January 30, 2014 Comments

On Thursday we had the S&P 500 up 1.1% and Toronto up 0.7%.

In something of a mirror image of yesterday, almost everything on our list was up.

Regarding the Royal Bank preferred shares that I mentioned yesterday, they started trading today. Symbol RY.PZ They traded at about $24.95. That’s interesting because at the IPO last week they were oversubscribed and the size of the issue was increased from $200 million to $500 million. Perhaps there was a perception of scarcity. They pay 4.0% and reset in five years which likely means that they can be counted on to trade around Par in five years. They are riskier than some preferred because they are non-cumulative and in certain conditions could be converted by the bank into common shares. For those happy to collect 4% yield they may be a decent choice. With interest rates having declined a little in the last week I had expected these Royal Bank preferred shares to trade a little above $25. That may yet occur. If interest rates rise they will decline in value. But I don’t think there is much risk a very significant decline due to the rest in five years.

Yesterday I had purchased similar National Bank at their IPO and purchased them in a corporate account. However I had second thoughts about that due to income tax implications. I called TD and they allowed me to shift the purchase to an RESP account. For the RESP which has just entered the spending phase these shares seem a reasonable alternative to cash. Most of my RESP will remain in common shares because I can afford the risk.

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