Growth stocks are so April. May is all about yield.
Over the past few days, if you didn't know better, you would think that retail investors had never seen offerings geared for yield before. These buyers have been lunging at anything with a relatively safe annual payment hat comes their way, and convertible debentures, preferred shares and REITs all make the cut.
Shaw Communications tapped into this demand with a $200-million of rate reset preferred shares that pay 4.5 per cent annually. The deal was upsized by 50 per cent to $300-million before you could barely blink.
Then more names are piled on. Ivanhoe Energy and Anderson Energy both launched bought deals of converts and Dundee REIT tapped the market for $135-million of new trust units.
At the surface, the demand makes sense. Income trusts are all but gone, so the average retail investor has to look elsewhere for a steady income stream. But some realism is also needed. Investors are turning to yield stocks because the growth plays aren't in favour anymore - however, the market truthfully hasn't come off that much. It's all about momentum, and right now yield names have it.