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What’s driving the surge in rate-reset preferred shares?
Andrew Allentuck
Published May 4, 2021
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Prices of rate-reset preferred shares, which pay dividends at a fixed rate until they’re reset every five years, have been soaring. And as interest rates rise, these shares’ payouts will increase as their rates reset – regardless of what their issuers’ common stocks do on the basis of sales or profits.
Rate-reset preferred shares make up three-quarters of the S&P/TSX Preferred Share Index, which has risen by 56 per cent since hitting a low on March 16, 2020. Meanwhile, the S&P/TSX Composite Index has risen by about 62 per cent in the same period. Looking ahead, investors are pushing the prices of rate-reset preferred shares even higher in anticipation of further interest rate increases. ....

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