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Old 04-10-2016, 12:24 PM   #621
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There is a mandatory conversion price if company elects to force the conversion. Common must be 30% above conversion price for 20 of 30 days. It got very close to the forced conversion price a while back, but is now not close at all. It will be a while if it ever happened and even then company would have to want to.
Its just less violative than the common. Preferred is down 16% while common is down 32% last 52 weeks.


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Old 04-10-2016, 01:38 PM   #622
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With BG down so far, maybe its greater volatility will be to the upside next, although a good dividend and some potential upside on the preferred does have an appeal. But this thread is on preferred stock and I am headed off topic so I will let this discussion rest. Thank you both for the information.


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Old 04-10-2016, 04:09 PM   #623
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Hamster,

You are putting forth a discussion on a preferred and a fairly valuable one I think for many to understand, with BGEPF you get participation if the agribusiness of BG moves to the upside, meanwhile as long as Bunge pays a dividend, the preferred will continue to get the whole $1.21875 per quarter dividend even if the common dividend is cut in half. It is also cumulative so if there is an interruption in dividends before common could be issued again then the BGEPF would have to be paid out, The conversion is relevant in that at $92.20 stock price of the common BG you would get 1.0846 shares of common for every share of preferred you own, if you want. This is a conversion price then of 100 on the preferred once the common hits $92.20. When the common hits 120 then the meter starts running and once it trades over that for 20 of 30 days then the company can make you convert, even if on he 31st day the common fell to 75. At $120 in the common BG you have a value of $130 for the preferred.

So what are the advantages of this preferred:
1) you are in the agricultural side of the business, a very necessary business that is basic at it’s core. While it is subject to feast and famine (pardon the bad pun) Bunge has solid financials and the preferred dividend is not in jeopardy at the present time.

2) At the present price you are earning a 5.74% dividend yield and have a 52% potential price upside if inflation were to become a problem and stock price went up only due to inflation, unlike many preferreds which earn no inflation premiums and instead would be hurt by inflation.

3) The preferred in general should be rising about 35-40% of the dollar per share increase in the common in the interim as BG would approach $92.20, yet at this point unless interest rates rose the downside on the fall of the common is probably limited to 10-15%on BGEPF total based on common price action only, as long as dividend remains secure. Interest rate increases with a rising stock price will mean the BGEPF will still most likely rise in price due to the conversion feature.

4) The preferred trades enough so you can actually place a bid and have an order filled, unlike some of the other preferred mentioned here - especially the illiquid utilities - which require more patience to get a good fill price.
What are the downsides:

1) You are tied to the performance of a single company and need to be aware of the finances of the company to insure payment of the preferred.

2) Most painful environment would be rising interest rates and falling commodities from this point which are not a common occurrence.

3) The preferred dividend for BGEPF is not eligible for 15% tax rate and so are just common income.

4) Interest rate increases and a drop in the price of BG, in that case BGEPF would drop substantially in price.


In general both BGEPF and WFCPL which also has a convertible feature which is further out of the money, WFCPL conversion value = 1300, make good income additions in my opinion to a portfolio. In a world where I have been expecting since 2007 lower rates for longer and continue to hold that view until a solid reversal appears to take hold these are both solid values for the return on the invested dollar. But you need to keep an eye on the financial status and be willing to monitor that monthly if you invest in these types of securities.
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Old 04-11-2016, 11:04 AM   #624
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Just got an order filled of CNTHP @ $52.86 , it had sat for about 2 wks.

Now I have to cross my fingers it does not get called soon ...
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Old 04-11-2016, 11:13 AM   #625
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Just got an order filled of CNTHP @ $52.86 , it had sat for about 2 wks.

Now I have to cross my fingers it does not get called soon ...

Ah, so that 200 share trade this morning was yours. No other trades so far. You got a reasonable price. As Mulligan has mentioned several times, risk of call on the CLP issues, while present, is not high.

My expectation is for CNLPL and CNTHP to produce income for a while yet, maybe several more years. Hope so.





Unfortunately, CNTHP went ex-div last week, which means you do not get the next dividend paid on May 1st.
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Old 04-11-2016, 11:52 AM   #626
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I only took 100 shares of it, so somebody else is crossing their fingers too.
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Old 04-11-2016, 11:57 AM   #627
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I also own a batch of AHT-D, which you will recall is the one that tanked from par value down to just over $16 when they were having a tiff with their investors. I bought mine at par, and it's almost back to par now. Unfortunately, I didn't have the guts to buy more when it was down around $16, which was just for a few hours.
In case anyone cares, this one is back over par today, even after going ex-div at the end of March. I think I may exit soon. I just don't trust the management of the company any more. They have split the enterprise up into three separate companies, which they said was to maximize shareholder value. In retrospect, it looks like they have jiggered the organization to their own benefit, at least in my eyes.

And they pay themselves too much.
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Old 04-11-2016, 02:52 PM   #628
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So I just want to see if I'm thinking about the value proposition of these preferreds correctly. I'll use Sunset's purchase of CNTHP as an example.

Sunset paid $52.86. Ignoring credit risk, the worst thing that could happen is that CNTHP gets called on its next dividend date of 5/1/2016 so Sunset receives the $51.44 call price plus the 5/1/2016 dividend of $0.82 so a total of $52.26 and has a $0.60 loss.

On the other hand, let's say the issue is called in 3 years... on 5/1/2019. In that event, the return is ~5.36% (=RATE(3,3.28,-52.86,51.44)). If it is called in 5 years then the return is ~5.73% (=RATE(5,3.28,-52.86,51.44)). And the return gradually increases but can never be more than 6.21% (3.28 annual dividend dividend by 52.86 purchase price). I'm assuming a 5/1/2016 purchase for easy calculation.

Am I thinking about this correctly?
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Old 04-11-2016, 04:35 PM   #629
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So I just want to see if I'm thinking about the value proposition of these preferreds correctly. I'll use Sunset's purchase of CNTHP as an example.

Sunset paid $52.86. Ignoring credit risk, the worst thing that could happen is that CNTHP gets called on its next dividend date of 5/1/2016 so Sunset receives the $51.44 call price plus the 5/1/2016 dividend of $0.82 so a total of $52.26 and has a $0.60 loss.

On the other hand, let's say the issue is called in 3 years... on 5/1/2019. In that event, the return is ~5.36% (=RATE(3,3.28,-52.86,51.44)). If it is called in 5 years then the return is ~5.73% (=RATE(5,3.28,-52.86,51.44)). And the return gradually increases but can never be more than 6.21% (3.28 annual dividend dividend by 52.86 purchase price). I'm assuming a 5/1/2016 purchase for easy calculation.

Am I thinking about this correctly?

No, Sunset did not get the May 1st dividend, because he bought today, April 11. The ex-dividend date was April 6.

And since the issue is long past first call, it can theoretically be called anytime - even tomorrow. Unlikely, because the BOD meets on a fixed schedule and I think their next meeting is around late June.

IF CNTHP was called tomorrow, for a May 12th redemption date ( assuming the usual 30 day advance notice ), he gets redemption value plus 12 days accrued interest ( assumption is accrued interest begins the day after div payment ).

Total he would get is $51.44 + $0.11 = $51.55. A loss of $1.31. This is the worst possible case. But as each day passes, his accrued interest increase by about 1 cent.

Sunset would be at break even around mid/late Aug 2016, when the next dividend plus accrued interest equals $1.31.

Hope I'm correct in this, this is only a back of the envelope calculation and I don't guarantee it.
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Old 04-11-2016, 05:44 PM   #630
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No, Sunset did not get the May 1st dividend, because he bought today, April 11. The ex-dividend date was April 6.

..... But as each day passes, his accrued interest increase by about 1 cent.

Sunset would be at break even around mid/late Aug 2016, when the next dividend plus accrued interest equals $1.31.....
So why would this guy do such a stupid thing ?

Well being the optimist, I can think that since pretty much everyone feels the Feds will raise rates a bit in the next couple of years, that there will be less pressure for the board to call it.
Not that they feel any pressure now.
So hopefully I can earn some good dividends for a bunch of years in a low rate environment.

Also, its pretty thinly traded, so had I put in a price of $51.44 since I would possibly not get the dividend (order was put in prior), it would not have been accepted by anyone, my only evidence of this is that my gross overpayment took 2 weeks to be accepted with a delay even after the dividend declaration.

I think this over-pricing reflects a balance of a great rate countered by the possibility of being called.

The money I used was currently earning approximately 0% , and I could have easily made it earn 2% risk free in a 5 yr cd. So the possibility of earning 6.xx% seemed attractive enough.

My worst case is being called tomorrow, in which case I'll share the loss with the IRS to shave 15%-25% off the pain.

I'm totally open to advice.
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Old 04-11-2016, 06:46 PM   #631
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Don't get me wrong... I think it is a good play as I think the likelihood of it being called is remote. I just wanted to make sure I understood it correctly before I started putting in buy orders. I wasn't aware that ex date was April 6 so the returns are slightly lower than what I outlined.
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Old 04-11-2016, 07:39 PM   #632
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So why would this guy do such a stupid thing ?

Well being the optimist, I can think that since pretty much everyone feels the Feds will raise rates a bit in the next couple of years, that there will be less pressure for the board to call it.
Not that they feel any pressure now.
So hopefully I can earn some good dividends for a bunch of years in a low rate environment.

Also, its pretty thinly traded, so had I put in a price of $51.44 since I would possibly not get the dividend (order was put in prior), it would not have been accepted by anyone, my only evidence of this is that my gross overpayment took 2 weeks to be accepted with a delay even after the dividend declaration.

I think this over-pricing reflects a balance of a great rate countered by the possibility of being called.

The money I used was currently earning approximately 0% , and I could have easily made it earn 2% risk free in a 5 yr cd. So the possibility of earning 6.xx% seemed attractive enough.

My worst case is being called tomorrow, in which case I'll share the loss with the IRS to shave 15%-25% off the pain.

I'm totally open to advice.


The likelihood of CNTHP being called is low. Very low.

My cost basis is not far from Sunset - it is $52.38. ( Of course, I have had a couple dividends since then ). But at the time I bought, my risk exposure was similar.

Review the posts where Mulligan describes how the Connecticut Light & Power preferreds are " ring fenced ". Furthermore, these old issues had special features, such as voting rights under certain circumstances, that make it difficult to retire them quickly and easily.

I think Sunsets has made a very reasonable buy, and should enjoy the income stream for quite a while yet. Risk of call has been often mentioned by Mulligan and me, it is a known risk which can be quantified accurately.

I think we'll still be enjoying the income at this time next year -- I hope!!
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Old 04-11-2016, 08:55 PM   #633
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So why would this guy do such a stupid thing ?

Well being the optimist, I can think that since pretty much everyone feels the Feds will raise rates a bit in the next couple of years, that there will be less pressure for the board to call it.
Not that they feel any pressure now.
So hopefully I can earn some good dividends for a bunch of years in a low rate environment.

Also, its pretty thinly traded, so had I put in a price of $51.44 since I would possibly not get the dividend (order was put in prior), it would not have been accepted by anyone, my only evidence of this is that my gross overpayment took 2 weeks to be accepted with a delay even after the dividend declaration.

I think this over-pricing reflects a balance of a great rate countered by the possibility of being called.

The money I used was currently earning approximately 0% , and I could have easily made it earn 2% risk free in a 5 yr cd. So the possibility of earning 6.xx% seemed attractive enough.

My worst case is being called tomorrow, in which case I'll share the loss with the IRS to shave 15%-25% off the pain.

I'm totally open to advice.


Sunset, personally I would feel just fine with what you did...I have been buying pre exD , post exD for several years around your price.
Eversource (the parent) in their rate filing request lists all the issues together as a lump yield. Collectively as a group they are under 5%, and of such little value these would have been called a long time ago if they were going to be. Usually these old preferreds are only called on a company buyout. It didnt happen then, so I doubt it does.
Yes there are higher yielding preferreds out there, but show me one that covers the dividend by 50 times like CLP issues are, with a guaranteed monopoly and rate of return, yielding 6% plus percent. You wont find it.... For all this safe high yielding return your risk is maybe losing 60 cents tops... Common stocks drop that much in a day.... The Board doesnt meet again until probably June. Next divi is almost a guarantee for you...If you notice all of CLP's dozen or so issues are declared at once but spread out over the 3 month period...when these were issued 50-70 years ago it was set up for "the locals" to buy them and get monthly income each month from them.
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Old 04-12-2016, 12:57 PM   #634
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Don't get me wrong... I think it is a good play as I think the likelihood of it being called is remote. I just wanted to make sure I understood it correctly before I started putting in buy orders. I wasn't aware that ex date was April 6 so the returns are slightly lower than what I outlined.
Actually I welcomed your calculations and appraisal of the buy, as it really helps to have decisions dissected to see if they are worthy.

While Coolius and Mulligan may have gotten the shares a little cheaper, it's nice to hear that they got them a little cheaper , and not a lot cheaper.
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Old 04-12-2016, 01:12 PM   #635
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Actually I welcomed your calculations and appraisal of the buy, as it really helps to have decisions dissected to see if they are worthy.

While Coolius and Mulligan may have gotten the shares a little cheaper, it's nice to hear that they got them a little cheaper , and not a lot cheaper.


CNLPL and CNTHP are essentially the exact same issue with one penny difference in dividend. I bought a 100 more of CNLPL at $53 after it went exD so you can say I paid more for my last 100 than you did. Sometimes I pay more, sometimes a little less. When you look at low purchase prices remember that is usually just one lucky person and then that price is not available. As long as you are comfortable with 6% plus yield it is good. Especially if you are just holding for income. CNTHP says low trade of year was $50... That was an off market purchase that none of us had a chance to buy at as it was sold $3 under bid price that day.
The value is good. The 6.5% yield when issued was when 10 year bond was 4%. You are buying it at 6.2% with a sub 2% 10 year treasury. Actually a better value purchase than when issued in late 60s. Its the same company, same monopoly, same T&D utility. For a safe income investment for yield, and not capital appreciation, its a good buy.
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Old 04-12-2016, 04:56 PM   #636
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Sunsets post on buying CLP exD, Texas Proud made me remember a point in buying illiquid, past call preferreds....Have you noticed that MNR-A has been trickling up in price since you bought it? Here is the reason and its pretty standard.... When you bought MNR-A its next dividend had not been declared, so the constant specter of a call hangs over issue. When next dividend has been declared the immediate risk is off, so price gets a bump. Sometimes it overshoots the value of the dividend, and sometimes you can just sell with more gain, and then repurchase after going exD at even lower price if you are into that game.
Now on to my point....If you are interested in trying to take a position in AILLL, now would be the time. As it is in that window of already gone exD and next one not declared. Last sale was $26.30 and that was pre exD. Right now its a battle between buyer and seller. If sellers are out there and cave the price could drop to $25.80 or under. It did last cycle and I picked up 400 more in the $25.70 range. It may not happen, but it will be quick if it does so you need a bid in at a price you can accept. Typically I wont go above a 2 divi risk. But I did buy one $8 over par a while back and next divi will put me in the black. Of course I don't think it will ever be called and have been proven right so far.


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Old 04-13-2016, 09:23 PM   #637
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I allow myself a small percentage of more "aggressive" purchases in small amounts... Bought 300 shares of JBN today. These are trust debentures from JCPenny. It yields 10.3%...S&P upgraded their debt ratings 2 levels last week. Things have been getting better for them the past few years. They have always paid the interest on this issue since its inception about 10 years ago. Trades about $8 under par still. Waited a week as I knew a spike would occur and it is around $17 now. Actually is trading about what it was a year ago, and financial health has improved greatly since then. S&P said there was a 1 in 3 chance they may further upgrade the debt again this year. A small $5k position is the limit here, but it is tempting to buy more.


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Old 04-14-2016, 11:09 PM   #638
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I allow myself a small percentage of more "aggressive" purchases in small amounts... Bought 300 shares of JBN today. These are trust debentures from JCPenny. It yields 10.3%...S&P upgraded their debt ratings 2 levels last week. Things have been getting better for them the past few years. They have always paid the interest on this issue since its inception about 10 years ago. Trades about $8 under par still. Waited a week as I knew a spike would occur and it is around $17 now. Actually is trading about what it was a year ago, and financial health has improved greatly since then. S&P said there was a 1 in 3 chance they may further upgrade the debt again this year. A small $5k position is the limit here, but it is tempting to buy more.


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I could not see what the rating is now... do you know?

I bought a bit today, but will probably not buy any more... I want to keep my avg rating up in the investment grade area or maybe one level below...
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Old 04-14-2016, 11:22 PM   #639
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I could not see what the rating is now... do you know?

I bought a bit today, but will probably not buy any more... I want to keep my avg rating up in the investment grade area or maybe one level below...

My suggestion is dont dump all your money in this issue if staying investment grade rating is your goal, ha!
Here is a link that discusses it. I am sure they are referring to the parent total debt rating. Quantum hasnt updated from last fall. When parent rating goes up all issues should go up in unison though this article doesnt specifically mention the debentures. So this issue should be a CCC+ now (up from CCC-) since parent rating is now upgraded to B.

http://www.fool.com/investing/genera...t-upgrade.aspx
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Old 04-15-2016, 08:57 AM   #640
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My suggestion is dont dump all your money in this issue if staying investment grade rating is your goal, ha!
Here is a link that discusses it. I am sure they are referring to the parent total debt rating. Quantum hasnt updated from last fall. When parent rating goes up all issues should go up in unison though this article doesnt specifically mention the debentures. So this issue should be a CCC+ now (up from CCC-) since parent rating is now upgraded to B.

J.C. Penney Snags a Big Debt Upgrade -- The Motley Fool

LOL... not a chance of me buying a lot of this issue... this is part of my HY bond allocation and I want to lean more toward the low investment grade...

Funny thing is that a year or so ago I did buy some JCP common in my testosterone account and made a few bucks... but I was too scared to hold onto it and it has gone up even more since I sold...
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