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Discussion Starter · #1 ·
I never looked a preferreds as an asset with provides outsized returns. I bought these stocks in July of 2020 . As I recall I bought these stocks in the $11 range. ENB is close to $19 and Pembina is close to $21. The dividends are still pretty close to 6% and are locked in for another 3 or 4 years. If the government 5 year rate should be increased these stocks should have more upside. I have done much better then expected and right now I see no reason to sell either.
 

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Agreed. Bought some from others a little before that and made similar if not better returns. Basicly analyzed them the same way I would a high yield bond. Probability of default and expected loss if a default occurred. Typically with a preferred one sits behind the debt (bank loans, bonds and other liabilities) but before common shares. So in a worse case scenario if the company is worth more than the debt the prefs have a value (which can be estimated).
 

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You bought at a great time at historic low interest rates. You have to view these as having the risk of an equity. You can get the nice 50% upswings ( like if you bought any equity around that time) but these are awful to have when interest rates decline unexpectedly. I had some HPR in 2018 and it tanked 30% to the market bottom.

But then people piled in , it rose w the general market ( these are ~ .4% correlated to the TSX) and interest rates rose 1% and I am back to even. I think they should be ok for a few more years as rates rise.

I like the min rate resets and have some BAM.PF. J. They have a floor of 4% so they are immune to int rate changes but do move w the market. I am up about 8% in price as these have risen w the TSX.
 

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Discussion Starter · #4 ·
I bought with the government 5 year rate at an all time low. Going forward I figure interest rates are going up and that will be bullish for the resets.The chances of drastic costs to the 5 year rate are very remote. I understand the pain that resets went through when these rates were being cut in a significant way. Inflation is a significant concern and the best tool for combating it' is raising interest rates.
 

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I bought a slew of pfds in 2nd quarter of 2020. Just had a quick look at BMOIL site, that breaks the preferreds out.

A/C 1 +33.35% (+$15.8k)
A/C 2 +5.3% (+$2.2k)
A/C 3 +13.8% (+$13.2k)
A/C 4 +29.7% (+$2.9k)
A/C 5 +41.2% (+$25.5k)

Nice gains along with the 5 or 6% divvies. Some that are over $25 may be called and reduce those gains somewhat. (A couple have already)

Don't see that increasing fed rates will necessarily cause resets to gain. Each one is different and it will depend on the spread. If resulting rate is too high, they will be called. Min resets will be too. Once price is over $25, not much further upside. Most good ones are there already.

My pfds include some perpetuals. They will likely drop in price as interest rates increase. But they all yield over 5%, so they can either keep paying me the 5 or 6% on my original cost or call them at $25. Either way, I am happy :)
 
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