16 January 2015

Non Convertible Preference Shares & Retail Bonds IV

[This is an update of a previous post.]

Traded on the SGX, NCPS are traded like shares (which means the bid-ask price fluctuates), but gives out dividend/coupon payments like bonds.  There aren't that many such NCPS, and they're mostly from the 3 big banks in Singapore. So long as the issuers don't call back their NCPS, they will continue to pay out the dividends at the stated rate.  However, some of these have 'maturity' dates where the coupon rate reverts to a floating rate thereafter.  Prior to the maturity date, the bank cannot call back the NCPS.

The risk of failure stems from the issuing company going down under (you lose your pants!), or when it fails to pay out any dividends for their standard shares resulting in no dividend payout for their NCPS as well. However, the likelihood of these negative events appear slim given the strong historical performance of these Singapore banks.  But then again, we've seen also big banks in the US going down under in recent history!

If one is not worried about the fluctuations of the "capital", and is happy with the dividend/coupon payout, NCPS may not be a bad option for building a "cashflow" stream.  So long as the issuer doesn't call back the NCPS, you will get the annual payout (usually half-yearly or quarterly) perpetually.  If they do call back the NCPS, you will get back the par value anyway.

Below are the respective NCPS.  Read as such:
[Date of maturity] @ [Rate] ([Dividend/Coupon payout date])

Hyflux 6.0% - Cumulative NCPS
- 25 Apr 2018 @ 6% (25 Apr, 25 Oct)
- Thereafter @ 8% (25 Apr, 25 Oct)

DBS 4.7%
- 22 Nov 2020 @ 4.7% (22 May, 22 Nov)
- Thereafter @ 3-mth SOR + 2.28% (15 Feb, 15 May, 15 Aug, 15 Nov)

OCC 5.1%
- 20 Sep 2018 @ 5.1% (20 Mar, 20 Sep)
- Thereafter @ 3-mth SOR + 2.5% (20 Mar, 20 Jun, 20 Sep, 20 Dec)

OCC 3.93%
- 20 Mar 2015 @ 3.93% (20 Mar, 20 Sep)
- Thereafter @ 3-mth SOR + 1.85% (20 Mar, 20 Jun, 20 Sep, 20 Dec)

OCBC 4.2%
- 14 Jan 2013 @ 4.2% (20 Jun, 20 Dec) [re-callable anytime]

SOR refers to the Swap Offer Rate. This would be one case where as an investor, we actually be happy to see the SOR soaring.

For the latest, refer to SGX List of Preference Shares.

For an elaboration to understand about these preference shares, you may want to examine this talk on Comparing Bonds from an SIAS MyMoney investor education programme.

You may also be interested in SGX List of Retail Bonds.  As an example, "LTA n4.17% 160510" means that the bond issuer is LTA at a coupon rate of 4.17% per annum and matures on 10 May 2016.  See also My Name is Bond.


MSAPersonalFinance said...

Thanks for the info.

Lizardo said...


You're most welcome!