Aug 14, 2013

Cory Diary : Preference Shares

Preference Shares(PS) are specific class of stocks where a company promise to pay fixed dividends subject to terms and conditions. Like equity, PS have different risk levels and rewards. For me to invest in PS, things i would look for is as follow:

1. Piece of Mind : Risks from company collapse
Limit myself to safety of the bank which align my motivation to be in PS

2. Sufficient Returns : Dividends in Percent around 4-5% are reasonable
Sufficient enough to ward-off inflation

3. Reputation : Consistency in payments
Calling off once or twice payments will lower my returns significantly for already a low return

4. Currency Risk : Large capital for fixed yield cannot afford currency risk
Ratio of invest amount to yield is high. Shift in rate may wipe-off my returns.

14th August 2013


  1. When interest rate rise, PS price falls.. Banks won't call when interest rise, cos the cost of paying dividend is lower than interest from loans

  2. Make sense PS will fall. For DBS 4.7% now at $108, is like 1.7x of a year dividend premium. For a long term investor holding PS price has not much relevence since we have no plan to sell. So the constant stream of 4.7% income is not a bad deal compared to Fixed Deposits. And unlike Reits, there are no cash call. In the event it get recalled, we get $100 back and not market price.