Just in case you haven't already noticed, investing is not an exact science.
For example, there's the question of whether preferred shares should be accounted for on the fixed income side of your portfolio or the equity side. When I took the Canadian Securities Course about 100 years ago, I remember losing a mark on an assignment because I listed prefs as equity. The person marking my paper said they were fixed income.
I took that lesson and applied it my own investing. Today, the fixed income side of my portfolio includes several preferred share issues (I'll tell you about the rest another time). Almost all of the preferred shares I hold are perpetuals, which means they don't have the rate-reset feature that most pref shares issued today have. The dividend they pay is the dividend they pay, until such time as the shares are redeemed by the issuer.
Two of the pref issues I own were bought back in 2009, when preferreds were being hammered along with everything else that wasn't a government bond. My favourite of the pair is a George Weston perpetual issue that has moved up 36 per cent in price since purchase and yields 7 per cent based on the cash I put up to buy them. Things were dire back in '09, but not enough to imagine a diversified food conglomerate like Weston defaulting on its quarterly dividend payments. Sure enough, these Weston shares have delivered the goods every quarter, right on schedule.
The yield on these shares beats anything else in the fixed income side of my portfolio by far, but I don't put much stock in the price increase. I know it will melt away when interest rates rise. That's the catch with perpetual preferred shares – like bonds, they get sold off when rates move higher and rise in price when rates fall.
Since I bought my perpetual pref shares, I've noticed that you win some and lose some as rates cycle higher and lower. But that 7-per-cent yield from George Weston has been the very picture of fixed income.