A perpetual preferred share offering at 4.5%
At this moment TD Direct has on offer a new issue of Power Financial preferred shares paying 4.5% annually. It’s unfortunate that they do not label these as perpetual which is certainly what they appear to be. That is, they are not rate reset preferred shares.
These will be a good investment is interest rates remain low and would be a poor investment if rates rise significantly. We could be stuck holding 4.5% shares in a world where the market rate is 6%. But as of now that seems unlikely.
I think these type of shares deserve a place in the portfolio of many investors especially older investors with larger portfolios.
A week or so ago I noted that Great West Life had an issue of 4.5% perpetual preferred shares out. That seemed attractive. I “put in” for 1000 shares and I see today I was allocated only 300. That indicates that the 4.5% was popular with investors.
Having only gotten 300 of my order for 1000, I am not going to bother with this one although it looks attractive.
I suspect this Power Financial issue will sell out quickly. If interested in this sort of thing be sure to register for announcements of new issues with your broker. It’s an unfortunate reality with these these new issues that you often have very little time to investigate the offer or think about it. You have to move fast if you want them.
There are various complexities of these shares such as the right of the issuing company to buy them back. And the credit rating of the issuer can be important. Typically only strong companies get to issue these preferred shares. I am not sure there is such a thing as “junk” preferred shares except where a strong issuer later becomes financially weak (known as a fallen angel).