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

[pb4uski]

Yes, it is a small portion of my stash... currently ~5% but I hope to increase that to ~10%... I don't fret much about price movements since I'm viewing them as a medium quality perpetual bond (economically).

The ratings on thse things seem odd though... for example one of my holdings is JPMPRH... according to quantumonline the issue is rated BBB- by S&P... the senior debt is A-.... I have trouble thinking the preferred is 3 full notches lower than the senior debt. All of mine a BBB or BBB-... I'm not going any lower than that.

While I totally understand what you are saying with respect to 6% last year and 5.5% this year, some of the issuers that I recall looking at the trading prices didn't seem to be reflective of the yields.... IOW, the same issuer can have two different preferred that trade at significantly different yields.... that made no sense to me... if the credit risk is essentially the same then I would have thought that the effective yields of different preferreds from the same issuer would be pretty similar (all else being equal)... but it didn't appear that was the case.

[Mulligan]

Quote:

Originally Posted by pb4uski Yes, it is a small portion of my stash... currently ~5% but I hope to increase that to ~10%... I don't fret much about price movements since I'm viewing them as a medium quality perpetual bond (economically). The ratings on thse things seem odd though... for example one of my holdings is JPMPRH... according to quantumonline the issue is rated BBB- by S&P... the senior debt is A-.... I have trouble thinking the preferred is 3 full notches lower than the senior debt. All of mine a BBB or BBB-... I'm not going any lower than that. While I totally understand what you are saying with respect to 6% last year and 5.5% this year, some of the issuers that I recall looking at the trading prices didn't seem to be reflective of the yields.... IOW, the same issuer can have two different preferred that trade at significantly different yields.... that made no sense to me... if the credit risk is essentially the same then I would have thought that the effective yields of different preferreds from the same issuer would be pretty similar (all else being equal)... but it didn't appear that was the case.

PB, the real traders can exploit sell imbalances from funds. Most of these track stupid random preferred indexes and they shuffle whats in them all the time. The real criteria seems predicated on volume...How stupid is that? So they just dump and then drive up prices when buying on other end.
But also, being past call, call protected, how close to next exD, and yield it was originally issued at, etc, will also play a part also. Usually an observation I see is one issue will be less liquid and that usually results in it trading a bit higher. Or for example some have a better protection covenant that makes it a bit more appealing. Look at SOCGP and SOCGM. Basically same damn issue at 6% uncallable. One is at $28 and the other last traded at $33...Now figure that out, lol...
Also, you are wise to look at the senior debt and unsecured debt that has ratings. This is where the real analysis is at...Rating agencies admit they just slot the preferreds below the debt. Usually 1- 3 notches below debt depending on whether it is senior unsecured or junior subordinate debt.
A company could have BBB junior subordinate debt and have one share of a preferred stock outstanding with a dividend of a penny and it would still be rated BBB- or BB+ depending on credit agency.

[pb4uski]

Quote:

Originally Posted by Mulligan .....Look at SOCGP and SOCGM. Basically same damn issue at 6% uncallable. One is at $28 and the other last traded at $33...Now figure that out, lol... ...

That sort of thing is exactly what I was talking about.... so much for the theory that markets are efficient.... if I was going to buy, put me in for the $28 one... not the $33 one.

[Texas Proud]

Quote:

Originally Posted by pb4uski Yes, it is a small portion of my stash... currently ~5% but I hope to increase that to ~10%... I don't fret much about price movements since I'm viewing them as a medium quality perpetual bond (economically). The ratings on thse things seem odd though... for example one of my holdings is JPMPRH... according to quantumonline the issue is rated BBB- by S&P... the senior debt is A-.... I have trouble thinking the preferred is 3 full notches lower than the senior debt. All of mine a BBB or BBB-... I'm not going any lower than that. While I totally understand what you are saying with respect to 6% last year and 5.5% this year, some of the issuers that I recall looking at the trading prices didn't seem to be reflective of the yields.... IOW, the same issuer can have two different preferred that trade at significantly different yields.... that made no sense to me... if the credit risk is essentially the same then I would have thought that the effective yields of different preferreds from the same issuer would be pretty similar (all else being equal)... but it didn't appear that was the case.

Do the issues have the same call date etc? Say one is past call and one cannot be called for 10 years... of course the one safe from call can get much higher over par than the one past call... so the yield can be pretty large do to other risks...


As to the last few months being difficult, well the interest rate has gone down which means prices have gone up... so as long as the yield is matching the market you have to pay up to get it...

[Mulligan]

Quote:

Originally Posted by pb4uski That sort of thing is exactly what I was talking about.... so much for the theory that markets are efficient.... if I was going to buy, put me in for the $28 one... not the $33 one.

But the market certainly appears hot for QDI preferreds. DUEKL (Duke Energy) was a $25 5.75% par issued this week and it is creeping up now to $25.47. MBINP (Merchants Bank) was a 7% issue that is already at $25.97. Other decent quality issues have shot up to. This I am sure will embolden more companies to issue more preferred...at lower yields until rate trajectory changes.

[bobandsherry]

Kinda quiet in here. New preferred should be hitting the markets. Proceeds being used to redeem some Baby Bonds (SOHOK). Non-Qualified.

8.25% Series D Cumulative Redeemable Perpetual Preferred Stock
Temporary OTC Grey Market -> SOHEP (permanent ticker will be SOHON)
Pricing Sheet

[Sunset]

Quote:

Originally Posted by bobandsherry Kinda quiet in here. New preferred should be hitting the markets. Proceeds being used to redeem some Baby Bonds (SOHOK). Non-Qualified. 8.25% Series D Cumulative Redeemable Perpetual Preferred Stock Temporary OTC Grey Market -> SOHEP (permanent ticker will be SOHON) Pricing Sheet

Obviously I'm not an accountant, as I don't understand why they would issue these paying 8.25% to pay "redeem in full its operating partnerships 7.25% senior unsecured notes due 2021."

[bobandsherry]

Quote:

Originally Posted by Sunset Obviously I'm not an accountant, as I don't understand why they would issue these paying 8.25% to pay "redeem in full its operating partnerships 7.25% senior unsecured notes due 2021."

I can think of a couple of reasons and there's probably more to the story under the covers.

• The baby bond was also coming due for maturity in 2 years, so could be the company would like to lock down current low rates rather than risk what rates could be 2 years from now.

• This moves the outstanding from debt to equity. Has some benefits from window dressing of the company on ratios and such. Conceptually this could have positive impact even on the common stock valuation.

[Coolius]

Mulligan mentioned ( on another site ) that the move is to shift Debt over to the Capital side.



A sneaky way to achieve locking in a rate for a long time to come ( avoiding a possible problem if rates are higher when SOHOK matures ), and to "improve" some of their financial ratios, as Bob said above.

[Mulligan]

Been making a few modest moves. Sold off the rest of my MBINP over 26.30 the other day. Would like to see it drop to repurchase again. Bought a chunk of PPX about a month ago under 25.30 and sold it all at 25.70, then repurchased at 25.47. Hard to let that one go. IPWLK has had a very rare liquidity event and bought 400 at 99.75. Sold off some of my DUK-A at 25.75.
Someone on another forum mentioned HE-U was getting redeemed Friday and people were selling left and right and buyers were purchasing over $26 for an issue they didnt know is getting redeemed for around 25.20 or so. Issue finally got halted around noon. I had sold mine off over a month ago for over 26.50 pre exD.

[brokrken]

Any thoughts on the PBI-B notes? Under par, past call date, sort of a cash cow type company at this point. Yielding near 7% at current price.

[Mulligan]

Quote:

Originally Posted by brokrken Any thoughts on the PBI-B notes? Under par, past call date, sort of a cash cow type company at this point. Yielding near 7% at current price.

Ken, sign up with Moodys (its free) and you can read a just issued credit rating and overall summary of company. Some moving parts here as it tries to move a way from its ever present declining cash cow postage metered stuff. I cant link the above info because they dont allow you to as condition upon signing up.

[brokrken]

Quote:

Originally Posted by Mulligan Ken, sign up with Moodys (its free) and you can read a just issued credit rating and overall summary of company. Some moving parts here as it tries to move a way from its ever present declining cash cow postage metered stuff. I cant link the above info because they dont allow you to as condition upon signing up.

Thanks, Mully. I was able to read the ratings action from April 17, but unable to read the update following the downgrade from April 18th since I'm not a paying member. Were you able to read the latter? If so, any additional info not in the former, I should be aware of?

[Mulligan]

Quote:

Originally Posted by brokrken Thanks, Mully. I was able to read the ratings action from April 17, but unable to read the update following the downgrade from April 18th since I'm not a paying member. Were you able to read the latter? If so, any additional info not in the former, I should be aware of?

No that was all I can see too. But thatshould be pretty accurate though.

[brokrken]

Picked up some GLP-A today, still debating that PBI-B

[Mulligan]

Quote:

Originally Posted by brokrken Picked up some GLP-A today, still debating that PBI-B

I have owned GLP-A a few times and presently do own it buying around par again about 6 weeks ago. Feel pretty comfortable owning it. Trying to play a little future price spike on KTBA buying at $26.70 today. Have traded bounces on it a few times for modest flip gains. It cranks out a 6 month interest payment next month.
Notice IPWLO hadnt traded in 6 months so I bought 100 shares at $88 today. $8 lower than last trade in Oct. Just having a little fun buying a dark OTC grey. Funny thing was 130 more shares traded at same price after I did after being dormant so long.

[brokrken]

Quote:

Originally Posted by Mulligan I have owned GLP-A a few times and presently do own it buying around par again about 6 weeks ago. Feel pretty comfortable owning it. Trying to play a little future price spike on KTBA buying at $26.70 today. Have traded bounces on it a few times for modest flip gains. It cranks out a 6 month interest payment next month. Notice IPWLO hadnt traded in 6 months so I bought 100 shares at $88 today. $8 lower than last trade in Oct. Just having a little fun buying a dark OTC grey. Funny thing was 130 more shares traded at same price after I did after being dormant so long.

You're a trailblazer!

[bobandsherry]

Quote:

Originally Posted by Mulligan My biggest holding is now EBGEF which will roll into over 6..7% yield on my recent purchase price of about $19.80 for this BBB- issue. Over a third of my shares now in various Canadian resets though a lot is still US currency based despite trading on TSX.

Thanks for the heads up on EBGEF, got in just a few cents more than you. As I'm sure you know, Enbridge now officially announced div at the higher rate, right where you said it would be. Based on the 6.7% yield, with this being qualified and investment grade I'm thinking this should trade closer to 6%, so I'm expecting this to trade around $22.50 or so, a possible run-up of a couple bucks from today's price.

[Mulligan]

Quote:

Originally Posted by bobandsherry Thanks for the heads up on EBGEF, got in just a few cents more than you. As I'm sure you know, Enbridge now officially announced div at the higher rate, right where you said it would be. Based on the 6.7% yield, with this being qualified and investment grade I'm thinking this should trade closer to 6%, so I'm expecting this to trade around $22.50 or so, a possible run-up of a couple bucks from today's price.

Bob, normally if I have a preferred that pops a buck, I start eying a sell and flip. Even if this goes up a buck I would have no desire to sell. Quality wise in relation to yield there just wouldnt be a suitable replacement even if it did pop some. So it looks like a long term hold.

[Mulligan]

Quote:

Originally Posted by brokrken Picked up some GLP-A today, still debating that PBI-B

PBI keeps dropping with interest payment approaching....Ken its your destiny to buy! That yield is going to look too tempting!!
I would be interest maybe for a smaller play, but no money in my high risk bucket. Dont want to sell what I have to buy any.