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Canadian Western Bank Preferred Shares Series 9 (CWB.PR.D) |
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Author(s)’ disclosure of share ownership: |
Author(s) hold shares |
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Last updated: |
07-Apr-24 |
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Share Price At Date of Last Update: |
$25.30 |
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Yield: |
7.6% |
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Currency: |
$ Canadian |
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Generic Rating (This rating does not consider the circumstances of any individual investor and is therefore not specific advice for any individual): |
Buy at $25.30 |
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SUMMARY AND RATING: These Canadian Western Bank Preferred shares Series 9 (CWB.PR.D on Toronto) were issued at a price of $25.00 by prospectus with a closing date of January 29, 2019 paying 6.0% on a $25.00 amount ($1.50 per year). Note that preferred shares can have customised aspects that affect their value. We have described the basic features here but we do not guarantee completeness or total accuracy of this description. For more detail consult the prospectus on sedar.com. On April 30, 2024, they are set to reset at 7.651% of $25 or $1.91275 per year. On April 5, 2024, they closed at $25.30 to yield 7.56% per year. If held in a taxable account, they are eligible for the dividend tax credit. The dividend is non-cumulative (In the unlikely event that they skip a dividend due to financial difficulty, you will never get that dividend). The dividend will reset every five years (next reset is five years away – April 30, 2029) and will be set at the yield on the five-year Canada Bond at that time plus (a very hefty) 404 basis points. (The spreadi sunusally high because rate resets were particularly unpopular at the original issue date. It seems likely that the dividend will decrease at the next reset in five years time. CWB cannot redeem these shares before April 30, 2029, but on that date (and on each future 5 year anniversary) can redeem at $25.00. At this time there is now an option to convert these shareas to a floating rate that would initially start at 9.039% of $25. These preferred shares are subject to a market value decline if Canadian Western Bank’s outlook worsens and there is some potential for dividends to be skipped or for the Bank to go bankrupt with no recovery of this investment. However we suspect that the possibility of such a bankruptcy scenario is quite remote. The Bank can convert these preferred shares into common shares in the event of a triggering event whereby the bank’s financial viability is in doubt. We consider the chances of that ever happening to be very remote. These preferred shares are rated Pfd-3 by DBRS (with a stable outlook) on a scale of 1 to 5, where 1 is the strongest. Due to the rate reset feature, these shares are not as risky as perpetual preferred shares in terms of the risk of an interest rate increase. In fact, higher rates at the reset date will be beneficial. However, investors have learned that rate reset shares are risky in terms of interest rate decreases. But with five years to go beforee the reset date, lower interest rates would likely lead to a modest and ultimately temporary capital gain. The 7.56% yield is attractive. There is not much of an insider trading signal given that nine insiders bought under the prospectus on early 2019 at $25 and it appears that none have sold and there has been no recent insider buying. Overall, we rate these a Buy for the yield. |
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INSIDER TRADING / INSIDER HOLDING: There has been no insider trading reported since there shares were issued in early 2019. Nine insiders bought under the prospectus with amounts ranging from 600 to 20,000. The typical amount was about 1500 shares or $37,500 worth. This insider buying was a positive signal. But there is really no insider trading signal as of the end of April 2024 given the lack of trading. |
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Symbol and Exchange: |
CWB.PR.D, Toronto |
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Basis and Limitations of Analysis: The following applies to all the companies rated. Conclusions are based largely on achieved earnings, balance sheet strength, achieved earnings per share growth trend and industry attractiveness. We undertake a relatively detailed analysis of the published financial statements including growth per share trends and our general view of the industry attractiveness and the company’s growth prospects. Despite this diligence our analysis is subject to limitations including the following examples. We have not met with management or discussed the long term earnings growth prospects with management. We have not reviewed all press releases. We typically have no special expertise or knowledge of the industry. |
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DISCLAIMER: All stock ratings presented are “generic” in nature and do not take into account the unique circumstances and risk tolerance and risk capacity of any individual. The information presented is not a recommendation for any individual to buy or sell any security. The authors are not registered investment advisors and the information presented is not to be considered investment advice to any individual. The reader should consult a registered investment advisor or registered dealer prior to making any investment decision. For ease of writing style the newsletter and articles are often written in the first person. But, legally speaking, all information and opinions are provided by InvestorsFriend Inc. and not by the authors as individuals. The author(s) of this report may have a position, as disclosed in each report. The authors’ positions may subsequently change without notice. |
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© Copyright: InvestorsFriend Inc. 1999 – 2024. All rights to format and content are reserved. |
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Canadian Western Bank Preferred Shares Series 9 (CWB.PR.D) |
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Author(s)’ disclosure of share ownership: |
Author(s) do NOT hold shares |
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Last updated: |
18-Dec-23 |
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Share Price At Date of Last Update: |
$24.30 |
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Yield: |
6.2% |
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Currency: |
$ Canadian |
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Generic Rating (This rating does not consider the circumstances of any individual investor and is therefore not specific advice for any individual): |
(higher) Buy at $24.30 |
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SUMMARY AND RATING: These Canadian Western Bank Preferred shares Series 9 (CWB.PR.D on Toronto) were issued at a price of $25.00 by prospectus with a closing date of January 29, 2019 paying 6.0% on a $25.00 amount ($1.50 per year). The yield was unusually high because rate reset shares were particularly unpopular in the market at that time. Note that preferred shares can have customised aspects that affect their value. We have described the basic features here but we do not guarantee completeness or total accuracy of this description. For more detail consult the prospectus on sedar.com. On December 18, 2023, they traded at $24.30 to yield 6.2% per year. If held in a taxable account, they are eligible for the dividend tax credit. The dividend is non-cumulative (In the unlikely event that they skip a dividend due to financial difficulty, you will never get that dividend). The dividend will reset every five years (starting April 30, 2024) and will be set at the yield on the five-year Canada Bond at that time plus (a very hefty) 504 basis points. If the five-year Canada bond declines to 3.0% from the current 3.31% (it could be higher but somewhat lower seems more likely), then these shares would reset to 8.04% of $25.00 , paying $2.01 per year. That would be a yield of 8.3% at the current price. Unfortunately, in that case CWB might redeem them at $25 and that would depend if the market spread on rate reset preferred was significantly lower than the 5.04% spread here. If we are more conservative and assume that the five year Canada bond will be 2.5% on April 30 next, then the reset dividend would be $1.885 or a 7.8% yield at the current price. CWB Bank cannot redeem these shares before April 30, 2024, but on that date (and on each future 5 year anniversary) can redeem at $25.00. On the reset dates there is also an option to convert to a monthly floating rate. These preferred shares are subject to a market value decline if Canadian Western Bank’s outlook worsens and there is some potential for dividends to be skipped or for the Bank to go bankrupt with no recovery of this investment. However we suspect that the possibility of such a bankruptcy scenario is quite remote. The Bank can convert these preferred shares into common shares in the event of a triggering event whereby the bank’s financial viability is in doubt. We consider the chances of that ever happening to be very remote. These preferred shares are rated Pfd-3 by DBRS (with a stable outlook) on a scale of 1 to 5, where 1 is the strongest. Due to the rate reset feature, these shares are not as risky as perpetual preferred shares in terms of the risk of an interest rate increase. In fact, higher rates at the reset date will be beneficial. However, investors have learned that rate reset shares are risky in terms of interest rate decreases. The 6.2% yield is attractive and unless the 5 year Canada bond yield is lower that 1.04% next April 30, these shares are going to reset at a somewhat higher dividend or would be redeemed at $25. There is not much of an insider trading signal given that nine insiders bought under the prospectus on early 2019 at $25 and it appears that none have sold. Overall, we rate these a (higher) Buy for the potential reset yield and for a potential modest capital gain if they are redeemed next April at $25. |
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INSIDER TRADING / INSIDER HOLDING: There has been no insider trading reported since there shares were issued in early 2019. Nine insiders bought under the prospectus with amounts ranging from 600 to 20,000. The typical amount was about 1500 shares or $37,500 worth. This insider buying was a positive signal. But there is really no insider trading signal as of the end of 2021 given the lack of trading. |
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Symbol and Exchange: |
CWB.PR.D, Toronto |
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Basis and Limitations of Analysis: The following applies to all the companies rated. Conclusions are based largely on achieved earnings, balance sheet strength, achieved earnings per share growth trend and industry attractiveness. We undertake a relatively detailed analysis of the published financial statements including growth per share trends and our general view of the industry attractiveness and the company’s growth prospects. Despite this diligence our analysis is subject to limitations including the following examples. We have not met with management or discussed the long term earnings growth prospects with management. We have not reviewed all press releases. We typically have no special expertise or knowledge of the industry. |
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|
DISCLAIMER: All stock ratings presented are “generic” in nature and do not take into account the unique circumstances and risk tolerance and risk capacity of any individual. The information presented is not a recommendation for any individual to buy or sell any security. The authors are not registered investment advisors and the information presented is not to be considered investment advice to any individual. The reader should consult a registered investment advisor or registered dealer prior to making any investment decision. For ease of writing style the newsletter and articles are often written in the first person. But, legally speaking, all information and opinions are provided by InvestorsFriend Inc. and not by the authors as individuals. The author(s) of this report may have a position, as disclosed in each report. The authors’ positions may subsequently change without notice. |
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© Copyright: InvestorsFriend Inc. 1999 – 2023. All rights to format and content are reserved. |
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