Enbridge Preferred Shares: A Crossroads for Dividend Investors

Let me break this down for you: enbridge just handed preferred shareholders a critical fork in the road. The Canadian energy giant’s decision to not redeem its Series 13 Preferred Shares on June 1, 2025, creates a high-stakes dilemma. Holders must choose between locking in a 5.395% fixed dividend or converting to floating-rate Series 14 shares by May 20. This isn’t just a technicality—it’s a make-or-break moment for income seekers. Let’s dissect the math, the risks, and what this means for your portfolio.

The Conversion Decision: Fixed vs. Floating

First, the facts:
- Series 13 Holders Who Stay Put: Get a 5.395% annual dividend until 2030. That’s a $0.2698 per share annual payout (assuming a $25 par value).
- Series 14 Converters: Take a quarterly floating rate starting at 1.33841% (equivalent to ~5.35% annually) for the first quarter. But here’s the catch: future payments reset every three months based on the Canadian 3-month T-bill rate + 2.51%.

This is a massive downgrade for those holding onto Series 13. The dividend has been slashed by over 30% from its 2020 level. Meanwhile, the floating rate’s initial offering is nearly identical to the fixed rate—but that’s only temporary.

Why the Dividend Drop?

Enbridge’s move isn’t arbitrary. The company is hedging against falling interest rates. By resetting the Series 13 dividend to a lower fixed rate, they lock in savings for the next five years. For shareholders who convert, the floating rate gives exposure to potential rate hikes—but also volatility.

Here’s the kicker: the spread of 2.51% added to T-bills is far wider than typical preferred shares. That’s a sign Enbridge is overcompensating for risk. If rates drop further, Series 14 holders could see payouts fall below the fixed rate. Conversely, if the Bank of Canada hikes rates, those floating shares might outperform.

What This Means for Investors

1. Fixed Income Fans:
If you need steady income and can stomach the 30% cut, Series 13’s guaranteed 5.395% for five years is a no-brainer. But remember: this is still a 25% drop from the 7.6% you were getting pre-2020.

2. Rate-Hawk Gamblers:
Convert to Series 14 only if you’re betting on rising rates. Let’s run the numbers:
- Current Canadian 3-month T-bill rate: ~3.5% (as of May 2025).
- Series 14’s initial rate: 3.5% + 2.51% = 6.01%, but the first quarter’s rate was set at 1.338% (due to timing). That discrepancy highlights the lag effect—rates are already moving faster than the reset mechanism.

3. The 14 Million Share Elephant in the Room:
With 14 million Series 13 shares outstanding, this isn’t just a small-scale event. Mass conversions could pressure Enbridge’s balance sheet if rates spike, while hoarders of Series 13 lock in subpar returns.

The Bottom Line: Act with Your Goals, Not Greed

This isn’t about Enbridge’s future—it’s about yours. If you’re a long-term, low-risk investor, stick with the fixed rate. The 5.395% is still competitive compared to government bonds, and stability is key.

But if you’re a rate-call gambler, convert—but brace for volatility. The floating rate’s 2.51% spread is a safety net only if rates rise. If they stagnate or fall, you’ll trail the fixed holders.

And here’s the cold, hard truth: this isn’t the first time Enbridge has cut preferred dividends. In 2020, they slashed the Series 13 payout from ~11% to 7.6%, then again to 5.4% now. That pattern suggests they’ll keep resetting downward as interest rates normalize.

Final Call:
- Hold Series 13 if you want sleep-at-night money.
- Convert to Series 14 only if you’re willing to ride the rate rollercoaster.
- Sell entirely if you’re a growth investor—preferred shares are for income, not appreciation.

The clock’s ticking until May 20. Don’t let this decision go to redemption—pun intended.

Conclusion: Enbridge’s Series 13/14 split is a masterclass in trade-offs. With 5.395% fixed or floating-rate roulette on the table, investors must align their choice with their risk tolerance and time horizon. The math is clear: fixed offers safety at a discount, while floating bets on rising rates. With 14 million shares in play, this isn’t just a personal decision—it’s a ripple effect on Enbridge’s capital structure. Act wisely, and don’t be left holding the bag when the next reset comes around.