Time to BUY Zero Dividend Prefs (ZDPs)

[SKYSHIP]

Time to BUY Zero Dividend Prefs (ZDPs)

The "Hay Day" for ZDPs was back in 2002-2005 when many investors, innocent of balance sheet complexities, discarded perfectly secure Split-level IT prefs thinking they were wholly contaminated by risks evident in the ords. That proved a great opportunity as it became possible to scoop up well-covered asset bargains on 15%+ Gross Redemption Yields (GRYs). Most of the B/B discussion then went under the JDT thread over at ADVFN.

ZDPs went out of fashion for a time; but recently there have been quite a few issues; and it is time to have a look at a few.

I now hold a mini-portfolio of 3 Zero Dividend Prefs:

# Acorn Income ZDPs – 149p – Redeem at 167.2p on 28/02/2022 – GRY = 6.27%
# Inland Homes ZDPs – 143.4p – Redeem at 201.40p on 10/04/2024 – GRY = 8.84%
# NB Private Equity ZDPs – 110.7p – Redeem at 130.09p on 30/09/2022 – GRY = 6.7%

An equal investment across the three provides an average GRY of 7.29%.

All have substantial asset cover.

NB – a look at the trades suggest that the cheap stock in INLZ came from a seller c10days ago; and that stock is being hoovered up…

[Wizard]

Is there a general source that lists all the current ZDP?

[mc2fool]

Is there a general source that lists all the current ZDP?

https://www.theaic.co.uk/aic/find-compare-investment-companies/zdp-analytics

[everhopeful]

Those of us who experienced the total loss of Aberdeen ZDPs "back in the day" may take quite some convincing to dip a toe in to this water again.

[SKYSHIP]

everhopeful - sorry that you had such a bad experience with your one and only ZDP. That was then. Now is now. Surely you have to get back into the saddle.

mc2fool - thankyou so much for that excellent link. Makes life a whole lot simpler to actually know who is out there - though not all it would seem. The best value ZDP is not an IT. It is a housebuilder. INLZ can still be bought at 144.7p inc. costs, for a GRY of 8.62%.

I've used the site to look at other possibilities beyond my opening three:

# Polar Cap - PGHZ @ 106.25p. GRY = 3.6%
# EFJ Invs. - EFJZ @ 1114p. GRY = 5.8%
# Aberforth -ASIZ @ 101.0p. GRY = 5.6%
# Chelverton UK Div. - SDVP @ 102.0p. GRY = 5.4%

I won't look at Utilico - a rubbish IT IMO. Good for the directors, not for the shareholders.

Anyway; looking at the above stats it would seem as though I found the best three. As stated in my original post:

================
# Acorn Income ZDPs – 149p – Redeem at 167.2p on 28/02/2022 – GRY = 6.27%
# Inland Homes ZDPs – 143.4p – Redeem at 201.40p on 10/04/2024 – GRY = 8.84%
# NB Private Equity ZDPs – 110.7p – Redeem at 130.09p on 30/09/2022 – GRY = 6.7%

An equal investment across the three provides an average GRY of 7.29%.
=================

May have to pay 113p for NBPP now; but GRY still 5.87%...

[StayinAlive]

SKYSHIP - # NB Private Equity ZDPs – 110.7p – Redeem at 130.09p on 30/09/2022 – GRY = 6.7%

I make redemption price for these as 126.74 -can you confirm?

[88V8]

These yields are nothing wonderful by current standards. One can match them in ords and/or fixed interest.
So what is the attraction? OK they're a bit senior, but is this the tax tail wagging the investment dog?
And why now in particular?
And how liquid are they?

V8

[SKYSHIP]

88V8

Could you pls suggest which ordinary share and which FI stock you have in mind to make that statement?

[SKYSHIP]

Stayinalive - I agree that both the AIC report and the NBPE Feb'20 Investor Presentation state 126.74p. So must be right.

Now need to find where I got that figure of 130.09p!

[LittleDorrit]

For those with lockdown time on their hands, the definitive and compelling account of the failure of the split capital trust world is still available as a free download:-
https://epdf.pub/the-split-capital-inve ... eries.html

(as made clear in the introduction to the book, not suggesting any comparison with the above ZDP's)

[SKYSHIP]

Little Dorritt - thnx for that. Very glad that such a book wasn't published in some more limited format back before the
SPLIT ITs fracas.

For many of us 2003/2005 represented a fantastic opportunity. I grew my SIPP by 32% in 2003; then 39% in 2004 - almost
entirely due to a massive over-allocation to ZDPs. It really was a licence to mint money; and my only regret was not to
have geared up in my personal a/c.

[ChrisNix]

everhopeful - sorry that you had such a bad experience with your one and only ZDP. That was then. Now is now. Surely you have to get back into the saddle.

mc2fool - thankyou so much for that excellent link. Makes life a whole lot simpler to actually know who is out there - though not all it would seem. The best value ZDP is not an IT. It is a housebuilder. INLZ can still be bought at 144.7p inc. costs, for a GRY of 8.62%.

I've used the site to look at other possibilities beyond my opening three:

# Polar Cap - PGHZ @ 106.25p. GRY = 3.6%
# EFJ Invs. - EFJZ @ 1114p. GRY = 5.8%
# Aberforth -ASIZ @ 101.0p. GRY = 5.6%
# Chelverton UK Div. - SDVP @ 102.0p. GRY = 5.4%

I won't look at Utilico - a rubbish IT IMO. Good for the directors, not for the shareholders.

Anyway; looking at the above stats it would seem as though I found the best three. As stated in my original post:

================
# Acorn Income ZDPs – 149p – Redeem at 167.2p on 28/02/2022 – GRY = 6.27%
# Inland Homes ZDPs – 143.4p – Redeem at 201.40p on 10/04/2024 – GRY = 8.84%
# NB Private Equity ZDPs – 110.7p – Redeem at 130.09p on 30/09/2022 – GRY = 6.7%

An equal investment across the three provides an average GRY of 7.29%.
=================

May have to pay 113p for NBPP now; but GRY still 5.87%...

Utilico has always rolled their ZDPs so far as I'm aware. Even if they may not be best managers for the ords, does that matter?

[StayinAlive]

Does anyone know what constitutes whether a ZDP is subject to Stamp Duty or not?

[SKYSHIP]

Residency. Most are Guernsey registered and free of SD. With INLZ regrettably you have to pay the 0.5%

Incidentally, still not found where I found that redemption price of 130.09p for NBPP. A very precise figure, so not invented....but still not traced the source of that figure!