Wednesday, October 1, 2014

Preferred Shares

TD Waterhouse has a weekly video and this one is on Preferred Shares. Preferred Shares are quite popular at the moment and this market has grown significantly over the past while.

TD Waterhouse talks about the most popular Preferred Shares currently, which is Rate Reset Preferred Shares. If you want to understand this subject, this would be a good video to watch and as with all TD videos it is a short one of less than 10 minutes.

A lot of people perceive that Preferred Share dividends are safer than Common Share dividends. It is true that Preferred Share dividends must be paid in full for a company to issue Common Share dividends. So you could be in a situation that Preferred Share dividends are paid and Common Share dividends are not. When I say that Preferred Share dividends must be paid in full, I mean that any missed Preferred Share dividends must be paid. Missed Common Share dividends are never paid.

I feel that if a company is in severe difficulties, it does not matter what you position is in the debt line. If a company goes bankrupt few people get any money and certainly not Preferred Shares or Common Shares. What happens if a company gets into trouble is payments are stopped on Common Shares, then Preferred Shares and then Bonds.

The site Investopedia has some notes on Preferred Shares. Raymond James has a recent report on Canadian Preferred Shares. This report includes a sample preferred share portfolio that might be of interest. There is also a blogger Pref Blog that talks about Preferred Shares.

On my other blog I am today writing about Le Chateau Inc. (TSX-CTU.A, OTC-LCUAF) ... continue...

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