What Are Canadian Preferred Shares?
Canadian preferred shares are a class of equity securities issued primarily by Canadian banks, insurance companies, utilities, pipelines, and real estate investment trusts. Unlike common shares, preferred shareholders do not normally participate in the growth of the company. Instead, they receive a fixed (or formula-based) quarterly dividend — paid before any dividend is paid to common shareholders — in exchange for giving up capital appreciation potential. They occupy a middle ground between bonds and common equity: higher yields than investment-grade corporate bonds of the same issuer, with more downside protection than common shares.
The Canadian preferred share market runs deeper than most retail investors ever see. While the U.S. market for preferreds is small and dominated by banks, Canada has over 250 listed preferred share issues from six dozen-plus issuers, collectively worth tens of billions of dollars. That depth makes Canada one of the most developed preferred share markets in the world — and one of the most misunderstood.
Why Do Companies Issue Preferred Shares in Canada?
Canadian institutions — especially banks and insurers regulated by OSFI — are subject to strict capital rules. Issuing preferred shares (which count toward regulatory capital under the Non-Viability Contingent Capital (NVCC) regime) is a way to raise capital without diluting common shareholders or adding debt. Since 2014, essentially all new Canadian preferreds are NVCC-eligible, meaning they can be converted into common shares (or written down) if the issuer faces failure. This is a regulatory backstop, not an investor feature — but it explains why Canadian banks issue preferreds in large volumes and why the market works the way it does.
Types of Canadian Preferred Shares
The Canadian market has several distinct structures, each with its own risk/return profile:
- Rate resets (also called "fix-float" or "fix-reset"): These pay a fixed dividend for five years, then reset to a new fixed rate based on the prevailing 5-year Government of Canada bond yield plus a fixed spread. If the issuer's credit screen clears, holders can convert to a floating-rate (quarterly, 3-monthCORRA-based) alternative instead. Rate resets are the most common structure in Canada — roughly 80% of the market by count.
- Perpetuals: No fixed reset date. Perpetual preferreds pay a fixed dividend forever, unless the issuer redeems them. Because they have no reset date, they behave more like long-duration bonds and are more sensitive to interest rate moves.
- Floating-rate: Dividend is a spread over the 3-month Canadian Overnight Repo Rate Average (CORRA) or a similar short-term benchmark, so the income adjusts with the Bank of Canada's policy rate.
- Fixed-rate reset (the "classic" reset): Five-year term, a reset auction every five years, with holders able to convert to floating if they prefer.
- Split (hybrid) shares: Structured through an investment corporation that splits a common stock into a preferred share and a capital share. The preferred gets a fixed dividend and the capital share gets essentially all the upside — combined, they replicate owning the common stock.
How Canadian Preferred Share Dividends Are Taxed
Preferred share dividends from Canadian companies qualify for the federal dividend tax credit. For investors in higher tax brackets, this can make the after-tax yield of a preferred share meaningfully higher than a GIC or bond of the same headline yield — because interest is fully taxable while eligible dividends benefit from the credit. In the highest bracket, the effective rate on eligible dividends is roughly half that on interest. This tax efficiency is one of the core reasons Canadian income investors hold preferreds in non-registered accounts. (As always, confirm your specific tax situation with a professional.)
Preferred Shares vs. GICs and Bonds
A common question: why hold a preferred share yielding 5.5% when a GIC pays 4%? The comparison is more nuanced than the headline numbers suggest:
- Yield: Preferreds typically yield more than GICs of comparable term, but this is compensation for higher risk — they are equity, not deposits.
- Capital protection: GICs are (usually) CDIC-insured up to $100,000. Preferred shares can lose principal, and during the 2022 rate reset cycle many fell 15–30% before recovering.
- Duration: Rate-reset preferreds have duration sensitivity similar to a 5-year bond, but the reset mechanism means the dividend adjusts — an embedded inflation/rate hedge that plain bonds lack.
- Taxes: Eligible Canadian dividends receive the dividend tax credit; GIC interest does not. On an after-tax basis, the gap narrows in lower brackets and widens in higher ones.
- Liquidity: Most major preferreds trade liquidly on the TSX, but some series are thinly traded — you may not always get the listed price when buying or selling.
How to Buy Canadian Preferred Shares
Preferred shares trade on the Toronto Stock Exchange (TSX) under symbols like ENB.PR.V (Enbridge Series V) or BNS.PR.M (Bank of Nova Scotia Series M). You can buy them through any Canadian brokerage that provides TSX access — big-bank brokerages, Questrade, Wealthsimple Trade, Interactive Brokers, and others. Each issue has a ticker with two parts: the issuer symbol and the series prefix (PR or PF for preferred). They trade in Canadian dollars and settle like ordinary equities.
Before buying, check the current yield and ranking, the issue's reset date (from the prospectus — see our issue-terms data on each symbol page), and the credit rating. Series with the same name from the same issuer behave very differently depending on their reset terms, so picking among "Enbridge Series 1 vs. 5" is a decision about structure, not just brand.
Key Risks to Understand
- Reset risk: When a rate reset comes due, the new dividend can be much lower (or higher) than the old one — investors in perpetuals issued at 5% yields in 2014 saw resets offering 2.5–3% in 2021 before rates rose again.
- Credit risk: Preferred shareholders rank behind bondholders. A downgrade moves not just the price but the risk of missed dividends in stress scenarios.
- Call risk: Nearly all preferreds are redeemable at the issuer's option, usually on reset dates — meaning a great-yielding issue can vanish exactly when you most want to keep it.
- Liquidity risk: Some series trade fewer than 1,000 shares/day; exit prices can differ materially from listed quotes.
The Market Today
The preferred share market has been a tale of two regimes over the past decade: derided through the zero-rate 2010s as a structurally broken asset class, preferreds staged a dramatic recovery as interest rates rose from 2022 onward. The overall market yield — which had fallen to the low 3% range in 2020–2021 — moved back above 5–6% as resets repriced to the new rate environment. For income-focused investors, today's market is structurally healthier than at any time since 2008: the same reset mechanism that hurt holders in the 2015–2020 era now works in their favor.
Frequently Asked Questions
What are the characteristics of Canadian preferred shares as an investment?
They offer equity-like yields that have historically been more stable than common shares, for investors who understand the reset mechanism. They are not risk-free: prices fluctuate with interest-rate expectations and credit conditions. Evaluating them means looking at the current yield table, understanding the reset date, and diversifying across issuers. Whether they fit any individual portfolio depends on that investor's circumstances.
How many Canadian preferred shares are there?
Currently around 253 listed preferred share issues across roughly 70+ issuers, split between rate-reset, perpetual, floating-rate, and split-corporation structures. Our full database tracks all active issues.
What does a rate reset mean for my shares?
At the reset date (typically every five years), the dividend is reset to the 5-year Government of Canada bond yield at that time, plus a fixed spread set at issue. If bond yields have risen since issue, the dividend rises; if they've fallen, the dividend falls. This gives rate-reset preferreds an embedded interest-rate sensitivity that perpetuals don't have.
Are preferred shares guaranteed?
No. They are equity, not deposits — they carry no CDIC insurance and no guarantee. In a bankruptcy, preferred shareholders rank behind bondholders (though ahead of common shareholders). Credit ratings from DBRS Morningstar (the standard rating agency for Canadian preferreds) help assess this risk.
How are preferred share dividends taxed in Canada?
Dividends from Canadian preferred shares qualify for the dividend tax credit, making them more tax-efficient than interest income for non-registered accounts. In registered accounts (TFSA, RRSP), an American listing like US-listed preferreds can trigger withholding tax — but Canadian-listed preferreds held in a TFSA don't. Ask an accountant for your specific situation.
Can I buy Canadian preferred shares in a TFSA?
Yes — dividends earned on Canadian-listed preferred shares inside a TFSA are tax-free, just like any other Canadian dividend. For American investors using Canadian preferreds in a TFSA (which the CRA-IRS treaty generally exempts from Canadian withholding tax), a TFSA is not a registered account in the U.S., so Americans face different treatment than Canadians.
What's the difference between PR and PF in a ticker?
Nothing fundamental — both denote a preferred share series. "PR" is the convention on the TSX ticker feed, while "PF" is used on some data feeds and TSX's own listings. Series 1 and Series 15 might both appear as, say, BNS.PR.L or BNS.PF.L. Our database uses the PR format, like the exchange does.
Where can I find the prospectus for a preferred share?
Each symbol page on Pref Shares Data links to the offering prospectus when a public copy is available, plus a "From the Prospectus" section summarizing key issue terms — reset spreads, redemption dates, reset frequency, and more — so you can understand an issue's structure without reading the full legal document.