It is the objective of highest yield that entices investors to divulge in The Canadian preferential shares. For anybody seeking a regular dividend payout, it is virtually impossible to ignore annual yields that are upwards of +4% and something that the passive stake-holders of Canadian stocks have duly received every month.
Royal Bank of Canada boasts of a market capitalization bigger than any other Canadian company and delivers a dividend yield of 4.45% and it is good to know info that the bank has elevated the dividend amount 15 times in the last 8 years which is fixed at 50 cents per quarter since 2009. Banking major Toronto Dominion Bank is offering an average yield of 4.85% along with an equivalent price appreciation.
Insider v/s the outsider!
Perhaps the best way to depict an inactive security holder is that of an outside investor who has no voting rights yet will always be given preference over a common investor, in terms of dividend payouts and claiming rights in case the company hits a wall and decides to liquefy its assets.
Participating equities are also subjected to the 'Call' feature, a provision which is attached with most preferential options and bonds if not all. In simple words it means that if in case the stock is in a rally, promoters can recall the shares to increase their stake, thereby ensuring that all surge based profits are distributed to the common share holders only. On the advantage front, holder experiences very little volatility in contrast to the common investor. As a thumb rule, if a business is delivering below forecast earnings, prices of its cumulative equity will fluctuate lesser than that of the common share as long as the promoters have enough dollars to spare for the preference stake holders share of the dividend.
As opposed to the paltry post tax returns that may be derived out of bonds, exposure to Canada Preferred ETFs adds up in form of tax benefits and a long term growth opportunity because the prices of the participating stocks are correlated to that of common stocks. Although, the right reason to buy the asset should be a monthly pay out incentive rather than capital growth. Readers wanting to add more income to their retirement plan may also take a close look at this investment product especially in a low interest rate environ.
Adding a dividend paying Canada Fund to your kitty does open a window to a regular income source and will surely appeal to buyers looking for the same. Asset allocations may vary with individual approach as market has quite a few products to offer. A niche fund like Horizons Preferred ETF has a best in its class Year to Date growth of 12.66%, but requires minimum investments beyond $100,000. Global X CNPF shares some of the top assets with its Horizon counterpart with nil or little minimum criteria. A fair index to keep a track on this market territory is Solactive Canada Preferred Stock Fund which has given a 10.42% returns for the past twelve months.
The focus out here is on equities like TransCanada, Enbridge Inc., Bank of Montreal, and Bank of Nova Scotia among others. These are some of the highest yielding Canada preferential stocks along with the heavy weights like Royal Bank of Canada and Toronto Dominion Bank. Dividend yielding Canada ETFs have proved their monthly payout skills over time and again and only time will tell whether if they can achieve the same feat in terms of wealth creation for a long investor.
Global X Canada Preferred ETF [CNPF] entitles investors to a wide spectrum of Canadian stocks with an almost equal weight age. Apart from the financials which account for 70% of the assets, Energy with 13.36% holdings is the second biggest sector. CNPF ETF operates at a management fees of 0.58 basis points.