PREF opportunity ( or do I just have something wrong)DFN.PR.a at its current price offers one the ability to lock in 11%/yr gain for next 1.7yrs without freezing your money in GIC/etc... Here is the math. Comments gladly accepted !!
NOTE: Distribution at month end will change the numbers a bit....
Current price apx 9.20. Dividend is 5.5% on issue price, so the yield on purchase at todays price apx 6%
But at anniversary ( dec 1, 2024) you can ask for redemption. If unit price is over $10, you get $10. Potential capital gain of another 80c if held to that date. Works out to be 5.2%/yr .
Add the two, and one gets 11%+/yr. but your exposed to appx 33% leverage (unit value is 15,23 and would need to drop 34% before you don't get $10.
I explicitly asked the Redempetion question to Quadravest (ie what if they just renew for 5 years), and they said you always get the oppurtinity to redeem at anniversayr date.