DBS Preference Shares (with a dividend rate of 4.7%)

[Yew Meng]

Hi Dennis,

What's your view on the DBS Preference Shares (with a dividend rate of 4.7%)? As I am not familiar of how preference shares works, do you think it is worth trying to apply via ATM ? What is your advice ?

thanks,
yew meng

[findleowong]

Hi Yew Meng,

for your info, this is the second time, DBS propose the preference shares. We could also call it preference stocks. The first preference share started in year 2001 with 6% with an A3 credit rating from Moddy's

Somehow, this preference shares from DBS is quite different from others.
Hence, is non convertible to ordinary stocks and no voting rights in the management.

The advantage of preference shares is the consistent dividend payment without capital gain. For example, if one fine day, DBS collapse in terms of liquidation, preference share holders will have the rights to the claim before the ordinary share holders.

And of course before the preference shareholders, the creditors will always have the first right follow by the bond holders and others.
Apparently, the current one offer by DBS is lower in dividend payment compare to the one in year 2001. It's still better the bank saving rate as well the bond. Which i remember correctly, the information from Bloomberg for 10 years bond is around 2.11%.

At of course, if we are talking about bank saving rate for Singapore or countries around the Asia region is miserable. Till date, the high bank saving rate will be Brazil and Argentina which is around 10 to 11%. But, not forgetting, we also need to look into the country risk factor & economy before we invest our money.

The credit rating for this round of preference shares stated by Fitch, Moody and S & P belong to the high quality end. Being an investor, do not take the word from that credit rating company. History has shown that they do make mistakes. And there are reasons to those mistakes.

Nonetheless, there are other factors to consider besides knowing the credit rating from them. Such as if the bank is not making money and do not have enough cash to pay to the shareholders, they can choose this alternative. Which is unlikely to happen but that does not mean, it will not happen.

My mentor has mention to me, if there are any new stuffs going in singapore, whether is new IPO, new property or others. Those folks will always rush in to get a share out of it. Usually, they will get burnt without doing their homework or listen to others, etc.

To conclude it, if the retail investors have a sum of money and not able to generate a return more than 4.7% which obviously not the case, they could consider to invest in these preference shares

[Dennis Ng]

Hi Dennis,

What's your view on the DBS Preference Shares (with a dividend rate of 4.7%)? As I am not familiar of how preference shares works, do you think it is worth trying to apply via ATM ? What is your advice ?

thanks,
yew meng

is this attractive to you? They aren't attractive to me at all. If I want to buy shares for dividends, I can easily find stocks paying me MORE THAN 6% dividend yield.

I think for a KNOW Nothing Investor, this is attractive, since they don't know any better.

[FunkyPeach]

In fact, my aunt asked me about this over the weekend as her friends indicated interest in it.

My comments to her then was also is this the best place for u to put your money. There are better investment vehicles around if u have attended Dennis' seminars.

[spezlezz]

Think Sunday Times on 14 Nov cover this. The 4.7% dividend is not guaranteed when the bank's financial condition deteriorate