While preference shares do not come without risk, they do offer potential in a lacklustre investment environment.
Trying to find something that is going up in our current market is proving almost impossible. It feels like there is nowhere to hide. And no matter what valuations you buy at, the price just continues lower. Even the market darlings of the last few years are out of favour.
But there is still money to be made. We just need to look in different corners.
The corner I am talking of here is preference shares. These are debt instruments issued by listed companies, and are a loan to the company at the time of listing. They then pay regular dividends that are linked to the prime interest rate. Being dividends, they attract dividend withholding tax of 20%. What we are seeing is some great yields from the non-financial preference shares, with some over 10%. This is potentially a great place to hide while our market decides what it wants to do.
What is also important is that while a preference share will be issued at an underlying value (most often R100), it trades free without a market maker. You can therefore buy it at a discount to its actual value, enhancing the yield.
This story is from the 25 October 2018 edition of Finweek English.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the 25 October 2018 edition of Finweek English.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber? Sign In
THE HEALTH OF SA'S MEDICAL SCHEMES
As the Covid-19 pandemic abates, finweek takes a look at the financial performance of some of the largest players.
The effect of Gilbertson's departure
With Ntsimbintle Holdings now the major shareholder of Jupiter Mines, it could change SA’s manganese industry.
Making money from music
Why investors are increasingly drawn to the music industry.
Conviction is key
Sandy Rheeder plays a critical role in Mukuru’s mission to open up financial services to the emerging consumer market in Africa through tailor-made technology solutions and platforms.
The post-pandemic toolkit
How CFOs can use technology to support growth.
Big city living exodus
Mini cities like Waterfall City and Steyn City are redefining city-style apartment living.
Big compact, big value
Handsome, with a hefty level of standard specification, the roomy Haval Jolion compact crossover is a great value proposition.
On barriers to entry
There are various ways in which a company or sector can achieve competitive dominance. They usually make for good investments.
Fear and greed in one index
To buck the trend, when markets are hot or cold, is a tough thing to do. However, it can deliver solid returns.
Africa's largest data centre facility coming soon
Vantage Data Centers plans to invest over R15bn for its first African data centre facility in Attacq’s Waterfall City.
