With so many investment products to consider in today’s market place, choosing the right one is not an easy decision.
Preference shares are an investment product that offers distinctive features for both investors and the issuing companies.
Preference shares have been used by both large and small corporations as a means to raise capital whilst providing investors with handsome returns.
Ecsponent Limited is an industry leader in the provision niche market investment products based on secured and JSE listed preference shares.
So what makes Ecsponent’s preference shares unique to others available in the market?
While traditional preference shares generally offer no repurchase commitment by the issuer (i.e. no security that you will get your capital back), Ecsponent’s preference share options are all redeemable after five years.
In addition, Ecsponent products provide above average dividends (monthly or at term) and cater for both investors that require a monthly return as well as five-year capital growth providing option.
In practice, unlike ordinary shares and most other preference shares currently available, Ecsponent’s clients do not have to trade their shares in the market in order to relinquish their capital. Instead they can rest assured that they will realise their full capital investment at the close of the investment term.
Market liquidity and the willing buyer/willing seller mechanism of trading listed shares is still an option for Ecsponent clients as all shares are listed on the JSE, but in reality who would want to risk trading when your capital is 100% secured.
Other general benefits of preference shares, including Ecsponent’s unique offering, is that preference shareholders rank higher than ordinary shareholders in a company’s capital structure. This provides additional peace of mind for preference shareholders in a company’s debt structure. As a result Ecsponent preference shareholders receive the contractually agreed dividends irrespective of the operational performance of the company (subject obviously to the Companies Act solvency and liquidity requirements).
Unlike common shareholders that will usually be paid dividends a maximum of twice a year, preference shares can distribute income as frequently as stipulated in its indenture (the documents governing the preference share’s structure and features). This means that while investing in preference shares has some common features, each class of preference share can have distinctive features that need to be considered before deciding where to invest.
In Ecsponent’s case, the company has issued four different classes of preference shares, all of which have been approved and listed on the JSE.
All of the preference shares have a five-year term, a unique feature designed to ensure that investors’ capital will automatically be returned on the fifth anniversary date.