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

[Coolius]

Bought OSBCP 500@ 9.84 not much $$ but its a start. I guess

Good for you on OSBCP.

My buy was at $10 even, and a second lot at $9.96, so you're well ahead of me. the only risk we have is if the Bank goes belly-up, and with the background info Mulligan has supplied, the risk is reasonable, IMO.

 

[Mulligan]

Good for you on OSBCP.

My buy was at $10 even, and a second lot at $9.96, so you're well ahead of me. the only risk we have is if the Bank goes belly-up, and with the background info Mulligan has supplied, the risk is reasonable, IMO.

Coolius, I will gladly take the credit if it pans out. If it blows up on us, don't expect me to tell the truth and admit it was my fault....Besides if it goes back into suspension, you have to keep the arrows in the quiver aimed at me for 5 years because they are not in violation of the payment covenants until then. That leaves plenty of time for me to get out of Dodge.


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[Coolius]

Coolius, I will gladly take the credit if it pans out. If it blows up on us, don't expect me to tell the truth and admit it was my fault....Besides if it goes back into suspension, you have to keep the arrows in the quiver aimed at me for 5 years because they are not in violation of the payment covenants until then. That leaves plenty of time for me to get out of Dodge.


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If they ( OSBCP ) announce a suspension, that's a signal for me to say bye-bye. I would hope not, but one never knows. QOL says the next div payment is Sep 30, with expected ex-div on Sept 25. Once we get that one, I will feel better.

 

[capjak]

Well Mulligan has me buying these things now:

AILLL 400 shares @25.60 waiting on 100 more

CNLPL 400 shares @ 52.70 waiting on 100 more

OSBC 500@ 9.79

Think I will take a rest for awhile now.

 

[Mulligan]

Well Mulligan has me buying these things now:

AILLL 400 shares @25.60 waiting on 100 more

CNLPL 400 shares @ 52.70 waiting on 100 more

OSBC 500@ 9.79

Think I will take a rest for awhile now.

Have someone keep an eye on OSBCP, while you take a Rip Van Winkle nap on the other two. All of the juicy dividends will be there safely in your money market account when you awake 20 years from now!


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[Coolius]

Well Mulligan has me buying these things now:

AILLL 400 shares @25.60 waiting on 100 more

CNLPL 400 shares @ 52.70 waiting on 100 more

OSBC 500@ 9.79

Think I will take a rest for awhile now.

Good show on AILLL and CNLPL. You will do fine with them, especially if the Fed spreads out rate hikes across several years.

I have GTC orders on both which have been sitting there for ages it seems; AILLL at $25.50 and CNLPL at $51.96. Maybe I should crank them up a little.....

 

[Coolius]

More Preferred Purchases

Bought ELUOP at $100.24, par value + 24 cents.

This highly rated Utility Preferred Issue pays $6.95 annually, for 6.95% yield on par.

Primary "risk" is a call , currently higher than normal as they are merging with a sister utility ( gives them an opportunity to retire older high cost debt ).

However, there is usually a 30 day advance notice, which means accrued interest of 56 cents/share paid out along with par value. So I will gain at a minimum of 32 cents/share even if they called it today.

And if they don't call it? I will enjoy a yield of 6.93% until they do. Hardly a losing proposition, IMO.

 

[capjak]

Bought ELUOP at $100.24, par value + 24 cents.

This highly rated Utility Preferred Issue pays $6.95 annually, for 6.95% yield on par.

Primary "risk" is a call , currently higher than normal as they are merging with a sister utility ( gives them an opportunity to retire older high cost debt ).

However, there is usually a 30 day advance notice, which means accrued interest of 56 cents/share paid out along with par value. So I will gain at a minimum of 32 cents/share even if they called it today.

And if they don't call it? I will enjoy a yield of 6.93% until they do. Hardly a losing proposition, IMO.

Sounds interesting. How are their books?

 

[Coolius]

Sounds interesting. How are their books?

Capjak, our in-house Guru on Trapped Utility preferreds is....drum roll, please...... Mulligan the Great !!! ( Wild Applause )

He has done exhaustive research on this issue. He's got some as well.

He's waiting at the top of the highest mountain in Missouri, for you to make your pilgrimage there to ask the question: O great Guru, whats the meaning of ELUOP ?

 

[capjak]

Capjak, our in-house Guru on Trapped Utility preferreds is....drum roll, please...... Mulligan the Great !!! ( Wild Applause )

He has done exhaustive research on this issue. He's got some as well.

He's waiting at the top of the highest mountain in Missouri, for you to make your pilgrimage there to ask the question: O great Guru, whats the meaning of ELUOP ?

You had me at Mulligan....I'm in

 

[Mulligan]

Capjak, our in-house Guru on Trapped Utility preferreds is....drum roll, please...... Mulligan the Great !!! ( Wild Applause )

He has done exhaustive research on this issue. He's got some as well.

He's waiting at the top of the highest mountain in Missouri, for you to make your pilgrimage there to ask the question: O great Guru, whats the meaning of ELUOP ?

Hey don't be setting me up Coolius. You are as knee deep into these things as me and provide just as much insight into purchases. And for my protection and proof, I am keeping our correspondence as documentation!


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[Mulligan]

You had me at Mulligan....I'm in

Im in with Coolius on it too with ELUOP. Now we have two reasons to make sure LA stays safe from hurricanes....W2R and our transmission lines and utility poles. The CEO did say they have upgraded poles to handle 140 mph winds! Like Coolius says, it is at a call risk. But we wont be out of any money if they do and if they don't, I will gladly cash their $1.74 dividend on a quarterly basis until they do.


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[Mulligan]

Sounds interesting. How are their books?

Cap, the issue is investment grade. Anytime the lowest of the companies financial commitments (and preferreds are these, with the exception of the common stock divi which it doesn't have because Entergy controls them) are investment grade it is a fairly secure issue. This preferred has been around for over 10 years and has made every payment. It is merging with a sister company Entergy Gulf States. Merger is supposed to increase financial strength of company and save rate payers money.
Companies call or don't call preferreds for various reasons that they do not disclose. Especially the Utes. Some get to add the cost of preferred dividends to rate increases so the incentive to call isn't as strong. Some require in their bylaws a certain percent of capital structure to preferreds.
Several months ago SO called a 5.2% issue and did not call a higher yielding 5.83% that is also past call. On the surface it makes no sense.


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[Coolius]

ELUOP traded only 110 shares today, at $100.35. Could that have been you, Capjak ?

Currently Bid $100.10, ask $100.35.

I have a GTC buy at $100.12 AON, just waiting and biding my time. Hope someone less informed about the situation will sell them to me.

 

[capjak]

ELUOP traded only 110 shares today, at $100.35. Could that have been you, Capjak ?

Currently Bid $100.10, ask $100.35.

I have a GTC buy at $100.12 AON, just waiting and biding my time. Hope someone less informed about the situation will sell them to me.

I got another 100 shares of AILLL at $25.80 a little higher than my other 250 shares.

Not a preferred but with Excelon at 4.0% Dividend and at a low for the year had to take a dip.

 

[Mulligan]

I got another 100 shares of AILLL at $25.80 a little higher than my other 250 shares.



Not a preferred but with Excelon at 4.0% Dividend and at a low for the year had to take a dip.

Well looks like you will be joining Coolius and I to check the internet in a couple of months to see if the Board Of Directors does right by us and declare the following dividend on this issue.


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[capjak]

Well looks like you will be joining Coolius and I to check the internet in a couple of months to see if the Board Of Directors does right by us and declare the following dividend on this issue.


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Should we be worried?

 

[Mulligan]

Should we be worried?

Worried they wont have the money to pay us the dividend? Certainly not...They have plenty of money.... Worried they don't want to pay us anymore and call the issue? Well its past call which means it is out of our hands....But on the plus side, its been callable since the late 1990s and has not been called.


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[Mulligan]

Should we be worried?

As NW aptly says...There is no free lunch. The price you pay to get a 20% higher yield on a Ute preferred is buying the past call issues. That is why you never want to risk too much by buying too far over par. Next dividend is already declared, so you just need one more declaration to put you in the black even if there is a call. I have bought some of my shares at $25.80 last year, so I survived, and I hope you do to, because this is my favorite one and I hope it never gets called.
Maybe I mentioned this but a similar rated preferred is IPL-D (Interstate Power) and is currently trading at par and not callable for 3 more years. Sounds better huh? Well the yield is 5.10%. Im not buying a 5.1% yield. If rates move up a bit and demand IPL-D to yield 6% it is going to drop to $20...No thank you...A slight increase in yield should actually DECREASE the possibility of a call for us. And since it already yields comfortably over 6% it wont need to be knocked down to get that yield.


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[Coolius]

Should we be worried?

Along with AILLL, I own several other past call Ute preferreds; ELUOP, CNLPL, and HE-U. Call risk is ever present, but if they are called, so be it. Just have to exit the ride and look for other alternatives.

Check out GLFPO. Investment rated, Gulf Power is a strong and stable utility ( parent is SO ). Trading for $99, par value is $100. Coupon is 5.6%. First Call is July 2018. This is a Generator, not Transmission & Distribution. I own this.

 

[Coolius]

Well, what Mulligan & I feared would happen, did happen.

ELUOP was called this evening, effective 9/28/2015.

So, on that day, I will receive $100 par plus 30 days of accrued interest ( 57 cents ). I paid $100.24, so my net profit from all that effort will be 33 cents a share.

Terribly disappointed, but it was a risk that we all knew was there.

Now I will have to look for another similar security, could be a tough assignment.

 

[MooreBonds]

ELUOP traded only 110 shares today, at $100.35. Could that have been you, Capjak ?

Currently Bid $100.10, ask $100.35.

I have a GTC buy at $100.12 AON, just waiting and biding my time. Hope someone less informed about the situation will sell them to me.

I was about to post a comment about being the proud owner of 30 of those shares that traded Monday at 100.35.....until I then read this:

ELUOP was called this evening, effective 9/28/2015.

Net result: Loss of $13.40 (Ameritrade typically charges $20 commission for corporate actions like calling preferred stock).

LOL! Good thing I only picked up 30! Sorry for cursing things. Better make sure I don't buy another one that's already callable, lest I start a trend of being the Grim Reaper of Preferreds!

 

[Mulligan]

I was about to post a comment about being the proud owner of 30 of those shares that traded Monday at 100.35.....until I then read this:



Net result: Loss of $13.40 (Ameritrade typically charges $20 commission for corporate actions like calling preferred stock).

LOL! Good thing I only picked up 30! Sorry for cursing things. Better make sure I don't buy another one that's already callable, lest I start a trend of being the Grim Reaper of Preferreds!

The last call we had last spring DQUEK, a transaction wasn't charged due to it being a corporate call. It isn't going to send you to the poor house, but I think you are getting stiffed somehow. You didn't enact the trade.
I was trying to sidestep low yielding preferreds and hope rates climbed a bit soon. But, there is a reason why many 4% yielding preferreds are still outstanding from the 1930s, 40s, and 50s. Because interest rates have been low for long periods of time in the past.


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[Coolius]

Another of my holdings, SCEDN, is also being called this month. Two calls in a month - darn.

Oh well. It happened, and the loss of the income stream hurts, but there will be other opportunities down the road.

 

[Coolius]

I was about to post a comment about being the proud owner of 30 of those shares that traded Monday at 100.35.....until I then read this:



Net result: Loss of $13.40 (Ameritrade typically charges $20 commission for corporate actions like calling preferred stock).

LOL! Good thing I only picked up 30! Sorry for cursing things. Better make sure I don't buy another one that's already callable, lest I start a trend of being the Grim Reaper of Preferreds!

Moorebonds, I also use TDA and they do not charge anything for a call. Talk to their Customer Service, they should waive the charge. Are you an APEX client? If so, make sure you kick up a fuss......