accountank wrote:88V8 wrote:spasmodicus wrote:...a bit tempted to buy back into LLPC as they were a nice little earner in the period 2013-2019 that I held them. But they always paid dividends, when the ords didn’t. What’s the point of them now?
The point is that along with other Prefs, they will still pay dividends.... until I see hard evidence to the contrary.
All the suspensions so far are ords.
I do still have some hopefully misplaced nervousness from the language in Lloyds's announcement:
"
the board has decided that until the end of 2020 we will undertake no quarterly or interim dividend payments, accrual of dividends, or share buybacks on ordinary shares."
ie it is possible to read it that they will not be doing any:
1) quarterly or interim dividend payments
2) accrual of dividends
3) share buybacks on ordinary shares (they never did share buybacks on the prefs anyway)
OR
[
1) quarterly or interim dividend payments
2) accrual of dividends
3) share buybacks
]
on ordinary shares
The prefs fell on the announcement day although went back up a little since. I am assuming they need to pay the div this year if they want to do a final 2020 div on the ords albeit declared in 2021, but I don't know if that's actually the case that they couldn't stop one or both of the semiannual prefs payments this year if there was literally no dividend payment during calendar 2020.
I added a few LLPC just now at 112p on the hope that 4.125p will be getting paid back as a div at the end of next month. Yesterday afternoon the quote was returning 115.99p but today 112p is available for up to 10k shares despite the bid saying 116p. The published spread is always huge and it seems to be luck of the draw how far inside it you get, but I am interested again at these prices. I suppose the ordinaries do offer much more capital upside and both classes of shares are dead in a bail-in, so may not be very rational to go for the prefs - but I would like to give it several more months (or see the price a fair bit lower) before getting suckered into thinking that the ords were compelling.
I decided to dip my toes back into UK banking prefs. First time I have bought in ages, although I still hold significant positions. I am making a working assumption that dividends will not be stopped. LLPC/LLPD are probably most at risk of this happening though as the terms allow for it with no requirement to issue extra prefs, as is the case with NWBD, SAN/SANB, STAC/STAB. The market seem to think LLPC/LLPD are riskier as well as these are the best yielders. I think dividends on LLPC/LLPD (and other prefs) are probably safe. It would not send a good signal to the market for the PRA to order stopping of discretionary payments on prefs or other capital debt instruments.
SAN is the next best yielder, but I have chosen not to go for them due to the high price and the risk of them doing an Aviva at some point. I did consider STAB, for just under par, but in the end went for more NWBD (already my biggest bank pref holding) which had a similar running yield to STAB at the purchase price of 122.6808. I like the way that NWBD forms part of the capital of NatWest Bank, rather than being part of RBS top level capital and I like the clause in the articles that make an Aviva style capital reduction event less likely.
My purchases during the current crisis have been far from optimally timed. If they do get cheaper though, I would likely buy again and I am still considering STAB. The perpetual PIBS have all now dropped in price as well, but the tax treatment on these is not so favourable as income is treated as interest instead of dividends, so best held in tax shelters. I have little capacity for that until next week.
ps the LLPC payment due at the end of May is 4.625p, not 4.125p.