How to Buy Preferred Shares in Canada: A Step-by-Step Guide (2026)

Why Preferred Shares Belong in a Canadian Income Portfolio

Preferred shares occupy a unique space between bonds and common stocks — offering regular dividend income, preference over common shareholders in the event of liquidation, and in many cases, dividend tax credits that boost after-tax yields. For Canadian income investors, they can generate yields of 5% to 7% or more, often with lower volatility than common equities.

But buying preferred shares for the first time can feel intimidating. The terminology is different, the ticker symbols look unfamiliar, and the types of preferreds — rate resets, perpetuals, floaters — each behave differently depending on interest rates. This guide walks through the entire process step by step, from opening a brokerage account to placing your first trade and tracking your dividends.

Step 1: Open a Self-Directed Brokerage Account

Preferred shares trade on the Toronto Stock Exchange (TSX), so you need a Canadian brokerage account that provides access to TSX-listed securities. All major self-directed brokerages in Canada support preferred share trading:

Most accounts can be opened online in 15–20 minutes. You will need your Social Insurance Number, a government-issued ID, and banking details for funding. Once your account is funded, you are ready to trade.

Step 2: Understand the Types of Canadian Preferred Shares

Before buying, you need to know what type of preferred share you are purchasing. Each type reacts differently to interest rate changes, and choosing the wrong type for your outlook can mean unexpected price swings.

Rate resets are the most common type in the Canadian market today, making up the majority of the 250+ preferred shares currently trading. They offer built-in protection against rising rates because the dividend resets every five years to the prevailing Government of Canada 5-year bond yield plus a fixed spread. If rates have risen, your income resets higher. You also typically have the option to convert to a floating-rate share at each reset date.

Step 3: Research and Screen Preferred Shares

Once you understand the types, the next step is identifying specific shares to buy. This is where most investors get stuck — there are over 250 preferred shares on the TSX, and picking the right one requires evaluating several factors:

• Credit rating: Look for investment-grade ratings (P-1 through P-3 from DBRS, or equivalent from S&P and Moody's). Higher ratings mean lower default risk.


• Current yield: Compare the dividend yield against similar shares. Use our preferred share rankings page to sort by yield, type, and issuer.


• Reset spread: For rate resets, the spread over the GoC 5-year bond that will apply at the next reset. A higher spread means more income at reset.


• Days to reset: How soon the next reset occurs. Shares resetting soon may see price movement as the market prices in the new dividend rate.


• Liquidity: Check daily trading volume. Low-volume preferreds can have wide bid-ask spreads, making them harder to buy and sell at fair prices.


• Issuer quality: Major Canadian banks, insurance companies, and utilities tend to be the most stable issuers. Smaller or highly leveraged companies carry more risk.

Our preferred shares data table lets you filter all 250+ Canadian preferreds by type, yield, credit rating, and issuer — so you can build a shortlist before placing a trade. You can also explore split share corporations if you are interested in the split share structure.

Step 4: Place Your Trade

Once you have identified a preferred share to buy, placing the trade works the same as buying any stock on the TSX. Here is what to expect:

1. Find the ticker symbol. Preferred share symbols on the TSX follow a specific format: the company abbreviation, followed by .PR., then a letter for the series. For example, BNS.PR.E is Bank of Nova Scotia Series E preferred share. Your brokerage's search bar will find these when you type the full symbol.


2. Review the quote. Look at the current price, bid, ask, and volume. Preferred shares typically trade around their $25 par value, though prices fluctuate based on interest rates and issuer-specific factors. The bid-ask spread can be wider than common stocks, so check it carefully.


3. Choose your order type. For most preferred share purchases, a limit order is strongly recommended over a market order. Because bid-ask spreads can be $0.05–$0.15 or more, a market order could fill at a price significantly above the bid. Set your limit price at or near the current ask for immediate execution, or slightly lower if you are willing to wait.


4. Enter the quantity. Preferred shares trade in board lots of 100 shares. At $25 per share, one board lot costs approximately $2,500. Some brokerages allow odd-lot purchases (fewer than 100 shares), but liquidity may be lower.


5. Review and submit. Double-check the symbol, price, and quantity before confirming. Your brokerage will show the estimated total cost including any commission.

Step 5: Understand Dividend Payments and Tax Treatment

After purchasing, you will begin receiving quarterly or monthly dividends depending on the share. Here is how Canadian preferred share dividends work:

• Payment schedule: Most preferreds pay quarterly, though some pay monthly. The ex-dividend date, record date, and payment date are set by the issuer and announced in advance.


• Dividend amount: The rate is fixed at issue (for perpetuals) or resets periodically (for rate resets and floaters). For a $25 par share paying 5%, the annual dividend is $1.25 — typically split into four quarterly payments of $0.3125 each.


• Eligibility for dividend tax credit: Dividends from Canadian corporations qualify as eligible dividends, meaning they receive enhanced tax treatment through the federal dividend tax credit. In a non-registered account, this can reduce the effective tax rate by roughly 25–35% compared to interest income at the same marginal rate.


• Tax-free in a TFSA or RRSP: If you hold preferred shares in a TFSA, all dividend income is completely tax-free. In an RRSP, dividends grow tax-deferred until withdrawal.

Risks Every Preferred Share Buyer Should Know

Preferred shares are generally safer than common stocks but are not risk-free. Understanding these risks before you buy will help you make better decisions:

• Interest rate risk: Perpetual preferreds lose value when interest rates rise, since their fixed dividend becomes less attractive relative to new issues. Rate resets mitigate this risk but are not immune — they can still trade below par if the market expects rates to stay elevated.


• Extension risk: Some preferreds allow the issuer to extend the reset date or defer dividends. Read the prospectus carefully, especially for non-bank issuers.


• Call risk: Most preferreds are redeemable at par ($25) by the issuer. If you buy above par (e.g., at $26), you could lose $1 per share if the issuer calls the shares back at $25.


• Liquidity risk: Some preferred shares trade infrequently, making it harder to sell at a fair price — especially smaller issues or those from lesser-known issuers.


• Credit risk: While rare for investment-grade issuers, preferred share dividends can be suspended if the issuer faces financial distress. Preferred dividends must be paid before common dividends, but they are not guaranteed.


• Rate reset uncertainty: For rate resets, the dividend at the next reset depends on the GoC 5-year bond yield at that time. If rates have fallen, your income could reset lower.

Building a Preferred Share Portfolio: Best Practices

• Diversify by issuer: Do not put your entire allocation into one company's preferreds, even a major bank. Spread across 5–10 issuers across different sectors (banks, insurance, utilities, pipelines).


• Mix preferred types: Consider a blend of rate resets (for rising-rate protection) and perpetuals (for stability when rates are falling or flat). This provides income diversification.


• Focus on investment-grade: Stick to shares rated P-2 or higher from DBRS unless you are intentionally seeking higher yield and accept the added risk.


• Buy at or below par when possible: Preferreds trading below $25 offer a built-in margin of safety — you get a higher current yield and reduced call risk.


• Monitor reset dates: Track when your rate resets come due. Near a reset date, prices can be volatile as the market prices in the new dividend. Decide in advance whether you will elect the fixed or floating rate at each reset.


• Reinvest dividends: Many brokerages offer DRIP (Dividend Reinvestment Plan) for preferred shares, automatically reinvesting dividends into additional shares — often at a discount to market price.

Track Your Preferred Shares in One Place

Once you own preferred shares, monitoring your portfolio is essential. Our platform tracks all 250+ Canadian preferred shares with live prices, current yields, credit ratings, reset dates, and projected reset yields — all updated daily. Use these free tools to stay on top of your income portfolio:

• Preferred Shares Table — Filter, sort, and screen all 250+ preferreds by yield, type, rating, and issuer


• Yield Rankings — See which preferred shares offer the highest yields right now


• Issuer Pages — Deep-dive into specific companies and all their preferred share issues


• Split Share Corporations — Compare split corps and their preferred share classes


• Market Analysis Blog — Regular updates on preferred share market trends and rate decisions

Key Takeaways

• Open a self-directed brokerage account with TSX access (Questrade, Wealthsimple, National Bank, or any major bank brokerage)


• Understand the different preferred share types — rate resets, perpetuals, floaters, and split shares each behave differently


• Always use limit orders when buying preferred shares to avoid paying above the ask price


• Hold preferreds in a TFSA for tax-free dividends, or a non-registered account to claim the dividend tax credit


• Diversify across 5–10 issuers and mix preferred types to balance income and rate sensitivity


• Focus on investment-grade issuers and buy at or below the $25 par value when possible


• Use our free tools to research, screen, and track your preferred share portfolio