RE:Preferred SharesThe current premium is not out of line with other preferred shares that are also trading well above par. LBS.PR.A, ENS.PR.A, FTN.PR.A, etc. have all been hovering around $10.30 or even above. PDV.PR.A, another very llliquid stock, closed at $10.43 on Friday.
These are all technically overvlaued, but buyers are still able to make money over time simply because of their attractive dividend yields, which reduce their cost base over time.
The enormous risk posed by many of these split shares, both preferred and class A shares, is the lack of liquidity. If someone needs to get out, look out below! Compounding the risk is the leverage inherent in the capital shares. If the unit NAV corrects by just 5%, the NAV of the class A shares drops by 8.7%, wiping out most of the current discount.
A 10% correction would drop the unit NAV from the current $23.40 to $21.06, leaving the class A valued at $11.06, and trading at an unjustifiable premium of over 5%.
BeyondValuez wrote: The current NAV on the NPS preferred shares is $10. This is also considered a P3 in safety, which is low.
Currenly trading at $10.39 which is a premium to NAV, makes no sense to buy these at a premium especially with its low rating.