Understanding BCE inc Preferreds is a must for any investor wishing to hold telecom securities in their portfolio. BCE has issued 4 types of preferreds providing investors with a good selection set. I will review all 4 types and point out what you have to look out for. BCE is one of Canada’s largest telecom companies. Its the only one with a good set of preferreds. You can find a list and detailed information of these securities in our page Rank BCE Inc Preferreds. Shaw is the other, but its a smaller company and has only 2 preferreds, their securities are ranked in our page Rank Shaw Communications Preferreds .
Understanding BCE inc Preferreds through the prospectuses
I have reviewed the prospectus provided by BCE for each of their preferred shares. For each, I have highlighted the most important information you need to be aware of, as holder of this preferred. Here is a list of the locations for each preferred reviewed and highlighted for your review, if you wish to do so yourself as well. All of BCE inc preferred shares are cumulative.
BCE has issued a total of 21 preferred securities consisting of :
- Twelve “5 Year Resets ” of two variations
- Four Based on the 5 Year Rate plus a spread.
- Eight Based on the 5 Year Rate with a Negative spread.
- Two “3 Month” Floaters
- Seven Floaters based on the Prime Rate.
The “5 Year Resets” and the “3 Month” floaters follow the normal sturcture for their type. The “5 Year” with negative spread and the floater of the prime rate needs more investigation.
Understanding BCE Inc 5 Year Resets with Negative Spread
These 8 preferred stocks (BCE.PR.R, BCE.PR.T, BCE.PR.Z, BCE.PR.A, BCE.PR.C, BCE.PR.F, BCE.PR.G, BCE.PR.I) offer a negative spread. The yield of this security, is guaranteed to be >=80% OF 5YR RATE <=100%. In other words the yield will be always discounted between 20 and 0 %. BCE is the only issuer with a preferred structured this way. In the table below you can see how, this affects each of the preferreds at renewal, based on some what if scenarios.
Reset Scenarios Based on Various G.O.C. 5 Year Bond Yield Rates
- Scenario 1: 5YR GOC Rate is set at -0.5%
- Scenario 2: 5YR GOC Rate is set at 0.01%
- Scenario 3: 5YR GOC Rate is set at 0.4%
- Scenario 4: 5YR GOC Rate is set at 0.8%
- Scenario 5: 5YR GOC Rate is set at 1.2%
- Scenario 6: 5YR GOC Rate is set at 1.6%
| Credit Rating | Symbol | Reset Date Y/M/D | Fixed Rate Base | Current (Yield | Dividend) |
5Yr @ -0.5%. Reset (Yield | Dividend)Scenario: 1 yield and dividend based on GOC 5yr Rate of 5Yr @ -0.5%.
|
5Yr @ -0.5%. Blended (Yield | Dividend) | 5Yr @ -0.5%. Rate Increase (percent | to value ) |
5Yr @ 0.01%. Reset (Yield | Dividend)Scenario: 2 yield and dividend based on GOC 5yr Rate of 5Yr @ 0.01%.
|
5Yr @ 0.01%. Blended (Yield | Dividend) | 5Yr @ 0.01%. Rate Increase (percent | to value ) |
5Yr @ 0.4%. Reset (Yield | Dividend)Scenario: 3 yield and dividend based on GOC 5yr Rate of 5Yr @ 0.4%.
|
5Yr @ 0.4%. Blended (Yield | Dividend) | 5Yr @ 0.4%. Rate Increase (percent | to value ) |
5Yr @ 0.8%. Reset (Yield | Dividend)Scenario: 4 yield and dividend based on GOC 5yr Rate of 5Yr @ 0.8%.
|
5Yr @ 0.8%. Blended (Yield | Dividend) | 5Yr @ 0.8%. Rate Increase (percent | to value ) |
5Yr @ 1.2%. Reset (Yield | Dividend)Scenario: 5 yield and dividend based on GOC 5yr Rate of 5Yr @ 1.2%.
|
5Yr @ 1.2%. Blended (Yield | Dividend) | 5Yr @ 1.2%. Rate Increase (percent | to value ) |
5Yr @ 1.6%. Reset (Yield | Dividend)Scenario: 6 yield and dividend based on GOC 5yr Rate of 5Yr @ 1.6%.
|
5Yr @ 1.6%. Blended (Yield | Dividend) | 5Yr @ 1.6%. Rate Increase (percent | to value ) |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Pfd3 | BCE-R BCE.PR.R CA05534B7034 | 2020DEC01 | NEGATIVE_SPREAD(>=80% OF 5YR RATE <=100%) at least 0.28% | 08.71% | $1.0324 | -0.84% | $-0.1 | -0.36% | $-0.0 | 111% | -0.84% | 0.01% | $0.00 | 00.45% | $0.05 | 111% | 0.01% | 0.67% | $0.08 | 01.07% | $0.12 | 111% | 0.67% | 1.35% | $0.16 | 01.71% | $0.20 | 111% | 1.35% | 2.03% | $0.24 | 02.35% | $0.27 | 111% | 2.03% | 2.70% | $0.32 | 03.00% | $0.35 | 111% | 2.70% |
| Pfd3 | BCE-T BCE.PR.T CA05534B8107 | 2021NOV01 | NEGATIVE_SPREAD(>=80% OF 5YR RATE <=100%) at least 0.28% | 06.32% | $0.7544 | -0.83% | $-0.1 | 00.59% | $0.07 | 110% | -0.83% | 0.01% | $0.00 | 01.27% | $0.15 | 110% | 0.01% | 0.67% | $0.08 | 01.79% | $0.21 | 109% | 0.67% | 1.34% | $0.16 | 02.33% | $0.27 | 109% | 1.34% | 2.01% | $0.24 | 02.87% | $0.34 | 109% | 2.01% | 2.68% | $0.32 | 03.40% | $0.40 | 109% | 2.68% |
| Pfd3 | BCE-Z BCE.PR.Z CA05534B8289 | 2022DEC01 | NEGATIVE_SPREAD(>=80% OF 5YR RATE <=100%) at least 0.28% | 07.51% | $0.9760 | -0.76% | $-0.1 | 02.95% | $0.38 | 092% | -0.76% | 0.01% | $0.00 | 03.38% | $0.44 | 092% | 0.01% | 0.61% | $0.08 | 03.71% | $0.48 | 092% | 0.61% | 1.23% | $0.16 | 04.05% | $0.52 | 092% | 1.23% | 1.85% | $0.24 | 04.39% | $0.57 | 092% | 1.85% | 2.46% | $0.32 | 04.73% | $0.61 | 092% | 2.46% |
| Pfd3 | BCE-A BCE.PR.A CA05534B7943 | 2022SEP01 | NEGATIVE_SPREAD(>=80% OF 5YR RATE <=100%) at least 0.28% | 07.06% | $0.9025 | -0.78% | $-0.1 | 02.35% | $0.30 | 095% | -0.78% | 0.01% | $0.00 | 02.83% | $0.36 | 095% | 0.01% | 0.62% | $0.08 | 03.20% | $0.40 | 095% | 0.62% | 1.25% | $0.16 | 03.57% | $0.45 | 095% | 1.25% | 1.88% | $0.24 | 03.95% | $0.50 | 095% | 1.88% | 2.50% | $0.32 | 04.32% | $0.55 | 095% | 2.50% |
| Pfd3 | BCE-C BCE.PR.C CA05534B7869 | 2023MAR01 | NEGATIVE_SPREAD(>=80% OF 5YR RATE <=100%) at least 0.28% | 07.56% | $1.0950 | -0.69% | $-0.1 | 03.43% | $0.49 | 072% | -0.69% | 0.01% | $0.00 | 03.78% | $0.54 | 072% | 0.01% | 0.55% | $0.08 | 04.05% | $0.58 | 072% | 0.55% | 1.10% | $0.16 | 04.33% | $0.62 | 071% | 1.10% | 1.66% | $0.24 | 04.60% | $0.66 | 072% | 1.66% | 2.21% | $0.32 | 04.88% | $0.70 | 072% | 2.21% |
| Pfd3 | BCE-F BCE.PR.F CA05534B7455 | 2025FEB01 | NEGATIVE_SPREAD(>=80% OF 5YR RATE <=100%) at least 0.28% | 07.01% | $0.9663 | -0.72% | $-0.1 | 05.85% | $0.80 | 081% | -0.72% | 0.01% | $0.00 | 05.96% | $0.82 | 081% | 0.01% | 0.58% | $0.08 | 06.04% | $0.83 | 081% | 0.58% | 1.16% | $0.16 | 06.13% | $0.84 | 081% | 1.16% | 1.74% | $0.24 | 06.22% | $0.85 | 081% | 1.74% | 2.32% | $0.32 | 06.30% | $0.86 | 081% | 2.32% |
| Pfd3 | BCE-G BCE.PR.G CA05534B7372 | 2021MAY01 | NEGATIVE_SPREAD(>=80% OF 5YR RATE <=100%) at least 0.28% | 05.87% | $0.6875 | -0.85% | $-0.1 | -0.18% | $-0.0 | 113% | -0.85% | 0.01% | $0.00 | 00.60% | $0.07 | 114% | 0.01% | 0.68% | $0.08 | 01.20% | $0.14 | 113% | 0.68% | 1.37% | $0.16 | 01.81% | $0.21 | 114% | 1.37% | 2.05% | $0.24 | 02.42% | $0.28 | 114% | 2.05% | 2.73% | $0.32 | 03.04% | $0.35 | 113% | 2.73% |
| Pfd3 | BCE-I BCE.PR.I CA05534B7117 | 2021AUG01 | NEGATIVE_SPREAD(>=80% OF 5YR RATE <=100%) at least 0.28% | 05.98% | $0.6875 | -0.87% | $-0.1 | 00.15% | $0.01 | 118% | -0.87% | 0.01% | $0.00 | 00.91% | $0.10 | 118% | 0.01% | 0.69% | $0.08 | 01.48% | $0.17 | 118% | 0.69% | 1.39% | $0.16 | 02.07% | $0.23 | 117% | 1.39% | 2.09% | $0.24 | 02.67% | $0.30 | 118% | 2.09% | 2.78% | $0.32 | 03.26% | $0.37 | 117% | 2.78% |
Understanding BCE Inc Negative Spread
As you can see from the table above the effect of the reset will be devastating to your holdings. Lets review in detail what will happen. Lets take for example BCE.PR.R.
This will reset in DEC of 2020. To find out resetting dates just use our tool Preferreds Resetting Within In 180 Days.
Current yield is 08.71% with a yearly dividend of $1.0324. How is the reset going to affect this security.
- Based on today’s 5yr rate of 0.35% the new yield will be 00.99% and new annual dividend $0.11. That is about 1/10th of today’s yield.
- Based on 5yr rate of 0.8% the new yield will be 1.35% and the yearly dividend $0.16
You can view 6 scenarios in the above table.
Its clear in the current environment choosing to renew is a mistake. This is the default option.
Conversion is the better option.
All of the 5 year resets have a conversion option to a “floating 80% of prime” equivalent preferred. For example BCE.PR.R. can convert to a new issue of “First Preferred Series Q”. Based on today’s prime rate of 2.45% you can expect a yield of around 4.2% and yearly dividend of about $0.50. As you can see this is by far the better choice. To convert you must inform BCE you plan to do so within the allotted time period.
It may also be an opportunity depending on what happens to the price of the BCE.PR.R after it resets. With a crazy low yield I would expect to get this for a couple of dollars. For a patient investor this is definitely an intriguing situation.
Canadian Preferred Shares – Mission
Our mission is to provide the average investor with the knowledge, up to date information, latest trends, data and tools to select the best preferreds to purchase or sell today.
Without tools like the ones we provide here, its simply not possible to make an educated decision, thus keeping most individual investors away. Our tools provide an overall view, of the preferreds market. With a few clicks you can easily locate today’s best preferreds within a sector/category or across the whole market.
Using our homepage as a starting point you can access all of our tools.