Brookfield Office Properties Inc T.BPS.PR.U

Dividends are in the account.

[pierrelebel]

Life is good.

My wife and I received $4,201.31 dividends yesterday for our 9,900 BPO.PR.T.

Now let us take a few minutes and compare what life would be like if we had BPO.PR.A instead.

For the year 2024;

BPO.PR.A $0.294375 x 4 x 9,900 = $11,657.25
BPO.PR.T $0.424375 x 4 x 9,900 = $16,805.25

Net benefit holding T over A for year 2024 = $5,148.00

That is money in our pockets ("bird in our hands")

Now the "A" will reset at the end of this year with the new dividend rate applicable at the end of March 2025.

To estimate the eventual dividend one must make some projections since we do not know what the Canada 5 year bond rate will be on December 1st 2024.

What is generally understood and agreed upon in the investment community is that interest rates will be going down later this year. The current rate of 3.52% is slightly less than the December 1st 2023 rate when the "T" were reset. I expect and project Canada 5 year bond rate will go down with other interest rates by year end to around 3.00%/3.25%.

To be on the safe and conservative side of things I will use 3.00% as a base of the reset of "A" meaning 6.15% (3.00 + 3.15). This would bring a new dividend annual rate of $1.5375.

Based on our holdings of 9,900 shares that would be $15,221,25 (still $1,584.00 less than the "T"),

Now let's add up 5 years of differences in the dividends received
2024  $5,148.00
2025  $1,584.00
2026  $1,584.00
2027  $1,584.00
2028  $1,584.00

Total $11,484.00

Now there could possibly be an increase in the value of the "A" in relation to the "T" after reset.  However, considering the "A" would pay about 10% less dividend for the following four years it is hard to imagine their share value would appreciate above the "T".

Now, those projections may change if and when
1) the spread between the share price of A and T grows to $2.50/$3.00 over the next month or two as I expect
2) forecast for lower interest rates change over the next six months

[Carena]

Hi Pierre, I understand your work and agree with your logic. The A's closed at $13.92 yesterday and the T's closed at $15.18.  The spread on the A's are T's are the same and there is no floor on both...correct? So your analysis is concluding, the market has it about right.  That is, because the T's are a bird in the hand, the A's have a bit more interest rate

[pierrelebel]

Carena asked "why you think the A and T spread will increase in next 60 days to $3 per share." My expectation of a larger spread over the next few months is based on experience. While it does not always work that way, I noticed that investors who buy preferred shares after a reset with a much higher dividend payout often wait until they notice the higher yield in the financial media. It

[Carena]

I see, I now recall you saying that in past posts.

[rodbhar]

This is a thoughtful analysis. But do you really think you can predict 5 year bond yields? If you can you could make a lot more money in the bond market than you can bothering with bpo preferred stock.

[pierrelebel]

"do you really think you can predict 5 year bond yields?" No, I can't. My projections (not predictions) used in my calculations are based on available public information. Different people may see the same information and come with different conclusions. This is what makes the market: different opinions resulting in a buyer and a seller. In the meantime my investments are doing

[SONOFFERGUS]

Hi Pierre. Congrats on your T series call.  What a win!  I very much like your theory that it takes a while for Mr. Market to realize that dividends have reset and, since pref prices are overwhelmingly driven by retail, series T sure sticks out in a broker's data dump as a "bird in hand."  11%+ for 5 years does wonders for a payback ratio. The BPO prefs, and prefs in

[Carena]

Good morning, I always have to read your stuff twice....but I think I get it all.  Well said. I agree the BPO prefs are fascinating things.....the internal hedging characteristic has been intriguing to say the least...I was rooting for higher rates and then I was rooting for a return to lower rates..lol. I own the T and N rate resets and the E and G floors.  My choices were a

[CrazyTrader]

Pierre, no one here is your friend or trying to help you.  If they were, they would have pointing out you your Critical "mistakes" in this comparison example of yours between the A's and T's.    You take offence of me trying to help you so I won't mention your critical mistakes unless you want me too.

[CrazyTrader]

Your First Critial Mistake in your "A" vs "T" example is that you compared using the SAME number of shares for both A and T.....  You can buy a lot more "A" shares for the same amount you spent on the T's. I decided to Point out your MISTAKE.... and it is a MISTAKE.... since you posted a post basically to attack me, and for no other reason.  

[CrazyTrader]

Can you figure out your 2nd Critical mistake?   Just like your first mistake, it's very basic.      Everyone knows you could buy more A shaes than T shares with the same amount of investment. But nobody bothered to correct you when you compared the A's and T's using the same number of shares. Nobody here is your friend.