Prices drop fur­ther

Re­turns climb to un­prece­dented lev­els

Finweek English Edition - - Communication & Technology - VIC DE KLERK

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.

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