Brilliant Preferred Shares Picks

As happens from time to time, earlier this year, I saw someone post a stock tip to a social media website.

Now, I am not one to follow any random tip I come across. But this tip was backed by impressive research, so I decided to place a relatively modest bet on two of the stocks mentioned. The two purchases together represented about 5% of my portfolio at that time.

Up 32% and 40% year to date.

I regret that I did not make a larger bet on these stocks.

As you can see, in five months, I’ve earned approximately 7% as a dividend from each. The stocks have appreciated 25-30% each. They were underpriced in January.

Preferred shares are special. They’re complicated and don’t act like regular stocks. These particular issues have a reset date at which the interest rate is reset. The company can choose to roll over the stocks or repurchase them for a high premium.

Around the same time, I purchased Financial 15 (FFN) preferreds.

FFN was fairly priced but promised a solid 10% annual return. It has shown to be very reliable in that it has zero capital appreciation but delivers its dividends on time.

Theoretically, I could put my entire portfolio in FFN-PR-A and just collect 10% per year.

Unlike BPO above, this return is not tied to the Bank of Canada Prime rate and shouldn’t fluctuate as interest rates go down.

It is, however, assuming Banks will always pay a dividend. Which I think is a pretty safe assumption.