Brookfield Announces Reset Dividend Rate on its Series 34 Preference Shares
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Insights
The announcement by Brookfield Corporation regarding the fixed dividend rate for its Series 34 Shares represents a critical piece of information for investors and analysts, particularly those focused on income-generating securities. The set dividend rate of 6.145% is a significant figure, as it directly impacts the yield that investors can expect from their investments in these preference shares. This rate must be evaluated against the backdrop of the current interest rate environment and the yields offered by comparable securities in the market.
Investors will assess the attractiveness of the fixed rate in light of alternative investment opportunities, including government bonds and other corporate dividend-paying instruments. The conversion option into Series 35 Shares adds a layer of complexity, as it introduces a variable dividend rate tied to the performance of government treasury bills, which can be appealing if investors anticipate an increase in interest rates.
Furthermore, the condition set by Brookfield that automatic conversion will occur if the outstanding shares fall below a certain threshold is a mechanism that can influence investor decisions, as it may affect the liquidity and marketability of the shares.
From a market perspective, the conditional approval of the Series 35 Shares by the TSX is noteworthy. The listing requirements of the TSX are designed to ensure that only securities of a certain standard are traded on the exchange, which can serve as a quality assurance for potential investors. The conversion feature of the Series 34 Shares into Series 35 Shares, with a floating dividend rate, offers investors flexibility and potential for increased income, should the interest rates rise, making the Series 35 Shares potentially more attractive in a rising rate environment.
The ability to convert can also serve as a hedge against interest rate risk for the Series 34 Shareholders. It's important to monitor the uptake of the conversion offer, as a significant shift from fixed to floating rate preferences could signal market expectations regarding future interest rates.
An economist would scrutinize the dividend rates in the context of broader economic indicators. The fixed dividend rate of 6.145% and the floating rate of Series 35 Shares at 2.63% over the yield on three-month Government of Canada treasury bills must be contextualized within the current economic cycle, inflation rates and monetary policy outlook. The fixed rate provides a benchmark for investors to gauge the relative risk and return profile of these preference shares against the backdrop of potential economic scenarios, such as inflationary pressures or economic downturns.
The decision by investors to convert to Series 35 Shares with a floating rate will be influenced by their expectations of economic conditions, particularly the trajectory of interest rates. If the market anticipates higher interest rates, the floating rate shares could become more appealing. Conversely, in a stable or declining rate environment, the security of a fixed return might be more desirable.
BROOKFIELD, NEWS, March 04, 2024 (GLOBE NEWSWIRE) -- Brookfield Corporation (“Brookfield”) (NYSE: BN, TSX: BN) today announced that it has determined the fixed dividend rate on its Cumulative Class A Preference Shares, Series 34 (“Series 34 Shares”) (TSX: BN.PF.B) for the five years commencing April 1, 2024 and ending March 31, 2029.
If declared, the fixed quarterly dividends on the Series 34 Shares during the five years commencing April 1, 2024 will be paid at an annual rate of
Holders of Series 34 Shares have the right, at their option, exercisable not later than 5:00 p.m. (Toronto time) on March 18, 2024, to convert all or part of their Series 34 Shares, on a one-for-one basis, into Cumulative Class A Preference Shares, Series 35 (the “Series 35 Shares”), effective March 31, 2024. The quarterly floating rate dividends on the Series 35 Shares will be paid at an annual rate, calculated for each quarter, of
Holders of Series 34 Shares are not required to elect to convert all or any part of their Series 34 Shares into Series 35 Shares.
As provided in the share conditions of the Series 34 Shares, (i) if Brookfield determines that there would be fewer than 1,000,000 Series 34 Shares outstanding after March 31, 2024, all remaining Series 34 Shares will be automatically converted into Series 35 Shares on a one-for-one basis effective March 31, 2024; and (ii) if Brookfield determines that there would be fewer than 1,000,000 Series 35 Shares outstanding after March 31, 2024, no Series 34 Shares will be permitted to be converted into Series 35 Shares. There are currently 9,876,735 Series 34 Shares outstanding.
The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 35 Shares effective upon conversion. Listing of the Series 35 Shares is subject to Brookfield fulfilling all the listing requirements of the TSX.
About Brookfield Corporation
Brookfield Corporation is a premier global wealth manager for institutions and individuals around the world. With one of the largest pools of discretionary capital globally, we invest in real assets that form the backbone of the global economy to deliver attractive risk-adjusted returns to our stakeholders. We do this three ways: directly with our
For more information, please contact:
| Communications & Media | Investor Relations |
| Kerrie McHugh | Linda Northwood |
| Tel: (212) 618-3469 | Tel: (416) 359-8647 |
| Email: kerrie.mchugh@brookfield.com | Email: linda.northwood@brookfield.com |
FAQ
What is the fixed annual dividend rate for Brookfield's Cumulative Class A Preference Shares, Series 34, starting April 1, 2024?
What is the option available to holders of Series 34 Shares?
What is the quarterly dividend rate for Series 35 Shares from April 1, 2024, to June 30, 2024?
What happens if there are fewer than 1,000,000 Series 34 Shares outstanding after March 31, 2024?
How many Series 34 Shares are currently outstanding?
