Tag: preferred shares

What are preferred shares?

There are generally two types of stock issued by a company: common and preferred. Preferred stocks typically have no voting rights (unless a specified number of dividend payments have been missed). Instead, preferred shares are entitled to a fixed dividend payment. In the event of company bankruptcy, preferred shareholders have a higher priority claim on company assets than common shareholders.

Dividends on preferred shares must be paid out before dividends to common shareholders. Sometimes preferred dividend payments are cumulative—all preferred dividends in arrears must be paid out before common dividends are resumed in a troubled company. But sometimes preferreds are non-cumulative.

There are ETFs that hold preferred shares. For example, the BMO S&P/TSX Laddered Preferred Share Index ETF, symbol ZPR on the Toronto stock exchange, holds floating-rate preferred shares that pays dividends that fluctuate with changes in interest rates. The dividend rate may range from 50% to 100% of (usually) the prime bank rate. As interest rates rise, so do floating-preferred dividend yields.

Sometimes the floating-rate feature only kicks in several years after the issuer sells the preferreds to investors. For example, the preferreds may pay dividends at a fixed rate for five years, and then the payout floats with interest rates.

High-quality preferred shares are okay to hold in your portfolio, although we think that the best common shares can offer both high yields and growth prospects. All in all, we think you should follow TSI Network and use our three-part Successful Investor strategy:

  1. Invest mainly in well-established companies;
  2. Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; the Consumer sector; Finance; Utilities);
  3. Downplay or avoid stocks in the broker/media limelight.

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Q: Pat: Thanks for all your great advice over the years. What do you think of Expedia Group as a stock to buy?

June 6, 2023||How To Invest

A: Expedia Group Inc., $106.90, symbol EXPE on Nasdaq, (Shares outstanding: 142.6 million; Market cap: $15.8 billion; Consumer sector; TSINetwork Rating: Average; http://www.expediagroup.com) operates the world’s largest travel booking platform. Its brands include Expedia, Orbitz, Travelocity, Vrbo and Hotels.com.

In 2000, Expedia made two significant acquisitions… Read More

Spinoffs & Takeovers Hotline – Friday, April 14, 2023

April 14, 2023||How To Invest

MIDDLEBY CORP., $139.01, symbol MIDD on Nasdaq, designs, manufactures, markets, distributes and services a broad line of (i) foodservice equipment for all types of commercial restaurants and institutional kitchens, (ii) food preparation, cooking, baking, chilling and packaging equipment for food-processing operations, and (iii) premium kitchen… Read More

Teck shifts focus to ‘green’ metals

March 16, 2023||Spinoffs

Mining firm Teck Resources recently announced that it will spin off its metallurgical coal (used for making steel) operations. It also recently sold its stake in an oil sands project.
These moves are part of its plan to focus on “low carbon metals,” particularly copper and… Read More

A Yield to Caution: BCE 1st Preferred Series B

February 23, 2023||Dividend Stocks

BCE 1ST PREFERRED SERIES B $19 (Toronto symbol BCE.PR.B) is a preferred share issue from BCE Inc. (symbol BCE on Toronto).
The BCE Series B preferreds yield 8.8%. That’s much higher than the 6.3% offered by the utility’s common shares.
Note, though, that preferred shares behave more like long-term… Read More

Carveout should unlock value

September 22, 2022||Spinoffs

VOLKSWAGEN AG is a hold. The German automaker (Manufacturing sector; Shares outstanding: 5.0 billion [preferred and common]; Market cap: $177.6 billion; Dividend yield: 3.8%; Takeover Target Rating: Medium; www.volkswagenag.com) has its main listing on the Frankfurt Stock Exchange, but it also trades on the U.S. over-the-counter market under two symbols:… Read More

Not all high yield ETFs are created equal

August 11, 2022||ETFs

High yields, especially in what is still a relatively low interest-rate environment, have lots of appeal for many income investors. But ETF investors should look beyond the historical distribution yield for any danger signs.
The managers of ETFs use various strategies to generate high yields for… Read More