FUND SUMMARY
The Claymore S&P/TSX CDN Preferred Share ETF seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the S&P/TSX Preferred Share Index™ (the “Index”). The investment strategy of the Fund is to invest in and hold the constituent securities of the Index.
The ETF provides suitable investors of any size with the opportunity to gain exposure to the Canadian preferred shares market, while providing a diversified portfolio and the potential for quarterly distributions. By accessing preferred shares through an ETF portfolio rather than buying individual securities, investors may benefit in other ways as well. The ETF may:
- Reduce risks associated with retractions and early redemptions, which might otherwise compromise the potential returns of an individual investor’s preferred share portfolio.
- Reduce the credit risk associated with any particular security/issuer.
- Eliminate the responsibility of individual investors to elect fixed or floating option upon reset of fixed/floater preferred share holdings.
Overview of Preferred Shares and Their Benefits
Preferred shares are equity securities that typically offer attractive dividend yields. They can be considered a “hybrid” investment, carrying attributes similar to both bond and stock investments. Preferred shares, like common shares, represent a form of ownership in a corporation and may also be traded on a stock exchange. Preferred shares are primarily purchased by investors for income purposes and are therefore often compared with fixed-income investments. There are a variety of characteristics common to all preferred shares:
- As an equity investment, preferred shares rank above the interest of common equity holders and behind creditors – both in their right to receive dividend payments and ranking in their claim on the assets of the issuer.
- The preferred share investor is entitled to a preset rate of dividend that must be paid out of earnings before any dividends are distributed to common shareholders.
- Equity dividends receive favourable tax treatment relative to ordinary income. Normally, preferred shares carry no voting rights. However, there are often provisions for limited voting rights in the case of missed dividend.