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Author Topic: Coreshares Preftrax  (Read 12779 times)

Fawkes85

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Coreshares Preftrax
« on: October 23, 2015, 06:42:13 pm »
Can anyone explain this one to me. It's dividend yield is much higher than the DIVTRX but yet it has been on a downward spiral since inception. According to its webpage its dividends are also more tax efficient. Wouldn't mind if you can explain that to me as well.

Here are links to its fact sheet and webpage:

http://coreshares.co.za/products/coreshares-preftrax-preftx/

http://coreshares.co.za/wp-content/uploads/2015/10/6520-CoreShares-FS-Sep-PrefTrax.pdf
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marguerittereed

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Re: Coreshares Preftrax
« Reply #1 on: October 26, 2015, 08:53:26 am »
Hi
I am not sure if I am right, but if you look at individual preference share prices, they are very static, very slight up and down over a year.  I am thinking of starting a new portfolio with only preference shares... Has anyone done this and how financially successful are the preference shares.
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Fanus

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Re: Coreshares Preftrax
« Reply #2 on: January 06, 2016, 03:25:01 pm »
I'm also interested in information regarding Preftrax.  It looks like a stellar dividend fund with low volatility.  Other dividend funds have far lower dividends with much higher volatility.
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Moonraker

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Re: Coreshares Preftrax
« Reply #3 on: January 06, 2016, 03:34:56 pm »
Too many bank shares. Basel 3 requirements will affect them.

See here .. Preference shares: Letdown or opportunity?

Quote
The SA Reserve Bank has ruled that prefs be phased out as tier one capital at the rate of 10%/year, a process dubbed "grandfathering" that began in January 2013. For most banks prefs will no longer be cost-effective at below 50%-60% of their tier one capital.

Banks have three choices: retain prefs as expensive capital, amend the terms of their prefs or buy them back.

The only action has come from Capitec Bank, which began buying back its prefs in 2014 and has so far bought back about 21%. Standard Bank has indicated it will buy back its prefs. At a market cap of R4,37bn it has the largest single pref issue.

The attraction for banks to buy back their prefs is their big discount to par value.

Greg Saffy of Cast Iron Capital has cried foul. His view is that the banks sold prefs to the market at par value and should give investors that money back.

Saffy is mustering his forces, calling on bank pref holders to back his initiative to lobby banks to buy back prefs at a fair price. In the case of Nedbank prefs he is looking for the backing of holders of at least 26% of the prefs and has set a minimum target buyback price of 925c/share or 92,5% of par.

Ultimately an offer by banks to their pref holders could prove the easiest way to rid themselves of what will be costly capital. To buy back in what is a highly illiquid market would be a lengthy process that could drive prices far higher.

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Samurai

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Re: Coreshares Preftrax
« Reply #4 on: January 06, 2016, 04:44:28 pm »
I might be wrong, but as I understand it preferance shares pay higher dividends and also pay dividends before normal shares do. However preference shares have no voting power and also the growth of preference shares seems to be very close to the growth of inflation. One has better growth and appreciation of assests with Divtrax.
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Fanus

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Re: Coreshares Preftrax
« Reply #5 on: January 07, 2016, 09:51:46 am »
Well Divtrx is tanking fast and I'm sure we are all patiently waiting to hear the div announcement but against negative growth and declining dividends the preftrx is looking good for a positive yield in 2016.
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Samurai

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Re: Coreshares Preftrax
« Reply #6 on: January 09, 2016, 06:57:16 am »
You might very well be right Fanus, especially during market uncertainty.

However long term I still believe tht eggs in Divtrav will yield far better growth, perhaps this is now the time to buy divtrax depending on your view.

Preftrax
Average dividend yield of 9.68%
Growth of -.6% since inception 

Divtrax
Average dividend yield of 3.64%
Growth of 19.7% since inception

As I get older and would require and relay more on dividends then yes I can see myself investing in Preftrax but not for the next 10 years or so being under 40 (almost there) one is willing to be a little more aggressive.


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Moonraker

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Re: Coreshares Preftrax
« Reply #7 on: January 10, 2016, 05:15:15 pm »
Before taking a decision to invest in a pref. shares ETF, you should really take the time to read the link provided in my earlier reply.
Also, refer to the last paragraph in the attached image. ...."therefore we believe patient investors should be rewarded with an offer closer to par or at least the original capital rolled into a suitable structure for both banks and investors." I don't believe that will happen. As I said before, way too many bank prefs in that ETF.




« Last Edit: January 10, 2016, 05:49:23 pm by Moonraker »
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RayRay

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Re: Coreshares Preftrax
« Reply #8 on: January 06, 2017, 12:04:32 pm »
So 1 year on, and I'd like some thoughts on pref shares, specifically relating to preftrax and using it in your TFSA. Shares prices bottomed out 3 Jan 2016, and have since increased by 8.6% (18.08% NAV incl Dividends). The dividends are very attractive, with the last dividend yield at 11.6%

How are the banks faring on their PS buy backs, and is it still sub-par?

PS If there is an intro section, please direct me to it as I could not find one clearly did not look hard enough.  :)
« Last Edit: January 06, 2017, 12:42:52 pm by RayRay »
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Patrick

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Re: Coreshares Preftrax
« Reply #9 on: January 06, 2017, 12:29:50 pm »
Quote from: RayRay on January 06, 2017, 12:04:32 pm
PS If there is an intro section, please direct me to it as I could not find one.
Welome and great idea, I've just made one: http://shareforum.co.za/introductions/

I'm sure someone with better knowledge than mine will comment on your question soon.
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RayRay

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Re: Coreshares Preftrax
« Reply #10 on: January 06, 2017, 05:28:06 pm »
« Last Edit: January 06, 2017, 05:30:02 pm by RayRay »
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Hamster

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Re: Coreshares Preftrax
« Reply #11 on: January 06, 2017, 06:24:40 pm »
For the n00b here - the fact that they are buying back the preference shares: good or bad for the ETF?
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PlatinumWealth.co.za

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Re: Coreshares Preftrax
« Reply #12 on: January 19, 2017, 01:08:01 pm »
We had a discussion about this ETF and preference shares in general this morning on MyBB and I must say, dammit I like this whole Preference share business since I do not really care so much to forfeit my voting rights in turn for solid dividends looking at the share the last year going forward it seems PREFTRAX might be worth climbing in this year?
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www.PlatinumWealth.co.za <- South African Investment and Finance forum.

czc

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Re: Coreshares Preftrax
« Reply #13 on: January 19, 2017, 06:34:09 pm »
Does this new law have any impact on Pref Shares?

Quote
Hybrid instruments
The Income Tax Act currently contains complex rules which seek to recharaterise preference share funding as debt in certain circumstances.

This means that what would normally be a tax-free dividend which is received by a holder of a preference share will be recharacterised and deemed to be income, which will be taxed in the hands of the holder of the shares.

“Numerous transactions have been designed to avoid these rules by, for example, interposing a trust between the holder and the issuer of the preference shares.

“The Taxation Laws Amendment Act has introduced various amendments to provide that the dividends on such arrangements will continue to be taxed in the hands of the recipients of the dividend,” Cridlan cautions.

http://www.fin24.com/finweek/business-and-economy/zumas-new-laws-20170119
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RayRay

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Re: Coreshares Preftrax
« Reply #14 on: January 19, 2017, 08:45:38 pm »
Quote from: czc on January 19, 2017, 06:34:09 pm
Does this new law have any impact on Pref Shares?

Quote
Hybrid instruments
The Income Tax Act currently contains complex rules which seek to recharaterise preference share funding as debt in certain circumstances.

This means that what would normally be a tax-free dividend which is received by a holder of a preference share will be recharacterised and deemed to be income, which will be taxed in the hands of the holder of the shares.

“Numerous transactions have been designed to avoid these rules by, for example, interposing a trust between the holder and the issuer of the preference shares.

“The Taxation Laws Amendment Act has introduced various amendments to provide that the dividends on such arrangements will continue to be taxed in the hands of the recipients of the dividend,” Cridlan cautions.

http://www.fin24.com/finweek/business-and-economy/zumas-new-laws-20170119

It seems it will. Similar to dividends form listed property (REIT's) http://www.moneyweb.co.za/uncategorized/reit-investments-and-tax/
« Last Edit: January 19, 2017, 08:49:23 pm by RayRay »
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