RE:RE:A question for PierrelebelThankyou for your time and viewpoints, enjoy the weekend.
pierrelebel wrote:
12diabolical - Thank you for your question. Mary and I are preferred shareholders (BBD.PR.D). The current - tax advantaged - yield is in excess of 8% (it was more than 13% on the last shares we purchased in January and February at $5.60/$6.00).
The BBD.PR.D have a call price of $25.00
They are "reset" preferred and, as such, provide substantial protection should interest rates go up in Canada. The next reset is scheduled fo August 2017, then August 2022).
Many potential upsides for the "D" preferred on the long term. As interest rates rise - and they will eventually as we all know - the dividend wil be reset at a higher level.
Because of the Quebec government "protection" and support, it is safe to state that BBD will not be allowed to go into bankruptcy. So the preferred shares are well protected against default.
In case of an unexpected sale of the company, the buyer(s) may call the preferred shares ($25) resulting in a large capital gain.
Now these comments apply to the reset preferred shares. BBD also has perpetual preferred shares outstanding. They have a good yield but do not have the protection of a reset if and when interest rates go up.
As far as common shares, as stated previously, I do not see any substantial gain possible over the next many years, even of the C Series is highly successful. Too many obstacles before "B" (limited vote) common shareholders see a benefit. BBD could sell hundreds of planes every year but... cannot produce them profitably. To increase production to meet the demand (should it develop) BBD would need to borrow again and, to be honest, they may find it difficult to do so. You can only borrow if someone is willing to lend you money (Credit rating for BBD has been downgraded and now stand at single B at S&P and Fitch, B3 at Moody's). Or BBD could issue more common shares, creating more dilution once again, to the detriment of common shareholders.
Everyone involved with BBD will make money before common "B" shareholders do.