The Bombardier pref share on our list is updated and rated Highly Speculative Buy at $10.75.
This has been a terrible investment due to Bombardier’s troubles. It’s yielding 14.5% which is indicative of very high risk.
However, if you think it is unlikely that Bombardier will declare bankruptcy then this may be worth considering. The investment by Quebec would appear to signal that the company will likely not be allowed to go under. But governments are concerned about job protection and might ultimately find a way to protect the jobs while letting the pref and common shares become worth even less. If the common shares significantly lower than there is a chance that pref shareholders will be given 12.5 common shares for each pref share and that could be worth even less than the present $10.75. It may be this aspect of the pref shares that is holding the price down so low. As of today if the company exercised the option to redeem these shares in return for 12.5 common shares, the 12.5 common would be worth $17.75. But if the common shares get low enough it is possible that the 12.5 common shares could be worth far less than $10.75.
While, there are no guarantees I think the odds are reasonably good that these shares will continue to pay their dividends and will ultimately rise in price.
I must admit though that I have not bought any additional Bombardier pref shares at prices below about $16. I have a modest exposure to these shares but did not want to go over board.