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.  

cm

My view

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