Hybrid Securities CBA PERLS etc

Discussion in 'Share Investing Strategies, Theories & Education' started by try anything once, 19th Mar, 2009.

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  1. try anything once

    try anything once Well-Known Member

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    Just wondering whether anyone knows much about about CBA's PERLS and Westpacs TPS?

    Just reading about them in the latest issue of Smart Investor and they seem like a reasonable buy at the moment.

    they are currently paying about 10% distribution (grossed up for franking credit).

    No ordinary share dividends can be paid by the bank until the Hybrid's dividend obligation has been paid, so the yield is quite robust.

    On top of that, there is potential for capital growth if the bank credit spreads
    reduce to historical levels over the next few years.

    Anyone know of any further analysis/commentary on these?
     
    try anything once, 19th Mar, 2009
    #1
  2. AsxBroker

    AsxBroker Well-Known Member

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    Hi TAO,

    Don't know much about them. Sounds like a great yield! Better than term deposits! Obviously being a debt from the banks and not a deposit they aren't government guaranteed, but at a yield two and a half times more than a term deposit...

    Cheers,

    Dan

    PS This is general information. Before making an investment decision you should speak to your professional adviser.
     
    AsxBroker, 21st Mar, 2009
    #2
  3. try anything once

    try anything once Well-Known Member

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    try anything once, 22nd Mar, 2009
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  4. acdp

    acdp New Member

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    Hey all,

    I think there are a few out there, all with names incorporating 'preferred', 'resettable', 'convertible' etc.

    Basically pref shares and the divs are linked to money-market rates (though payment rates are not guaranteed like with bonds).

    Apparently there's a firesale of such hybrids, Westpac's TPS are currently worth $63 and will be $100 upon maturity (though only with 3.43% yields). But it comes out as 10% annualised cap growth if you incorporate that cap gain (semi-franked). CBA's PERLs paid $11.84 divs (unlikely it'll happen this year) but if so, yield should be 12% (fully franked).

    Cash rate is expected to be cut by another 100bps this year, if this happens, the PERLs should still return 4%+ (where most savings, term deps would be hovering at the 2-3% mark).

    According to some (can't get the sources) it's heavily discounted at the moment (esp post-tax). Hopefully, the rate will catch up sometime in the next few years.

    Btw, is anyone here part of it yet? If so, what do they think of the DRP schemes?

    Thanks,

    Andy

    Btw, here are the links to the hybrids:

    Westpac FIRsTS
    Westpac TPS
    CBA PERLs II
     
    Last edited by a moderator: 23rd Mar, 2009
    acdp, 22nd Mar, 2009
    #4