Monday, July 26, 2010

DBS Preference Shares

Dear Mr. Tan,

DBS pref share is trading around 104 on par of 100.
It pays 6 a year on par of 100.

Please note that it is callable at 100 on 15 May 2011.  If you buy at 104, you will have make a loss of 4 on capital (and gain 6 as dividend).  You will get 3 on 15 Nov, and the other 3 on 15 May 2011 (together with 100).
If DBS decides not to call back the share, it will then start to pay dividend based on 3 mth Swap rates plus 2.28%.  current swap rates is probably around 0.5%.  without any big surprise, Swap rate will be around same level next May.  this means that if DBS does not call back the share, it will be paying investors about 2.8% in dividend.  


My view
With this additional information, DBS preference shares is not attractive as an investment.


Wealth Journey said...

DBS have a lot of preference shares listed on different occassion. The more value for money one if you have gotten it during the 2008 launch is this Hybrid-Tier 1 PS with the following terms :-

Please note it is non-call for 10years, preference shares issue.

1st 10 years coupon:
5.75% to 5.85% (S/A) - Indicative Rate

3-month SGD SOR + [3.36% to 3.46%] (Even with 0.5% sibor, it is a decent 3.86% yearly).

Again with everything, the entry price is important to your yield to maturity.

james new said...

If DBS decides not to call back the share.

What be the range of this share price?

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