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

[Coolius]

I also sold of 1/3 of my CNLPL today at $60. Price is too high to resist.


Am sure I will be able to buy the shares back below $60 in the future.


Call risk is low, I agree, but at $60 it's worth selling and hoping for a flip.


My sock drawer community is getting all shook up due to departure of residents, LOL. MTB-C, MTB, and now CNLPL. Not forgetting that some AILLL left recently as well.

 

[Mulligan]

Well that was quick. I flipped out of my XOM and PPL for well over a buck a share gain for 2 day hold. I just cant hold commons. I was itchin to be the ol gunslinger going back for one last flippin gunfight (again and again, lol) with PPX. Bought a slug under 25.30 at market close. Just need it not to be redeemed and it will be more easy money come next exD time.

 

[RE2Boys]

I also sold of 1/3 of my CNLPL today at $60. Price is too high to resist.


Am sure I will be able to buy the shares back below $60 in the future.


Call risk is low, I agree, but at $60 it's worth selling and hoping for a flip.


:

Agree, at 60 it was too hard to resist, but this issue doesn't trade very often, it may take awhile to replace any shares sold. Now if I only could find a buyer for my WGLCP. Back on 7/18 there was a transaction for more than I was willing to sell (open order in place), no idea why my order was not executed

 

[Coolius]

RE2, a little after I had sold my shares, an ask for CNLPL came out at $59.25 - fully $0.75 below what I had sold.


It remained right up to market close.


Tempted to buy and scalp a quick 1.3% gain, but I decided to hold off and try to get it around $58.75 or so.

 

[Mulligan]

Nothing kills a good thread like success...And sky high preferred prices, lol...Its funny reflecting on peoples worries owning preferreds in this thread a while back stating how high yields were going and we were going to get thrashed. Well that didnt happen so much. In fact the opposite occurred. Who would have ever guessed. Predictions are well, unpredictable....
Its been tougher but some flips have been done the past month. Just sold out of LXP-C. That was a sweet runup and divi received play. Done some others also.
Rates are low and may well remain this low..But wow some of these perpetuals are really priced high now. Chasing new yield as reasonable value is tough now.

 

[Coolius]

Mulligan, totally agree.


I had a few holdings called - the MTB sisters, BBT-E, and others which I've forgotten.


Very difficult now to find or buy good IG preferreds with a reasonable yield.


I'm hunkering down with what I have, not selling, as I really need the income flow to survive on. I would sell only if adverse news or adverse performance came out for a holding now - it's tempting to take profit, but inability to replace dividend makes for a difficult decision moment..

 

[pb4uski]

....But wow some of these perpetuals are really priced high now. ...

..... I'm hunkering down with what I have, not selling.... - it's tempting to take profit, but inability to replace dividend makes for a difficult decision moment..

+1 lots of dots crowding the high side of the 52-week range.... it is tempting to sell for a nice, quick profit... but where would the proceeds go?

 

[Running_Man]

Nothing kills a good thread like success...And sky high preferred prices, lol...Its funny reflecting on peoples worries owning preferreds in this thread a while back stating how high yields were going and we were going to get thrashed. Well that didnt happen so much. In fact the opposite occurred. Who would have ever guessed. Predictions are well, unpredictable....
Its been tougher but some flips have been done the past month. Just sold out of LXP-C. That was a sweet runup and divi received play. Done some others also.
Rates are low and may well remain this low..But wow some of these perpetuals are really priced high now. Chasing new yield as reasonable value is tough now.

Yes I definitely was one of the ones planning on higher rates and sold most of my preferreds last fall. However, my base theory and logic was reversed when the FED did a 180 after the stock market fell, which I did quite well on. I did re-establish a two percent of my portfolio into WFC-PL with the winnings on the put options @1285 which I am still holding here higher at 1451, I will sell them when the thirty year bond hits zero. So right now I am holding 20% of the preferred stocks I would be willing to hold.

It is extremely unusual times, the highest government investment grade payout anywhere in the world is the Feds Funds rate, and the US is running a deficit at 5% of GDP per latest government estimates. I never thought this would be possible for a central bank to allow to happen.

A firm I know run by a friend with probably a 50% chance of bankruptcy (they have bankrupted two other companies previously) was able to get a 10 year loan funding to expand their business at 3.5% fixed. The reason for borrowing was merely because the hurdle rate for success was so low, they felt made no sense to not take the money. The company has marginal income of 10 percent and is expanding into an area of their business they have not done previously with no assured chance of success.

 

[Mulligan]

+1 lots of dots crowding the high side of the 52-week range.... it is tempting to sell for a nice, quick profit... but where would the proceeds go?

Pb...Awe, you had to bring up that nasty problem that follows if one locks in the gains....What to do with the money...It isnt like there are a sunset of same quality preferreds sitting there to roll into at better yields are there, lol...

 

[Mulligan]

Yes I definitely was one of the ones planning on higher rates and sold most of my preferreds last fall. However, my base theory and logic was reversed when the FED did a 180 after the stock market fell, which I did quite well on. I did re-establish a two percent of my portfolio into WFC-PL with the winnings on the put options @1285 which I am still holding here higher at 1451, I will sell them when the thirty year bond hits zero. So right now I am holding 20% of the preferred stocks I would be willing to hold.



It is extremely unusual times, the highest government investment grade payout anywhere in the world is the Feds Funds rate, and the US is running a deficit at 5% of GDP per latest government estimates. I never thought this would be possible for a central bank to allow to happen.



A firm I know run by a friend with probably a 50% chance of bankruptcy (they have bankrupted two other companies previously) was able to get a 10 year loan funding to expand their business at 3.5% fixed. The reason for borrowing was merely because the hurdle rate for success was so low, they felt made no sense to not take the money. The company has marginal income of 10 percent and is expanding into an area of their business they have not done previously with no assured chance of success.

Yes, its hard RM, but I am not going to keep yield up by ratcheting up safety risk. I just have to accept lower yields and deal with it.

 

[Running_Man]

My fear is we wake up one day to an Argentina moment and all long term debt is down 50 percent and I don't have enough short term cash to make investing decisions.

 

[Freedom56]

Yes I definitely was one of the ones planning on higher rates and sold most of my preferreds last fall.

I did the opposite. I planned for declining rates and did not believe all the hype on global growth. I stated quite some time ago that rates would invert and go much lower. They should continue to drop but a sharp temporary reversal is possible and probable sending preferred shares lower. I'm up 15.8% YTD with four months of coupon payments to go. This is on top of a 6.8% gain last year. Most of my short/medium term notes (2022 - 2025) are up 12-14% from my purchase price. I'm watching the yield spread between treasuries and these notes and at some point if it is narrow enough I will start selling these notes. Right now I am 23% cash and 77% bonds and CDs. I would like to be about 80% cash/money market and 20% CDs heading into the next market crash.

 

[Coolius]

The sock drawer illiquid Ute Preferreds are going crazy, simply too high for me to resist selling, much as I like them.



So, this morning, sold some CNTHP and CNLPL for $59.44 and $59.50 respectively.


I'm now down to very reasonable amounts of both issues , maybe will buy back some if prices go back to sanity levels, like $55.

 

[brokrken]

Coolius, Any plans for the proceeds?

 

[pb4uski]

^^^^ Yeh, that's the trick... I'm all ears.

I received another call notice yesterday.... ALLPRD.... they are calling the E and F issue as well.

The BB&T call of the E issues was a non-event as I was able to replace it with the F issue... but I lost about 43 pbs of yield in the process.

 

[Free To Canoe]

Ideas? EBGEF Enbridge is currently yielding about 7.5%. Got my dividend a couple of days ago. Reliable Canadian oil & gas conglomerate. Not sure why it is trading so low. I have 1000 shares. Deal or fools errand? Maybe it has something to do with the Michigan pipeline they have been blocked from building?

 

[Coolius]

Well, another holding got called, with yet another imminent. NNN-E has been called. PSA-U will most definitely be called, likely next week.


Right now, finding strong candidates for investment is difficult. Those with above 6% yield are financially weak, lots of debt, lousy cash flow, and other undesirable attributes.


I'm looking to add more CBKLP, a thinly traded Financial Preferred. CoBank is #44 on the list of strongest banks in the world ( sorry, cannot remember the source ).


It is trading at a reasonable premium because it is in the AG sector, which has been struggling with poor harvests, harsh climates, and tariff related political activity. Now might be a good time to go in while storm clouds gather.

 

[pb4uski]

.... PSA-U will most definitely be called, likely next week....

Crap! I have some of that.

 

[bobandsherry]

Ideas? EBGEF Enbridge is currently yielding about 7.5%. Got my dividend a couple of days ago. Reliable Canadian oil & gas conglomerate. Not sure why it is trading so low. I have 1000 shares. Deal or fools errand? Maybe it has something to do with the Michigan pipeline they have been blocked from building?

Not sure why EBGEF not doing better on price other than tied to 5 year Treasury and we all know how that's been going lately. But still many years before a reset even possible and who knows what rates will be then. It's a buy and hold for me, thinking of picking up some more. At today's price no risk of call, that's for sure. [emoji39]

 

[pb4uski]

Not sure why EBGEF not doing better on price other than tied to 5 year Treasury and we all know how that's been going lately. But still many years before a reset even possible ...

The way I read it is that from 3/1/2019 the dividend will be the 5 year treasury + 2.82%... I presume quarterly... so the way I read it it resets every quarter. If so the current coupon would be about 4.22%. Have you read something elsewhere that the reset period is longer?

From 3/1/2019 dividends will be paid quarterly at a floating rate of the 5 Year US Treasury Bond plus 2.82% per annum.

Probably a little too small and dicey for me.... I try to stick to investment grade credits.

 

[bobandsherry]

The way I read it is that from 3/1/2019 the dividend will be the 5 year treasury + 2.82%... I presume quarterly... so the way I read it it resets every quarter. If so the current coupon would be about 4.22%. Have you read something elsewhere that the reset period is longer?

Could be reason more people have kind of shunned this, not understanding the details. It resets every 5 years. Just reset on 3/1/2019 (which was great timing as the 5 year was ratcheting up). So another 4.5 years before it resets. I'm OK with 7%+ return on this, and below par. Only downside is in taxable account there's 15% withheld, so I'll just apply that to my taxes when I settle up with IRS in April.

Probably a little too small and dicey for me.... I try to stick to investment grade credits.

Not sure how you determine if "too small". There's 8 million shares outstanding. Perhaps you look based on shares traded daily?

And this is investment grade. It's also qualified, 7+% qualified and under par? Winning!

It's OTC for US but trades openly on Toronto exchange under ENB.PF.V.

https://web.tmxmoney.com/quote.php?locale=en&qm_symbol=ENB.PF.V

It's denominated and paid in US dollars - so no worry about exchange rate).

Mulligan is much more verse on this, having posted on this and got me hooked up. Here's link to write-up on this:

https://seekingalpha.com/article/42...g-investment-grade-preferred-stock-strong-buy

And more recent write-up:

https://seekingalpha.com/article/4288564-enbridge-preferreds-collapsed-buy

A hidden gold nugget?? Of course do your own due diligence. Happy investing

 

[pb4uski]

That link is helpful... I couldn't find much on it.

Any idea how the tax withholding works if one holds it in an IRA? Seems that if I got the 15% withheld back on my tax return that it would be a taxable distribution... not that that is a problem but it would add another twist to the whole thing.

 

[bobandsherry]

That link is helpful... I couldn't find much on it.

Any idea how the tax withholding works if one holds it in an IRA? Seems that if I got the 15% withheld back on my tax return that it would be a taxable distribution... not that that is a problem but it would add another twist to the whole thing.

I have mine in taxable, but Mulligan and a couple others have in IRA/Non-taxable accounts, nothing withheld for that. Here's link for reference, copy/paste section below.

Owning Dividend Stocks in Retirement Accounts
If you have the contribution room available, owning Canadian stocks in U.S. retirement accounts (like a 401(k)) is always your best decision.

There are two reasons for this.

First of all, the 15% withholding tax that is normally imposed by the Canada Revenue Agency is waived when Canadian securities are held within U.S. retirement accounts. This is an important component of the U.S.-Canada tax treaty that was referenced earlier in this tax guide.

The second reason why owning Canadian stocks in retirement accounts is the best decision is not actually unique to Canadian investments, but its worth mentioning nonetheless. The remainder of the “normal” taxes that you’d pay on these Canadian stocks held in your retirement accounts will be waived as well, including both the capital gains tax and dividend tax paid to the IRS.

This means that holding Canadian stocks in United States retirement accounts has no additional tax burden compared to owning domestic stocks. In other words, owning Canadian stocks in a U.S. retirement account is the same as holding U.S. securities in the same investment account.

 

[pb4uski]

Oh, good... that totally alleviates my concern. I'll look into them... looks like a good possibility.

 

[bobandsherry]

Oh, good... that totally alleviates my concern. I'll look into them... looks like a good possibility.

Let me know if you find anything negative on the issue. No idea why it's such a sleeper other than it's OTC in US. That's fine, I'll sit with a 7%+ return for next 4.5 years.