I just took a few more nibbles about 30 or so minutes ago by buying INZ at 10.10, and PVX at 5.39 earlier this morning. Now, as those who follow me know, I do not like perpetual preferred stock issues. They have no maturity date. Being a preferred issue, preference rights in the event of a bankruptcy are just above common stakeholders. The INZ has a coupon of 7.2% and it is an issue from the Dutch bank and insurance company ING best known for INGDIRECT in the U.S. Dividends are paid quarterly and at my purchase cost the effective yield is around 17.2%. While you never know anymore, I do believe that ING is a solid credit but who really knows these days, maybe it is the end of days per Sarah's Pentecostals. As everyone knows, I always read the prospectus before I invest any money. This one does provide that, in the event of a deferral of an interest payment, the deferred amount will earn interest at 7.2%. ING has the option of paying in stock which is okay with me if and when it happens since I used to own the stock having sold my last shares in the mid 30s. You will just have to read the prospectus to see the circumstances that would justify a deferral. I am not going to explain them for you.
As for PVX, it is a Canadian energy trust that pays a monthly dividend. The current rate of about .12 per month would give it a yield before the Canadian 15% withholding tax of about 26.3%. I have explained in my emails the issues surrounding these trusts which include the change in Canadian tax law by the end of 2010 which is discussed also in Canadian Election Could Be A Matter Of Trusts (BTE, HTE, PVX) | September 16, 2008 | By Eugene Bukoveczky - Investopedia Advisor.Moreover, the amount of the dividend is impacted by the exchange rate. It is paid in Canadian dollars (see FXC) and that will of course be converted into U.S. Dollars for me. I received more when the Canadian dollar was at parity and less now since it has fallen versus the dollar. Provident also sold assets near the peak of oil and natural gas prices which appears now to have been a good move. Yahoo! FinanceWhile the company does have natural gas and oil assets, I bought it today primarily for its less cyclical and more stable midstream businesses. It is possible that the company will decrease its dividend due to the fall off in oil and gas prices but that is uncertain. The reason why these Canadian Energy trusts can afford to pay these dividends now is that they are not taxed at the federal level in Canada, but do pay taxes to the Provincial governments like Alberta. If the change in the tax laws is made it will have a substantial impact to the dividend level after 2010. As you know, I am a long term bull on oil and natural gas prices and look to acquire assets now at the cheapest prices that I have seen in years. I do my research prior to buying anything which for a stock like PVX would include reading recent earnings releases, examining financials, earnings estimates, trying to evaluate projected changes in Canadian Tax law as best as I can, reading recent news stories, reading the Morningstar and Value Line reports, etc. No one should make an investment without equaling or exceeding that level of research. I have bought and sold this security at much higher levels this year, with the last sale being around 13 I believe.
In full disclosure, I own shares of INZ AND PVX and will continue to buy additional shares at or below the current price, or even slightly above. This is not a recommendation to buy or to sell. Trade at your own risk, and perform research about these securities by reading the prospectus at sec.gov for INZ and further studying the financial health of ING AND PVX at yahoo finance before making any investment. Consult with your financial advisor prior to making any purchase. In this blog, I am merely describing my reasons for purchasing this security and the potential pitfalls that I identified prior to purchase. This security may not be suitable for others based on their unique financial position and risk profile. THE PROSPECTUS FOR INZ CAN BE FOUND AT SEC.GOVSearch the EDGAR Database (SEARCH ING, GO BACK TO START OF TRADING FOR INZ AND THEN GO BACKWARDS IN TIME UNTIL LOCATED)