Prices drop further
Returns climb to unprecedented levels
THE ONGOING fall in the prices of listed preference shares – and therefore the capital value of the investment – is still the same as, or more than, the excellent return earned on such investments. Thus, many an investor is perhaps, wrongly, at his wit’s end. It’s easy to say we should look beyond the capital values and focus on the return, which in some cases has now already increased to 16%. That’s a tax-free dividend yield and comparable to a fully taxable interest return of as much as 25%.
Sasfin Securities’ Elan Levy has helped Finweek regularly over the past two years with his comprehensive analysis of preference shares. As usual, we’re publishing a shortened version of his table, which in its own right provides a good survey of the available returns.
Levy’s comments address all the uncertainties surrounding the investments. I can only agree with Levy’s recommendation that preference shares now offer even better investments than they did six months or a year ago. To the best of my knowledge, none of the issuers of preference shares are now under any particular financial pressure. However, investors must remember the market always indicates higher risk with higher returns.