3 plus 6% is not going to be a mistake. I bought CU fixed a few weeks ago so got the 6.7% but Sun Life fixed seems to track CU. And they are both still several bucks below pre Corona hit. And oddly enough many of US fixeds are back in their normal range pre Corona and have weaker credit rating profiles.

            1. Grid – the observation is correct. Can prefs have come well up from the late March bottoms but still well below pre-Covid highs. Tell me what will become of Corona and I will give you flawless investment advice.

              SLF is probably the single most bullet proof Canadian preferred out there. If they ever get into trouble it will be time to start eating the grass.

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

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

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

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

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

  37. March 28 Update on Schwab characterization issue.

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

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

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

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

    I will continue to update as I receive information.

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

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

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

    March 26, 2020

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

    March 20, 2020

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

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

    Call centres
    Charities

    March 19, 2020

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

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

    Collections, audits, and appeals
    Outreach and Liaison Officer services

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

    Question is what happens next?

  39. Update on Schwab Classification of CAN preferreds.

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

    No CAN company notified Schwab to reclassify.

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

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

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

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

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

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

    Good health wishes to all.

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

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

      1. Tim,

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

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

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

          1. Gridbird,

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

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

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

            Stay healthy.

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

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

  41. Schwab Classification Issue on Preferreds.

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

  42. Canadian resets (no minimums) …..

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

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

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

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

    Recently repriced with US OTC tickers:

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

    And issues with with less room to fall:

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

    Sorry, no spreadsheet today.

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

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

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

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

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

  43. Canadian min rate preferred …

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  44. Update on Schwab Dividend Characterization Issue.

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

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

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

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

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

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

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

  46. Update on Schwab classification of CAN preferreds:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Let’s give it one more try!

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

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

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

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

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

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

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

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

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

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

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

          2. 730Cap,

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

            Perhaps you can contact me on SA?

            Thanks.

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

  50. Carnage on Bay Street …..

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Off to watch Hockey Night in Canada.

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

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

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

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

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

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

      If any problems arise you can reach me in Hermanus.

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

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

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

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

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

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

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

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

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

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

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

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

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

  53. Opportunities in min rate issues ….

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

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

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

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

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

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

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

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

    I own meaningful amounts of 3 of the 6.

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

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

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

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

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

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

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

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

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

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

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

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

        It doesn’t pass the smell test with me.

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

        I can be reached through messaging at SA.

      2. “Good afternoon Tim,

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

        Best regards,
        Investor Relations”
        investorrelations@fortisinc.com

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

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

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

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

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

      1. RE: Entry points on resets and floaters.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

        Where are the Customers’ Yachts?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    1. For what it’s worth, Joel:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

      2. RE: Canadian tax.

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

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

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

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

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

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

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

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

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

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

    Regards,

    Investor Relations, BCE Inc.

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

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

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

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

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

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

    Here are my thoughts, by category:

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

    Fixed. Nope.

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

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

    Today’s spreadsheet:

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

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

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

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

    Here are my thoughts, by category:

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

    Fixed. Nope.

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

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

    Today’s spreadsheet:

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

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

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

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

    Here are my thoughts, by category:

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

    Fixed. Nope.

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

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

    Today’s spreadsheet:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Dear Mr. Nieukerk,

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

    These shares are held by Schwab brokerage firm.

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

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

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

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

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

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

    Kindly,

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

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

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

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

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

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

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

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

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

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

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