Wouldn't you prefer some stability in your preferred share portfolio?

“Brompton Preferred Shares” represents the preferred shares of all five Brompton Split Share Corporations; please see disclosures below for individual share performance and other important details. Brompton Preferred Share performance as presented is the average performance of the five Brompton Preferred Shares over the relevant time period. “Preferred Share Index” or “Index” represents the S&P/ TSX Preferred Share Index, an index of Canadian corporate preferred shares. Source: Thomson Reuters DataStream, for the period beginning February 27, 2015 and ending July 31, 2017.

Brompton Preferred Shares offer investors unique and valuable features:

  • Periodic dividend resets at attractive market yields, without complicated reset formulas
  • Shareholder’s option to redeem at end-of-term, with no restrictions

How unique?

Corporate rate-reset preferred shares generally don’t offer these features. Approximately 78% of the Preferred Share Index is comprised of rate-reset preferred shares1.

How valuable?

Brompton Preferred Shares have outperformed the Preferred Share Index by 7.6% since February 2015, with 70% less volatility.

Why do reset formulas matter?

Corporate rate-reset preferred share dividend yields are reset periodically as the sum of: 1) the then-current base interest rate (usually the Gov’t of Canada 5-yr bond yield); and 2) a “spread” to account for the issuer’s credit risk. Market demands for increasingly higher reset spreads produced negative returns for many corporate rate-reset preferred shares in the period from mid-2014 leading up to early 2016 (representing “spread risk”). Certain preferred share trading prices declined by more than 50% during that time.

Brompton Preferred Share dividends are reset by the Manager every 5 years at competitive all-in market rates based on dividend yields observed in the preferred share market at the time of reset. This simple process effectively resets BOTH the base rate AND the spread for the preferred shares offered by our funds, mitigating spread risk for investors.

Why do retractions matter?

Typically, rate-reset preferred shares are only redeemable at the issuer’s option; when issuers redeem, this is usually ideal for the issuer, but not for the investor. Brompton Preferred Shares are retractable at the shareholder’s option at the end-of-term, providing support for the market price, and giving flexibility to shareholders.

Preferred Share Primer »


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Yield* Inception 1 yr 3 yr 5 yr 10 yr S.I.
SBC.PR.A 3.2% Nov/05 4.7% 4.1% 4.0% 4.5% 4.7%
LBS.PR.A 3.4% Oct/06 6.7% 4.7% 5.1% 5.0% 4.8%
LCS.PR.A 4.7% Apr/07 7.0% 5.6% 8.5% 5.3%
DGS.PR.A 5.0% Dec/07 4.3% 5.2% 5.1% 5.6%
OSP.PR.A 5.6% Feb/15 7.7% 3.9%
Index Jan/13 16.9% 0.3% 1.2% 2.6%

*Annualized quarterly yield to maturity based on market price. Index has no maturity date. Source: Thomson Reuters Datastream, S&P, Dow Jones Indices, Brompton, as at July 31, 2017. Returns are based on market price.

(1) Source: BMO Capital Markets as at July 31, 2017

You will usually pay brokerage fees to your dealer if you purchase or sell shares of the investment fund on the Toronto Stock Exchange or other alternative Canadian trading system (an “exchange”). If the shares are purchased or sold on an exchange, investors may pay more than the current net asset value when buying shares of the investment fund and may receive less than the current net asset value when selling them.

There are ongoing fees and expenses associated with owning shares of an investment fund. An investment fund must prepare disclosure documents that contain key information about the fund. You can find more detailed information about the fund in the public filings available at www.sedar.com. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.

This is for information purposes only and does not constitute an offer to sell or a solicitation to buy the securities referred to herein. The opinions contained herein are solely those of Brompton Funds Limited (“BFL”) and are subject to change without notice. BFL makes every effort to ensure that the information has been derived from sources believed to reliable and accurate. However, BFL assumes no responsibility for any losses or damages, whether direct or indirect which arise from the use of this information. BFL is under no obligation to update the information contained herein. The information should not be regarded as a substitute for the exercise of your own judgment. Please read the Funds’ public filings available at www.sedar.com before investing. Certain statements contained herein constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking information may relate to matters disclosed in this document and to other matters identified in public filings relating to the Funds, to the future outlook of the Funds and anticipated events or results and may include statements regarding the future financial performance of the Funds. In some cases, forward-looking information can be identified by terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue” or other similar expressions concerning matters that are not historical facts. Actual results may vary from such forward-looking information. Investors should not place undue reliance on forward-looking statements. These forward-looking statements are made as of March 2, 2016 and we assume no obligation to update or revise them to reflect new events or circumstances.