Preference share upside

[everhopeful]

If the predictions for the rate of inflation decline in the budget are correct and if predictions that interest rates will start to be cut are also correct does this make prefs cheap. Yields of around 6.5% on NWBD and ELLA suggest there might be significant capital appreciation potential. I have plenty of both of these but when looking where to invest dividend receipts I am struggling to find much enthusiasm for alternatives.

[mesb48]

Have a look at RSAB maybe. You can buy fractionally over par so yields close to 7.3%. Cumulative.

2022 accounts have gone on Companies House (yesterday) - was just reading them because I hold - says they’ve done a buy-in of the large defined benefit pension scheme post year end which significantly reduces risk imo. It was funded by capital contribution from new Canadian parent, showing strength on that front.

But I like the fact it’s so close to par too. So even though not redeemable, feels less risky on that front. Reading the accounts feels like there’s been a lot of a clean up of the company structure since it was acquired by Intact. My assumption is that at some point they will tender the prefs, and for a £125m share issue they can afford I suspect to make it attractive to get the tender to fly. The articles specifically explain it would be at par + any premium decided by board (could be zero, but then they’d maybe not get much acceptance so sceptical of that happening if they ever bother with the legal/admin hassle of doing it) + dividend arrears.

[Redhill]

Agree about RSAB for the reasons mentioned.

Having added at these levels I find it's now my largest individual Pref holding, but arguably there are numerous bargains in the bank and insurance Pref category at the moment, unless you think we're heading for complete financial sector wipe-out of course.......

[hind]

Yep added some yesterday @ 99.95p. Thank you for the accounts heads up. I will have a read if can find them and my holding may increase as they are one of my smaller pref holdings

[everhopeful]

Thanks mesb48. RSAB looks interesting. I don't have any at the moment and will look at a purchase after the weekend. I like that it is around par.

[Holts]

It would seem the events at Credit Suisse have also slightly enhanced prefs as they have better language in the prospectus than the now dreaded AT1/Co Co .