Enbridge Preferred Shares Conversion: A Strategic Opportunity for Income Investors

Income-focused investors face a pivotal decision this month: whether to convert their holdings of Enbridge’s Series 13 preferred shares into the newly introduced Series 14. With a May 20 deadline looming, the choice between fixed and floating rate dividends carries significant implications for dividend optimization and risk management. Here’s what investors need to know to make the right move.

The Conversion Basics: Fixed vs. Floating

As of June 1, 2025, holders of Enbridge’s Series 13 preferred shares (TSX: ENB.PF.E) can elect to convert their holdings into Series 14 shares on a one-for-one basis. The decision hinges on two critical factors: dividend stability and exposure to interest rate fluctuations.

Series 13 Holders Retaining Shares:
Investors who choose to keep their Series 13 shares will secure a fixed annual dividend of 5.395%, guaranteed through June 1, 2030. This rate, calculated as the five-year Canadian government bond yield plus a 2.66% spread, offers predictable income in an era of uncertain interest rate movements.

Series 14 Holders (Converted Shares):
Converting to Series 14 means accepting a floating dividend rate tied to short-term government treasury bills. The initial quarterly rate is set at 1.33841%, based on the March 2025 three-month Canadian T-bill rate. While this rate will reset every quarter, it could rise alongside broader market rates—a potential advantage if interest rates climb in the coming years.

Why Convert? The Case for Floating Rates

Floating-rate securities like Series 14 appeal to investors who believe interest rates will rise. In such an environment, the dividend could outpace inflation and potentially surpass the fixed Series 13 rate over time. However, this strategy carries risk: if rates stall or fall, the floating dividend could underperform.

Why Stay Fixed? Stability for the Long Term

For income investors prioritizing predictability, Series 13’s 5.395% fixed rate is a compelling choice. With the rate locked until 2030, this option shields investors from the volatility of short-term rate fluctuations. The spread over government bonds (2.66%) also reflects Enbridge’s strong credit profile, backed by its stable cash flows from energy infrastructure.

The Hidden Deadline Risk: Act Now or Lose Control

The conversion is not automatic, but two conditions could force investors’ hands:
1. If fewer than 1 million Series 13 shares remain post-conversion, all remaining shares will convert to Series 14.
2. If converting would reduce Series 14’s total shares below 1 million, no conversions will occur.

Given the current 14 million Series 13 shares outstanding, the first scenario is unlikely. However, investors who fail to act by May 20 risk losing control: those who don’t opt in may find themselves holding Series 13 indefinitely—or face unintended conversion.

Data-Driven Confidence: Enbridge’s Track Record

Investors should note Enbridge’s history of reliable dividend payments. The company has consistently prioritized shareholder returns, even through energy market turbulence.

The Bottom Line: Decide Now for Maximum Flexibility

For income investors, this conversion is a strategic fork in the road. Those seeking steady, inflation-resistant income should hold Series 13. Those willing to trade predictability for upside potential in a rising rate environment should convert.

But time is critical. With the deadline just days away, procrastination could leave investors stuck with unintended consequences. Act by May 20 to secure your preferred outcome.

In a market where certainty is scarce, this decision offers clarity. Whether you prioritize stability or speculate on rates, Enbridge’s preferred shares conversion is a rare opportunity to align your portfolio with your risk tolerance—before it’s too late.

Final Call to Action: Contact your broker by May 20 to convert your Series 13 shares—or affirm your decision to hold. The clock is ticking.