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

[bobandsherry]

Of all the PCG preferred issues, which ones are the desirable ones to own?

PCG-A, PCG-B and PCG-C are all non-callable. The others are callable but doubtful you'd see them get called either.

Currently, I'd purchase PCG-A (and actually did) which at the current ask ($27.75) would yield 6.35% after recouping the div in arrears). That's the best based return based on current bid/ask prices (PCG-A is trading in a very narrow B/A range right now). Using the 2017 avg share price, it also has the most upside potential - PCG-B is slightly better but looks like a harder trade to pin down.

Here's share prices with a 6% dividend target, so anything lower than that would be more meat on the bone. Note that some are already trading below the 6% target (PCG-C, PCG-G, PCG-H and PCG-I). The "Current Disc" is the % below the last trade price.

6% Target	$ Share	Current Disc
PCG-A	$29.13	4.89%
PCG-B	$26.70	4.49%
PCG-C	$24.27	-0.45%
PCG-D	$24.27	3.26%
PCG-E	$24.27	1.32%
PCG-G	$23.30	-1.89%
PCG-H	$21.84	-0.76%
PCG-I	$21.16	-3.95%

Just to be clear, the above is all based on the assumption that dividends in arrears are paid in 8/15 dividend payment.

 

[aja8888]

Aja, its gonna come down to you backing out 11 accrued dividends (including July), then divide price into annual payment and decide if its worth the risk reward to you. I consider PCG-A the anchor base price that others trade off and that is where you find relative value like Bob mentioned...I think its valuable PCG-A is uncallable because its 6%.. The C series is uncallable I remember but being 5% par not really a big deal. Especially considering the D and E are 5% and callable, but have a $26.75 redemption price. Since these issues are very old with A going back almost 100 years, I dont think any are call risk and being under par largely irrelevant for the 5% and below issues.

Thanks (Mulli & Bob)!

 

[bobandsherry]

Its been a fun and interesting trade hasnt it Bob....We just need this thing dragged over the finish line now.

I keep waiting for the other shoe to fall, but seems like too much incentive for all parties to get this done.

This has kept me busy fishing for issues to flip and pocket some money -- a bright side to the overall negative aspect of the markets (but today was solid). I may have one more play as I have PCG-H with a good chunk of gain, more than 10 dividends, so will see if I can flip that and snag another block of PCG-A. What is nice is what I've pocketed from flips and current gains I have covered more than 25% of my investment in PCG.

 

[aja8888]

I put an order in for PCG-A. I need to get moving and build out my preferred portfolio to a higher percentage since I am gun shy on regular equities. I haven't been flipping like you folks...just building an income stream. CD's are screwed these days and bonds are too dangerous.

 

[Mulligan]

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

I keep waiting for the other shoe to fall, but seems like too much incentive for all parties to get this done.

This has kept me busy fishing for issues to flip and pocket some money -- a bright side to the overall negative aspect of the markets (but today was solid). I may have one more play as I have PCG-H with a good chunk of gain, more than 10 dividends, so will see if I can flip that and snag another block of PCG-A. What is nice is what I've pocketed from flips and current gains I have covered more than 25% of my investment in PCG.

Bob, PCG is everybody’s whipping boy and probably deserved at times...But its popular to attack from both sides, but as you noticed it never goes wipe out bankrupt and state never takes it over despite yappings.....Why? PCG has too many teets with green money milk to be sucked on by everybody...Government through many back door fees, taxes, and green initiatives. CA pension systems are deep into company and need it solvent to get their money and then union power also...So it will keep on going despite all the howls.

 

[Mulligan]

I put an order in for PCG-A. I need to get moving and build out my preferred portfolio to a higher percentage since I am gun shy on regular equities. I haven't been flipping like you folks...just building an income stream. CD's are screwed these days and bonds are too dangerous.

Aja, though lower yield, I bought 200 of WELPM at 124 the other day...Non callable and pristine credit rating.

 

[Mulligan]

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

I keep waiting for the other shoe to fall, but seems like too much incentive for all parties to get this done.

This has kept me busy fishing for issues to flip and pocket some money -- a bright side to the overall negative aspect of the markets (but today was solid). I may have one more play as I have PCG-H with a good chunk of gain, more than 10 dividends, so will see if I can flip that and snag another block of PCG-A. What is nice is what I've pocketed from flips and current gains I have covered more than 25% of my investment in PCG.

Bob, you took this issue trading like a dog to a bone...Im definitely in second place behind you here in gains...But your enthusiasm for the game dragged me into more profits than I would have had if you had stayed quiet.

 

[Mulligan]

I put an order in for PCG-A. I need to get moving and build out my preferred portfolio to a higher percentage since I am gun shy on regular equities. I haven't been flipping like you folks...just building an income stream. CD's are screwed these days and bonds are too dangerous.

Like Bob mentioned A will probably most of the time yield the highest. Though opportunities can be exploited in other series at times. The callables will stay lower in yield generally because market tends to give some value to a call and cap gain from that happening, no matter how slim the odds are.

 

[aja8888]

Aja, though lower yield, I bought 200 of WELPM at 124 the other day...Non callable and pristine credit rating.

Thanks, I'll look into that one tonight. Seems like you are focusing on Utes these days.

Edit...I looked at it a bit. What's the rationale for paying $24 over issue price for this? Is that the "premium"for it 6% div payout? Since this is not callable, will it ever "go away" as a security?

I suppose when interest rates go up (if ever), the price will fall back toward $100.

 

[Mulligan]

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

Aja, yes it is uncallable. Issued around 70 years ago or so. About 43,000 shares outstanding. Yes if yields rise it will drop. But it hasnt seen $100 since great recession. Just a core anchor, but I dont own many sub 5% issues. Yield is usually determined by interest rates, liquidity of issue and credit quality. Its credit quality is high which holds yield down along with being very illiquid. I got my traders but have built up a few non callables in stash...But on other end I got term dated issues also, mid duration issues, and of course the traditional perpetual with a call date. Balance out duration risk some with this method. But yes, highly suspicious of anything paying near term but utes...
Overly paranoid but it helps me, ha.
Regular company if they get stiffed on payment its sucks to be you...But Utes are different...They get stiffed? No problem, next rate filing they are legally able to file increases to get those non payments back. So by hook or crook they gonna get theirs...Which means Im eventually gonna get mine....

 

[aja8888]

Aja, yes it is uncallable. Issued around 70 years ago or so. About 43,000 shares outstanding. Yes if yields rise it will drop. But it hasnt seen $100 since great recession. Just a core anchor, but I dont own many sub 5% issues. Yield is usually determined by interest rates, liquidity of issue and credit quality. Its credit quality is high which holds yield down along with being very illiquid. I got my traders but have built up a few non callables in stash...But on other end I got term dated issues also, mid duration issues, and of course the traditional perpetual with a call date. Balance out duration risk some with this method. But yes, highly suspicious of anything paying near term but utes...
Overly paranoid but it helps me, ha.
Regular company if they get stiffed on payment its sucks to be you...But Utes are different...They get stiffed? No problem, next rate filing they are legally able to file increases to get those non payments back. So by hook or crook they gonna get theirs...Which means Im eventually gonna get mine....

The thing I don't understand about these 70 year uncallable issues is how does the company ever retire them? Do they have to go out and try to buy them all from the general public or other owners?

 

[Mulligan]

The thing I don't understand about these 70 year uncallable issues is how does the company ever retire them? Do they have to go out and try to buy them all from the general public or other owners?

Yes if they so desire or they will offer public tenders. Obviously companies have gotten wise and dont issue uncallables anymore. Now some owner convertibles bust and pretty much become non callable also by accident..But there are very few non callables that havent been wiped out from tenders...A few examples like MSEXP, NEWEN, CTGSP, and CTPPO are uncallables but have had various tender offers over the previous decades. So there is only a couple thousand shares of each left anymore. MSEXP for example is down to 780 shares left.

 

[Mulligan]

The thing I don't understand about these 70 year uncallable issues is how does the company ever retire them? Do they have to go out and try to buy them all from the general public or other owners?

The interesting thing about these are who ever buys the company has to assume them...Take an extreme example...DMRRP...It was issued in 1863 and has went through dozens of railroad mergers over the past 150 years...CSX is the guaranteer of payment now.

 

[aja8888]

The interesting thing about these are who ever buys the company has to assume them...Take an extreme example...DMRRP...It was issued in 1863 and has went through dozens of railroad mergers over the past 150 years...CSX is the guaranteer of payment now.

Amazing that they weren't retired at some point.

 

[Mulligan]

Amazing that they weren't retired at some point.

Aja, added thought here..Most of these deep illiquids when checking filings shows the present controlling company actually owns the majority of the float. For example DMRRP. There are roughly about 15,000 shares of DMRRP still trading. However CSX intentionally bought up about 15,500, or just a few shares more than half. So they control the majority voting block of the preferreds which means they control their protective mechanisms. Its just simply a waste of time and money to track down the rest..
What is even funnier is DMRRP has a common stock DMRR that actually pays a dividend. DMRR actually trades a couple times a year, but the railroad doesnt even exist and hasnt in almost a 100 years, I think.

 

[bobandsherry]

Bob, you took this issue trading like a dog to a bone...Im definitely in second place behind you here in gains...But your enthusiasm for the game dragged me into more profits than I would have had if you had stayed quiet.

I guess that's the purpose here, sharing information. People can then make their own decision. It was you who got me noodling over the PCG issues, they were greatly disconnected from each other and other than rate, I didn't see much other reason why. I saw what I thought was an opportunity and glad it help fund your next steak and wine dinner

 

[Texas Proud]

Yes if they so desire or they will offer public tenders. Obviously companies have gotten wise and dont issue uncallables anymore. Now some owner convertibles bust and pretty much become non callable also by accident..But there are very few non callables that havent been wiped out from tenders...A few examples like MSEXP, NEWEN, CTGSP, and CTPPO are uncallables but have had various tender offers over the previous decades. So there is only a couple thousand shares of each left anymore. MSEXP for example is down to 780 shares left.

With only 780 shares I do not know why they do not offer 2X or even 10X to get rid of them... there are cost involved in having an issue outstanding... I cannot see trustee fees being less than $3,000 per year plus the legal and filing requirements.... so even if $5,000 per year that is over $6 per share expense...


Wonder what it would cost to go to court to be able to force a call... I assume they know who owns them... so can push to get rid of them

 

[Mulligan]

Texas I bet they have been tendered over the years but there are always unaware people...Take CTGSP...A an 8% $3.25 or so par issue. About 5 years ago they offered $12 a share and 20,000 still didnt tender and it trades at $6 or so....

 

[bobandsherry]

Texas I bet they have been tendered over the years but there are always unaware people...Take CTGSP...A an 8% $3.25 or so par issue. About 5 years ago they offered $12 a share and 20,000 still didnt tender and it trades at $6 or so....

Have to wonder how many of those shareholders passed to the other side and those who inherited have no idea. Or how many may have passed without any heirs. Think it's chance it's just dead wood?

 

[Mulligan]

Have to wonder how many of those shareholders passed to the other side and those who inherited have no idea. Or how many may have passed without any heirs. Think it's chance it's just dead wood?

Quite possible, as issues like CTGSP are over 100 years old which means they originated in stock certificate form. Very possible many were lost over time.
I remember about 5 years ago Connecticut Power and Light wanted to increase their short term borrowing limits. But they needed the preferred stock holders permission as it would have violated preferred covenants. Management said it failed because even though the ones who voted overwhelming approved they couldnt track down enough of the shareholders to get the vote. These are all old issues too. Dont know why they didnt just redeem them to do it, but they didnt.

 

[pb4uski]

So if they can't track them down then they can't pay dividends either I would think. I wonder if the unpaid dividends eventually get escheated to the state.

 

[Texas Proud]

So if they can't track them down then they can't pay dividends either I would think. I wonder if the unpaid dividends eventually get escheated to the state.

The answer is yes... and from what I found out if the shares are at Computershares the shares get escheated also...


The question I am still waiting to find out is if they sold those shares or not... so far New York is doing nothing on my request.

 

[Mulligan]

The answer is yes... and from what I found out if the shares are at Computershares the shares get escheated also...


The question I am still waiting to find out is if they sold those shares or not... so far New York is doing nothing on my request.

I would think its just the dividends not the shares. But remember many of these shares probably never made it into DTC. They were just paper issuances that never converted.

 

[pb4uski]

Probably sitting in a never-used drawer or landfill.

 

[Coolius]

Mulligan,


After reading about the emergence of PG&E from BK, I decided to tiptoe in and try to scalp some coin from this event.


Just bought 42 shares @ $27.50. Now I wait.