Fixed preference yield of 19% pa

The Clime preference shares CAMPA have now fallen to 1.16 and Clime have started buying them back. Each preference share will convert to 1.39 CAM ordinaries at end April 2017 - but before then, Clime will pay a fixed preference dividend of 32 cents including franking.

Based on today’s CAM price of 0.78, each CAMPA will convert to 1.084 worth of CAM ordinaries - that is, a capital loss of 7.5 cents. So for an investment of 1.16, there is a net return of 0.245 over 13.5 months - or close to 19% pa.

At this yield you would expect CAM to be a high risk investment - however they are one of the most conservative value-based fund managers on the market. I estimate present NTA to be 0.86 after taking into account the CAMPA dilution. They out-performed the market during the GFC and under-performed during the 2010-2013 spurt - as you expect of value-based funds. They are holding almost 20% in cash, 10% in hybrids, around 17% in large overseas companies, 20% in ASX20, another 13% in ASX100, and the rest in mid- and small-cap ASX companies.

The actual return for CAMPA will depend on the CAM price at conversion. I expect CAM will rise/fall according to the All Ords index. There is no obligation to sell the CAM ordinaries issued on conversion - if the price is low, you can hold them until the market recovers - the ords have been paying 4.8 cents pa plus franking, a gross yield of 8.8%.

My opinion only, please do your own research - however I have been buying as the CAMPA price has been dropping.