With base rates remaining stubbornly at 0.5%, income seekers are finding it hard to generate the kind of income they have grown accustomed to in recent years. However, for those prepared to widen their income-seeking horizon, there are attractive opportunities.
A hybrid of an ordinary share and a bond, preference shares stand in front of (i.e. are preferred to) ordinary shares in the queue for cash when a company is wound up, but behind all forms of company debt. They are also preferred to ordinary shares for dividend payments; indeed, no ordinary dividend can be paid until all dividends due to preferred holders have been paid.
We are recommending to our clients the General Accident 8 7/8% Preference Shares. A wholly-owned subsidiary of Aviva Plc, they are cumulative, meaning if the dividend is not paid one year, it is rolled up to the next. Priced at 104.5 pence per share, the current yield is yield 8.5%. Please find attached further information along with our guide to the preference share market.