Preferred Stock Investing-The Good , The Bad and The In Between 2015 - 2020

[Freedom56]

Dont blame you, Freedom. The yield isnt what you paid for it, its the yield that the stock currently trades at. Im in the middle of a little cost reduction trade myself. Hope I finish it up soon.

I raised just under $600K cash with the sale of those issues. but will lose about $35K per year in income offset by about $73K in capital gains. I'll use that money for trading. In a market hitting new highs, there a lot of sectors that have been beaten up badly - Retail, oil and gas, MLPs, Biotech, Pharma etc... This rally has been extremely narrow and led my stocks that I would never touch (i.e. Amazon, Facebook, Netflix, Google, etc...). It feels a lot like 2000 all over again.

 

[Freedom56]

Watch the rotation out of technology and into telecom and domestic based industrial stocks. Telecom pays the highest tax rate at an average of 34%. A drop to a 20% tax rate is significant for the profitable telecom companies.

 

[Mulligan]

Watch the rotation out of technology and into telecom and domestic based industrial stocks. Telecom pays the highest tax rate at an average of 34%. A drop to a 20% tax rate is significant for the profitable telecom companies.

Sounds reasonable to me Freedom. But I am done with common stocks. Maybe in a few years if a correction occurs I will go back into index funds.......I couldnt quite complete my round trip trade. Sold off 1000 shares of AILLL at $27 a couple weeks ago and bought 803 between 26.50 and 26.60. The trading dried up for a few days so I throw in the towel and bought the odd lot purchase back at $26.96 to return them all back into the fold.
I recently bought a few higher yielders so I put some money into the penalty box with GJO. A 2030 Walmart 7.55% bond held in trust with an artificial adjustable attached to it. So basically I am getting the same YTM as the bond currently yields but have upside in yield as it tracks Libor and trades off the short end....Low yield, low risk stuff.

 

[Freedom56]

Sounds reasonable to me Freedom. But I am done with common stocks. Maybe in a few years if a correction occurs I will go back into index funds.......I couldnt quite complete my round trip trade. Sold off 1000 shares of AILLL at $27 a couple weeks ago and bought 803 between 26.50 and 26.60. The trading dried up for a few days so I throw in the towel and bought the odd lot purchase back at $26.96 to return them all back into the fold.
I recently bought a few higher yielders so I put some money into the penalty box with GJO. A 2030 Walmart 7.55% bond held in trust with an artificial adjustable attached to it. So basically I am getting the same YTM as the bond currently yields but have upside in yield as it tracks Libor and trades off the short end....Low yield, low risk stuff.

Mulligan,

I don't plan to buy any common stocks other than the odd day trade. If you look back at the performance of common stocks from June 2000 to now, the vast majority have under-performed cash stuffed in a mattress. But with tax reform, it's good to look at the effective tax rate before and after since it will help pay dividends and service their debt.

 

[Mulligan]

Mulligan,



I don't plan to buy any common stocks other than the odd day trade. If you look back at the performance of common stocks from June 2000 to now, the vast majority have under-performed cash stuffed in a mattress. But with tax reform, it's good to look at the effective tax rate before and after since it will help pay dividends and service their debt.

I still am not touching Quest or Frontier, preferreds or debt, lol...

 

[Freedom56]

I still am not touching Quest or Frontier, preferreds or debt, lol...

I'm not touching FTR or retailers. Despite the tax reform, we will see more retailers file for bankruptcy protection next year. There are too many of them and they are competing with online merchants with low overheads.

 

[Dan32]

I have been using an asset allocation that allots 12% of my total investments to Preferred stocks. I also allot 4% to the BND etf and 5% to Cash. Looking at the year end status, I'm asking myself why I don't move the BND etf allocation to the Preferred category? Curious as to how much others on this board allocate to Preferreds and thoughts on moving my BND etf allocation to Preferreds?

 

[Sunset]

I just dabble in Preferred shares, slowly adding to my collection of them simply as an alternative to a bond.
I might have 3% in Preferred's.
I would not go over 5% myself, as I do subscribe to the thought that regular stocks will (or VTI) will outperform over the decades.

I also have some BND as I have no better idea what to buy for bond equivalence.

 

[capjak]

I have been using an asset allocation that allots 12% of my total investments to Preferred stocks. I also allot 4% to the BND etf and 5% to Cash. Looking at the year end status, I'm asking myself why I don't move the BND etf allocation to the Preferred category? Curious as to how much others on this board allocate to Preferreds and thoughts on moving my BND etf allocation to Preferreds?

Retiring next year so conservative: currently 9% in preferred plus 36% Bond, 10% Cash, 45% Stock

I try to keep pfd to 10% or less.

 

[Texas Proud]

I have been using an asset allocation that allots 12% of my total investments to Preferred stocks. I also allot 4% to the BND etf and 5% to Cash. Looking at the year end status, I'm asking myself why I don't move the BND etf allocation to the Preferred category? Curious as to how much others on this board allocate to Preferreds and thoughts on moving my BND etf allocation to Preferreds?

I have about 7% in a cash balance account at old mega earning 4.5% which I do not want to do anything with.... very safe and good yield...

I have my spending money in a ST bond fund and HY bond fund.... I will be using this over the next year....

So, my 5% (sometimes a bit more) that I had allocated to bonds I have moved to preferred.... I had most of the money in a HY fund and I think the pref I have bought are higher rated and better yield... my capital is down about 4% due to a loss on a couple of holdings, but I will keep them for now... I use to have a greater loss at times on the HY fund... AND the income I have had has more than made up for that loss... (BTW, my trading has also made more than that loss so no big deal IMO)....

 

[Mulligan]

Preferred Stock Investing-The Good , The Bad and The In Between

Financial experts generally have a consensus of no more than 10%, which seems prudent to me. And it also depends on what you are buying... But some preferreds I have are of higher quality than what most bonds are. Some preferreds on a market downturn would get crushed like any common stock. I am concentrated in preferreds, but I dont live on them in retirement. In fact I doubt I ever spend a nickel out of them because I dont even spend my monthly pension. So this gives me latitude to do what I want to do, for no particular reason. Preferreds can be targeted for different things (one needs to fully understand capital structure of a company and the safety of their bonds in relation to the preferreds amongst other thing things). For example me...My categories are non callable perpetuals (DMRRP, PPWLO, MSEXP) callable perpetuals (AILLL, AILNP, RNR-C, BURCP, FIISO, CTWSO), Adjustables (NSS, NGLS-A), Term dated (CNIGO, LANDP, KYN-F, SPLP-T) Term dated adjustables (GJP, GJO, which actually synthetic adjustables from non callable Walmart & Dominion senior debt).

 

[brokrken]

Mully, no IPL-D?

 

[Mulligan]

Preferred Stock Investing-The Good , The Bad and The In Between

Ken, I am out of it now. I had it and it spiked 50 cents quickly and I sold (of course it went higher so I didnt time it great). Excellent solid company. Its just that it is sitting below 5% and as liquid as it is it will drop quicker if rates raise. If it gets into $23 range I will look to get back in. I kind of consider my CNIGO as a substitute, but I can now just put those away knowing it matures in less than 6 years. I had them at $26, sold at $27 and $27.50 and it never traded again for months on end. Got a chance to get back in at $26.75 so I did. Now that it is pretty apparent very few people are going to sell this private issued placement preferred...Im not either now.

 

[Mulligan]

A couple trades...Sold off half my RNR-C locking in quick gains. Bought 300 shares of GWSVP at 26.50. Doing well under Primo and I believe last weeks self filing is common raise as common has sagged since the shelf while the trust issue is staying in normal range. Made an old man purchase of 100 shares today. TY-. Venerable old low yeilding top line safety preferred at 50.50 to get my feet wet.

 

[pig pile]

A couple trades...Sold off half my RNR-C locking in quick gains. Bought 300 shares of GWSVP at 26.50. Doing well under Primo and I believe last weeks self filing is common raise as common has sagged since the shelf while the trust issue is staying in normal range. Made an old man purchase of 100 shares today. TY-. Venerable old low yeilding top line safety preferred at 50.50 to get my feet wet.

will be joining you on the TY-train soon I suspect. jumped in on WGLCP today. low yield but A rated debt.

 

[Mulligan]

will be joining you on the TY-train soon I suspect. jumped in on WGLCP today. low yield but A rated debt.

That is a total sleep at night also. TY-, I strongly suspect is the safest preferred on the market. The stock market would have to collapse close to 80% to endanger payment. Oddly enough, I saw that same bid on WGLCP today which was very fair. I bought TY- for diversity as I have several nat gas preferreds already.

 

[pig pile]

That is a total sleep at night also. TY-, I strongly suspect is the safest preferred on the market. The stock market would have to collapse close to 80% to endanger payment. Oddly enough, I saw that same bid on WGLCP today which was very fair. I bought TY- for diversity as I have several nat gas preferreds already.

I think there is more at $101.75 available. I bought 300. Which is a lot for me. Needed to skew the account more towards safety. Fully expect these top notch preferred's to dip soon. I plan to have a like amount of TY- soon. Plus the TY has the $55 call to add bonus a little for feel good factor.

 

[Mulligan]

I think there is more at $101.75 available. I bought 300. Which is a lot for me. Needed to skew the account more towards safety. Fully expect these top notch preferred's to dip soon. I plan to have a like amount of TY- soon. Plus the TY has the $55 call to add bonus a little for feel good factor.

TY- and WGLCP are both similar in yield and price stability. They are so safe, they really dont suffer the extreme price drops even in higher interest rate environments according to their 20 year price histories. Always good to have some in safe reliable income.

 

[Mulligan]

Preferred Stock Investing-The Good , The Bad and The In Between

I think there is more at $101.75 available. I bought 300. Which is a lot for me. Needed to skew the account more towards safety. Fully expect these top notch preferred's to dip soon. I plan to have a like amount of TY- soon. Plus the TY has the $55 call to add bonus a little for feel good factor.

Pig, here is a bit of interesting history for you...WGLCP was issued $100 par at 5% in 7/1958 when 10 year was 3.2%.... So you have in essence a 4.95% yield today with a 2.4% treasury. So on relative terms as much as one would find surprising it is a better value deal today than when it was first issued.

 

[bobandsherry]

That is a total sleep at night also. TY-, I strongly suspect is the safest preferred on the market. The stock market would have to collapse close to 80% to endanger payment. Oddly enough, I saw that same bid on WGLCP today which was very fair. I bought TY- for diversity as I have several nat gas preferreds already.

Thanks for sharing info on TY-. Low volume may make it hit/miss to get in/out, but looks like decent return.

Just curious, what % of preferred's make up your portfolio? Perhaps you mentioned previously but I don't recall.

 

[Mulligan]

Thanks for sharing info on TY-. Low volume may make it hit/miss to get in/out, but looks like decent return.



Just curious, what % of preferred's make up your portfolio? Perhaps you mentioned previously but I don't recall.

About everything....Thus the mixture of adjustables, term dated, and preferreds... This is money I will never use. I dont even spend but about 60-65% of my monthly pension, and I am getting my COLA next month.

 

[Coolius]

I have held TY- for a few months now, bought at higher prices, around the $51.05-$51.10 area.

No concerns about this one, but also not expecting much in the way of cap losses/gains either.

A really boring holding, not much excitement about it, but that's just the way I like it.

 

[bobandsherry]

About everything....Thus the mixture of adjustables, term dated, and preferreds... This is money I will never use. I dont even spend but about 60-65% of my monthly pension, and I am getting my COLA next month.

Nice position to be in. I was wondering what you've had with returns with that portfolio, but with pension more than covering your living expenses I can understand your alignment with preferred's.

 

[Winemaker]

About everything....Thus the mixture of adjustables, term dated, and preferreds... This is money I will never use. I dont even spend but about 60-65% of my monthly pension, and I am getting my COLA next month.

Brother, can you spare enough for another FIRED brother to buy some wine?

 

[Mulligan]

Nice position to be in. I was wondering what you've had with returns with that portfolio, but with pension more than covering your living expenses I can understand your alignment with preferred's.

I really only went heavy a few years ago. Returned about 30% previous two years, and dropping to about 10% this year. The way I have moved my stuff around the past few months I suspect at best next year we are looking at the yield return of about 6% at best. But with a lot of them term dated or adjustable I really dont see much reason to mess with those. Throw in the ones I dont want to trade, and I dont have enough of the others to flip like I used to. Previous couple years one could make money flipping prefereds about every day as the illiquids I invested in were pretty jumpy. But past year they have crept upwards but not much bouncing to take advantage of.
I went leaning towards term dated and adjustables lately to prepare for inevitable drop in prices if yields do rise.