BMO S&P/TSX Laddered Preferred (ZPR.TO)

This has a number of reset preferreds in it, which is why he thinks it took a big hit. If you are looking at this today, he thinks it is a reasonable Buy as an income component of your portfolio. He prefers preferred shares and high dividend paying common shares at this point, relative to the bonds. Thinks the next resets you will see on a number of these instruments are going to be higher as interest rates are rising.

Sell? All of these tanked 1.5 years ago. A number of institutions have been buying the preferreds now, and he doesn’t see any reason to be selling this, once you have taken their hit. Also, as rates go up, some of the resets may be setting at a higher rate. A good fund and very well diversified. 5.5% dividend yield.

Preferred shares. They had a good run-up in recent weeks. He is just starting to lighten up his position. It could go another 5%. We are getting close to 52 week highs. We cannot get back to the historic highs, however, of the last number of years.

It got clobbered a year ago because all the rate reset preferred dropped. Right now they are offering a pretty good yield and they are well diversified. The problem with individual preferreds is the trouble getting rid of them. If he was going to buy a preferred, he would buy this.

Rate reset preferreds started coming out in 2008. They declare a dividend which has a formula attached to it. Every 5 years that rate gets reset based on a formula, a 5-year Government bond and some kind of spread. Sold off a lot last year, because the yield curve flattened significantly and there was a fear the rate resets were going to be a lot lower. However, what has tended to happen, is that you are now getting yields of about 5.5%. Actually one of the few securities that if interest rates go up, you are going to benefit from it. He could see about 5%-10% growth, plus reset rates going higher if rates do increase.

If interest rates stay where they are over the next 1-2 years, then this type of product and most dividend paying products will be fine more or less. He thinks most of the carnage was seen in 2015.

BMO S&P/TSX Laddered Preferred (ZPR-T) or iShares S&P/TSX preferred (CPD-T)? The only difference between these 2 is that this one probably has a little bit more in rate reset preferred shares. Those are the shares that will do well when interest rates start to move higher. The both are very similar though. There is going to be some volatility in the preferred share market.

Lost 28% in this. Sell or Hold? Last year the preferred market was down. This should not be a large part of your fixed income portion, and you should take some off the table, and reapportionment into a traditional fixed income security such as government or corporate bonds.

Preferred Shares Index. Close to 6.5%. The preferred space has been really stressed. Convertible shares protect shareholders in a rising rate environment. However, that has not been the case so there has been low levels of interest in these shares. He has these holdings for clients as a diversification tool.

Preferreds got really clobbered this year, and are down about 24% on the year. A lot of institutions were buying them because they were representing pretty good value and paying about 6%. Has bought a little bit for some clients that were looking for yield. Doesn’t particularly like preferreds because you are basically exchanging the yield of a bond with the risk of a stock.

Just bought some recently. The Preferred market has been so battered. He would not load up on this, but it would be one of the categories that he would include in a portfolio. He is stepping in now because it has a pretty good rate of return.

You can hold onto Preferred Shares for the longer-term. Preferred shares today are trading at about 125% greater than a yield on a 10 year bond with the same company. It is a better place to be than bonds would be. If interest rates are rising, that is a negative for preferreds. This is a good place to be.

Laddered preferred shares. This is not a bad way to enter the preferred share market. It is one of the fastest growing BMO ETFs today. This one is only investing in the very short end of the curve, resetting within 5 years. Government cuts in short term interest rates have impacted this one. He thinks the rates won’t go any further down in Canada.

He generally does not like preferred shares. You are getting the yield of a bond and the risk of a stock. However, he has actually been buying a little of this. Yields are very attractive.

This gives great diversification with a higher dividend and gives you instant diversification with hundreds of preferred shares. He likes the ladder component. As interest rates rise, you are going to have shares redeemed and invested at a higher rate. However, as interest rates have stayed lower longer than expected, we are now starting to get resets at a much lower level. Preferreds have come under tremendous pressure. Probably overdone in the short term and have gone down to very low values.