Premium Income Corp. Secures $42.6M with High-Yield Preferred Shares

TORONTO, ON – January 29, 2026 – In a move signaling robust investor appetite for stable, income-generating assets, Premium Income Corporation announced today the successful closing of a significant treasury offering. The investment fund raised gross proceeds of $42,654,600 through the issuance of 2,633,000 preferred shares.

The shares, which will trade on the Toronto Stock Exchange under the existing ticker PIC.PR.A, were offered at a price of $16.20 per share. This capital infusion reinforces the fund's market position and provides it with substantial capital to continue its long-standing investment strategy, which is heavily focused on Canada's largest banks.

A Beacon for Income Investors

In a market often characterized by volatility and fluctuating returns, the offering from Premium Income Corporation stands out as a beacon for income-focused investors. The newly issued preferred shares come with a fixed cumulative preferential monthly cash distribution of $0.10625 per share. This amounts to an annual payout of $1.275, representing a notable 8.50% yield based on the shares' original issue price of $15.00.

This high yield is particularly compelling for individuals such as retirees or those managing conservative portfolios who prioritize predictable cash flow over aggressive growth. The structure of the payout is designed for stability, offering a preferential claim on distributions before any are made to the fund's Class A common shareholders.

The fund's manager, Mulvihill Capital Management Inc., recently made strategic changes to enhance this appeal. Effective November 1, 2024, the distribution rate on the preferred shares was increased significantly from 5.75% to the current 8.50%, and the payment frequency was shifted from quarterly to monthly. This adjustment makes the income stream more frequent and aligns the product more closely with the needs of investors who rely on regular monthly income.

Confidence in Canada's Banking Giants

The successful completion of this multi-million dollar offering is more than just a win for the fund; it serves as a powerful vote of confidence in its underlying investment thesis. Premium Income Corporation's portfolio consists principally of common shares of Canada's six largest banks: Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, and The Toronto-Dominion Bank.

These institutions are the bedrock of the Canadian financial system, known for their stability, consistent dividend payments, and long-term performance. By anchoring its portfolio in these blue-chip stocks, the fund offers investors indirect exposure to a sector widely regarded as a pillar of the national economy. The oversubscription and successful closing of the offering suggest that investors share this confidence and are eager to participate in the steady returns these banks historically provide.

Established in October 1996, Premium Income Corporation has a long history of navigating different market cycles. The fund's mandate was recently extended for another seven years, now set to continue until at least November 1, 2031, providing a long-term horizon for its strategic operations. This longevity, coupled with the fresh capital, positions the fund to continue executing its strategy for years to come.

The Strategy Behind the Yield: Covered Calls Explained

While the quality of the underlying bank stocks provides a solid foundation, the fund's enhanced yield is generated through an active management strategy managed by Mulvihill Capital Management. To generate returns above and beyond the dividend income from its bank shares, the fund selectively writes covered call and put options.

A covered call strategy involves selling call options on some of the stocks held in the portfolio. In essence, the fund collects a payment, known as a premium, in exchange for selling the right for another investor to purchase the stock at a predetermined price (the strike price) before a set expiration date. This premium income supplements the dividends received from the stocks, boosting the overall return and providing a cash cushion that can help reduce portfolio volatility, particularly in flat or moderately declining markets.

However, this strategy involves a trade-off. By selling a call option, the fund caps its potential upside on that particular stock. If the stock's price surges well above the strike price, the fund's gains are limited to the strike price plus the premium received, and it forgoes any further appreciation. The long-term success of this strategy hinges on the expertise of the fund manager. Mulvihill Capital Management has demonstrated this expertise over decades, with the fund's Class A shares (PIC.A) showing a cumulative total return of over 7,200% since inception, significantly outperforming the S&P/TSX Diversified Bank Index.

Understanding the Risks and Rewards

Like any investment, the preferred shares of Premium Income Corporation are not without risk. As a fixed-income-like instrument, the shares are sensitive to interest rate changes. If general interest rates in the economy were to rise significantly, the fixed 8.50% yield might become less attractive relative to newer investment products, which could put downward pressure on the market price of the PIC.PR.A shares.

Furthermore, while the covered call strategy is designed to enhance income, it does introduce its own set of complexities, including the previously mentioned cap on upside potential. Investors should also be aware of standard market risks, including the fact that the value of the underlying bank stocks can and does fluctuate, which in turn affects the fund's Net Asset Value (NAV).

The press release includes standard disclaimers noting that the securities have not been registered for sale in the United States and that investors may pay brokerage fees and potentially more or less than the NAV when buying or selling shares on the open market. These are important considerations for any potential investor, highlighting the need for due diligence. With this fresh injection of capital, Premium Income Corporation is well-positioned to continue its mission of providing a stable, high-yield income stream derived from the strength of Canada's financial sector.