DBS Preference Share – Higher than FD dividend yield with Singapore’s largest lender?

DBS Preference Share (SGX Stock code: MU7) is currently trading at SGD 101.48 per share.

Should investors buy at current price and hold it to maturity, where a first and final call for redemption expected to be announced on 23 Nov 2020, investors stand to receive 2 more dividend payments in May and November 2020 as well as redemption at par of SGD100 per share. After accounting for transaction costs, holding period yield of 9 months comes to be about 2.7% with corresponding annualized yield of 3.9%. In view of the market turmoil due to the COVID-19 crisis, investors could count on Singapore’s largest lender DBS to honour its redemption and dividend obligations.

Final thoughts:

Pros: Potential higher than risk free FD dividend yield.

Cons: Lock up on funds till expected maturity in end November 2020.

Note: This is not an investment advice. Buy and sell any securities at your own risk.

Disclosure: Long DBS Preference Share.

Insas – PA – Defensive High Yield Preference Share?

Investors looking for some high yielding instruments may consider Insas-PA listed on Bursa Malaysia (Code 3379PA). It is a preference share issued by mother company Insas Berhad, a mini conglomerate with a collection of stakes in various companies such as the high flying Inari Bhd.

The key investment merit from Insas-PA comes from its expected dividend distribution and mandatory redemption by the company. There are 5 more dividend distribution cycles in which holders of Insas-PA will be getting RM0.02 per share for another 5 rounds all the way till beginning of 2020 which comes to a total of RM0.1 per share. At maturity which is expected to be in end February 2020, the preference shares will be redeemed at RM1 per share.

Should investors able to purchase the preference share at RM0.965 or RM0.97 based on best ask prices, you can expect to gain a little over 13% over the course of 2 years and 7 months, which works out to be a little over 5% per annum of investment yield.

Investors should take comfort on the financial strength of Insas Bhd where last check on its March 2017 quarterly report, it has a healthy net cash balance of over RM240 million, way above the expected dividend and redemption payout of about RM132 million.  

Pros: Healthy above average yield, backed by healthy balance sheet

Cons: Funds lockup, need to hold to maturity to fully realize gains

Note: This is not an investment advice. Buy and sell any securities at your own risk.

 
Disclosure: None.