The strength in the price of NAB income securities (ASX code: NABHA) has provoked some comment from analysts and other observers recently. Usually, any short-term price rise is provoked by speculation regarding a redemption. Investors’ willingness to acquire them pushes the price higher as buyers ignore a small additional cost to them in light of an expectation of a much larger gain.
The income securities have a face value of $100, so some investment advisers mistakenly spruik the idea of a $100 payout. In reality, a buyback at a discount to face value but at a premium to the current market price is more realistic. In any case, it is unlikely to occur before 2022 when the income securities lose their “Tier 1 capital” status. NAB would then begin franking any distributions to investors in line with franking on its ordinary shares.
