Capstone Preferred Reset: 5.788% Fixed or 4.994% Floating

Capstone Infrastructure Corporation set the dividend rates for its preferred shares, giving holders a choice between a five-year fixed coupon and a floating rate that resets quarterly. The Series A shares (TSX:CSE.PR.A) will pay 5.788% annually from July 31, 2026 through July 31, 2031. Holders who prefer a floating rate can convert to Series B shares, which start at 4.994% for the first quarter. The conversion deadline is July 15 at 5 p.m. Toronto time.

The spread is the same in both cases: 2.71 percentage points over a government benchmark. For the Series A fixed rate, the benchmark is the five-year Government of Canada bond yield. For the Series B floating rate, it is the three-month Treasury bill yield. The fixed rate of 5.788% is locked for five years. The floating rate starts at 4.994% but will change every quarter based on the T-bill yield.

The difference between the two initial rates reflects the current shape of the yield curve. The five-year bond yield is higher than the three-month T-bill yield, so the fixed rate starts higher. That gap could widen or narrow over time. If the Bank of Canada cuts short-term rates, the floating rate would fall, making the fixed rate more attractive. If rates rise, the floating rate adjusts upward and could exceed the fixed coupon.