iShares S&P/TSX Preferred ETF (CPD.TO)

This has a few more perpetuals in it. It depends on what your objective is. If looking for a trading vehicle or that the preferreds are going to come back, you could be waiting an awfully long time. If looking for some yields that are pretty attractive, then it could be fine.

If you think interest rates in Canada are going to stay where they are or rise ever so slightly, then this is probably near the low because he believes that is what has been priced into it. He would prefer Premium Income Corporation (PIC.PR.D-T), which is a 6% yield, $15 per share unit. This is like a deep in the money covered call. If interest rates rise, that will be positive for the banks, which means there is very little downside in this product.

Preferred Share ETF. The reset preferred market is now about 15% undervalued fundamentally so they should be trading up. This ETF, however, does own some perpetual preferreds which would react more negatively if interest rates rise. ZPR-T is his preference because it focuses on resets.

Not a huge fan of index, passive investing. This especially does not make sense in the preferred share market. You need active management to do it properly.

The preferred share market is not liquid. You should buy a small basket of preferreds with the assistance of an advisor. You can’t use an ETF in an illiquid market.

This is not a Preferred Share Market. We are in the early stages of rising interest rates. Most preferred shares, with the exception of a lot of the bank preferred shares, are perpetual preferred shares and will do poorly in a rising interest rate market.

He would want to know how many are perpetuals because those are the ones that are really going to get clobbered if interest rates go up. Doesn’t care for this because you don’t get the advantage of preferreds as everything from the US comes through as income.

(A Top Pick July 8/13. Down 3.85%.) For people trying to collect dividends, preferred shares do sell off in the summer, especially in August but he thinks the selloff has been overdone. For fixed income portfolios, where you are not going to trade, but are going to hold them for perhaps 5 years, this is a good entry point.

Preferred shares sold off with a lot of other interest sensitive stuff and he thinks they were a little bit over punished. Seems to be bouncing off its support level of around $16. Not looking for any large up movement but this would be for anyone looking at preferreds for their fixed income portfolio. Yield of around 4.5%.

Good product. Preferred shares from the old Claymore side of what is now Blackrock. Competes with its sister product iShares DJ Cdn Dividend (XDV-T). There are also other good dividend products on the market. The question is, do you like more financials, more utilities, etc. So you have to look under the hood and at the top holdings, especially the top 10.

It won’t hold the value if interest rates go up. Prefers ZPR, which is laddered and uses resets. Essentially floating rate. Gives more protection to rising interest rates.

Is iShares S&P/TSX Preferred Fund (CPD-T) or iShares 1-5 Yr Laddered Corp Bond Fund (CBO-T) better for safety for a retiree? This is not apples to apples. He likes this one better than CBO-T. Feels there is a fair amount of risk in bonds. However, if there is a situation where there is corporate province not being as good, they could go down more quickly than bonds. Both of them have been pretty much flat over the last year or 2.

He owns this as a sort of core holding for absolute yield, but has taken a big chunk of this and moved it to iShares S&PTSX N.A. Preferred (XPF-T) which he likes because it is 50% US Preferreds and the other half is in Canadian preferreds. The spread between preferred share yields in the US and the 10 year bonds is still extremely high so there is room for that spread to come down.

Likes this a great deal. Similar to ZDV-T. Good, long-term, safe hold.

Preferreds have a bond-like characteristic in that investors invest in for yield, rather than for growth. Does not see any major rate hikes. A fine alternative to fixed income.