Investec prefs

[foolishowl]

Can someone please advise me on the INVR divi please. I was expecting 50% of 6.25% ie 3.125 based on £10 shares I make that 31.25p. Instead the divi paid was 29.08904p.

I hold 600 in an ISA

Where am I going wrong?? Or am I just being stupid or not accounting for something?

Steve

[Laughton]

I'm afraid I can only point you to this:

https://www.londonstockexchange.com/new ... n/16209579

Have a cold today so brain not up to working out why your expectation didn't match up.

[GoSeigen]

Can someone please advise me on the INVR divi please. I was expecting 50% of 6.25% ie 3.125 based on £10 shares I make that 31.25p. Instead the divi paid was 29.08904p.

I hold 600 in an ISA

Where am I going wrong?? Or am I just being stupid or not accounting for something?

Steve

Working from memory the interest is calculated daily. So if base rates were rising during the preceding period then the interest payment may be a bit lower than you expected based on where rates were at the declaration date.

GS

[foolishowl]

Thank you.GoSeigen
I hadn't thought about it being accrued daily from April 1st to Sept 30th. I just looked it up and rates were

From Aug 3rd 5.25%
From 22nd June 5.00%
From May 11th 4.50%
From March 23rd 4.25%

I had forgotten there were so many in a short time period

I feel better setting out as above

[Kr1ck]

And thanks to our Efficient Markets you can now pick INVR up for 537. Which I think is a yield of over 12%. I have reinvested the recent payout in more INVR. It is now a nice little income stream.

[88V8]

And thanks to our Efficient Markets you can now pick INVR up for 537. Which I think is a yield of over 12%. I have reinvested the recent payout in more INVR. It is now a nice little income stream.

Yes, provided you don't mind a steady reduction in the SP, which with rate expectations is pretty much inevitable now.

V8

[GoSeigen]

And thanks to our Efficient Markets you can now pick INVR up for 537. Which I think is a yield of over 12%. I have reinvested the recent payout in more INVR. It is now a nice little income stream.

Yes, provided you don't mind a steady reduction in the SP, which with rate expectations is pretty much inevitable now.

Yah, 12% yield is way too little, send the price lower please.


GS

[hind]

88V8, all depends where you see base rates being in the future ?

At present 10 year is 3.5%, personally think we will go back to 3% base rate eventually so thats 40p/537p = 7.45%

[hind]

If we presume in the mean time they pay 5% total more over next 2 years more than other prefs then the 537 becomes 510p so 40p/510p = 7.85%

So plan keep mine, as hedge for normal prefs hold, however probably wont buy more

[Kr1ck]

And thanks to our Efficient Markets you can now pick INVR up for 537. Which I think is a yield of over 12%. I have reinvested the recent payout in more INVR. It is now a nice little income stream.

Yes, provided you don't mind a steady reduction in the SP, which with rate expectations is pretty much inevitable now.

V8

In Aug 22 when interest rates were at 1.75% these were priced at 600. Other than the covid crisis they never really moved much despite rates falling to 0.1%. Go figure. Nothing is inevitable with these! I picked these up for a song after the 2008 crash and have held them as an inflation hedge. I probably won't get too many more but enjoying the income while it lasts. Inflation tends to be sticky so I expect to enjoy it for a little while yet. I'll sell when either the market values these higher or we get a decent offer.

ps. I think the rather anomolous behaviour might be down to the number of shares in existence after the last offer.

[OldBoyReturns]

Worth a quick update on INVR following today's MPC meeting.

- there is now 4 months (c.21p) of dividend 'accrued' in the price. The current dividend period runs from 1 Oct 23 - 31 Mar 24 with the dividend accruing daily using an annual rate of BoE Base + 1% (so currently 6.25%)

- at current market offer price of 540 (519 after stripping out the accrued dividend from above) this represents a running yield of 12%

- BoE Base Rate was held at 5.25% at today's MPC meeting. The next meeting is not until the 21 March so base rate is guaranteed to stay at 5.25% until at least then. So the next dividend will be (or very close to) 31.25p per preference share

- today's MPC decision was an unusual 3 way split with noise around inflation expected to be sticky in H2 2024. So it seems unlikely base rate will be cut very much this year

With most other prefs now yielding under 7% the 12% INVR yield still looks attractive. Against this the combination of INVR being floater and the unusually small coupon margin (100bps above base) makes the coupon highly geared on changes to base rate. The market does not seem to like this feature so not one to buy in any expectation of capital appreciation.

[88V8]

With most other prefs now yielding under 7% the 12% INVR yield still looks attractive. Against this the combination of INVR being floater and the unusually small coupon margin (100bps above base) makes the coupon highly geared on changes to base rate. The market does not seem to like this feature so not one to buy in any expectation of capital appreciation.

As rates fall the income will fall and the SP likewise.
Quite unlike a normal Pref where they move contrarywise.
SP is already down quite a way from the peak.

I sold part of my holding today.
Next week I shall sell the rest.
It makes no sense for me to get income taxed at HRT and a guaranteed capital decline.

Even in an ISA the capital loss will exceed the income.

It was nice while it lasted and there may be a time to buy them again, but for now I shall pile a bit more into GACA where I can get c7% with a pretty much guaranteed rise in SP when the BoE actually get round to rate cuts, and the possibility of a tender.

V8

[GoSeigen]

As rates fall the income will fall and the SP likewise.
Quite unlike a normal Pref where they move contrarywise.
SP is already down quite a way from the peak.

I sold part of my holding today.
Next week I shall sell the rest.
It makes no sense for me to get income taxed at HRT and a guaranteed capital decline.

Even in an ISA the capital loss will exceed the income.

It was nice while it lasted and there may be a time to buy them again, but for now I shall pile a bit more into GACA where I can get c7% with a pretty much guaranteed rise in SP when the BoE actually get round to rate cuts, and the possibility of a tender.

V8

Who is guaranteeing all this stuff that is guaranteed to happen??

GS

[BullDog]

As rates fall the income will fall and the SP likewise.
Quite unlike a normal Pref where they move contrarywise.
SP is already down quite a way from the peak.

I sold part of my holding today.
Next week I shall sell the rest.
It makes no sense for me to get income taxed at HRT and a guaranteed capital decline.

Even in an ISA the capital loss will exceed the income.

It was nice while it lasted and there may be a time to buy them again, but for now I shall pile a bit more into GACA where I can get c7% with a pretty much guaranteed rise in SP when the BoE actually get round to rate cuts, and the possibility of a tender.

V8

Who is guaranteeing all this stuff that is guaranteed to happen??

GS

I think the key words there are "pretty much".

[88V8]

Who is guaranteeing all this stuff that is guaranteed to happen??

Wanna bet?

V8

[Padders72]

I like GACA too but can tolerate a small capital decline here if these continue to pay me the thick end of 10% of my purchase price for the next couple of years. Interest rates have to fall a very long way to make these look expensive IMO for instance if rates only fall ~1% in the short to medium term then these still make a lot of sense so I am staying put with my modest holding. Indeed if their price fall outstrips actual (rather than expected) cuts in interest rates and the yield stays at around 12% or even increases I may buy more.

[hind]

Issue for me is a large base rate fall is already priced in
If put INVR at 510p (530p - near term income over GACA) then to get the 7.07% that GACA is at, INVR needs a base rate of 2.55%

[GoSeigen]

Who is guaranteeing all this stuff that is guaranteed to happen??

GS

I think the key words there are "pretty much".

"It makes no sense for me to get income taxed at HRT and a guaranteed capital decline."

Where does it say "pretty much"?

I strongly dispute the idea that capital decline is guaranteed or even likely. What if the BoE raises interest rates? Will capital values still decline? What if they don't lower rates for years? Will these preference shares still yield 12% all that time? What if comparable yields are only 8-9%? Or if spreads in general narrow?

I am wary when people go around talking about anything being guaranteed in markets. For me the most guaranteed thing is that my opinion about the future will turn out wrong.


GS

[BullDog]

I think the key words there are "pretty much".

"It makes no sense for me to get income taxed at HRT and a guaranteed capital decline."

Where does it say "pretty much"?

I strongly dispute the idea that capital decline is guaranteed or even likely. What if the BoE raises interest rates? Will capital values still decline? What if they don't lower rates for years? Will these preference shares still yield 12% all that time? What if comparable yields are only 8-9%? Or if spreads in general narrow?

I am wary when people go around talking about anything being guaranteed in markets. For me the most guaranteed thing is that my opinion about the future will turn out wrong.


GS

Right here as quoted from the post you referred to -

It was nice while it lasted and there may be a time to buy them again, but for now I shall pile a bit more into GACA where I can get c7% with a pretty much guaranteed rise in SP when the BoE actually get round to rate cuts, and the possibility of a tender.

[88V8]

I think the key words there are "pretty much".

"It makes no sense for me to get income taxed at HRT and a guaranteed capital decline."
I am wary when people go around talking about anything being guaranteed in markets. For me the most guaranteed thing is that my opinion about the future will turn out wrong.

Yes, I have had that difficulty.

But over the next twelve months I give you four certainties:

1 The SP of GACA will rise, such that I will be able to sell for more than the 126.5p I paid today, or sell previously by tender.
2 The SP of INVR bid to bid will fall by more than the received divis of March and September.
3 Death
4 Taxes

Remind me on February 1 next year, assuming I avoid No 3

V8