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Old 03-17-2017, 08:39 PM   #1741
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Anyone looked at PFXF? Yields almost 6%, diversified away from financials, but the managing company isn't very free with more detailed info imho.


Its current yield is 5.77%. If one wanted skin in the game, but didnt want to purchase individual securities one could do worse than owning this and a slice of PFF to go with it. More aggressive investors (which I am not ) can buy preferred funds that have a higher yield because they will use leverage.....And this is just my opinion but I prefer to buy my own. But overall my yield is 6.89% which is almost 20% more yield, and my issues overall are safer.
But the negatives are I am more concentrated, more illiquid, and more call exposed also.
There are a lot of good preferreds available over 6%. PFXF clips purchasers with .40% expense fees, so subtract that out and it would be over 6% also. For a fund however, .40% in fees (at present) is reasonable for a fund of this type though.
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You guys are terrific
Old 03-19-2017, 02:12 PM   #1742
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You guys are terrific

You guys are terrific,

Iíve learned more about Preferred from you than anyone else
I have been reading your posts for months and took Mulliganís advice and read A Value Opportunity in Preferred Stocks | PHILOSOPHICAL ECONOMICS and learned about WFC-L and BAC-L
I know I have a lot more to learn, but you have given me the confidence to buy my first two Preferreds
My plan is to have 10% of my portfolio with 10 different Preferreds yielding around 6% for the long term. I am thinking that the first two will be WFC-L and BAC-L

What do you think?

Thanks
Ric Dee
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Old 03-20-2017, 08:19 AM   #1743
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I see those two as a good strategic income addition to a portfolio at 2% of the total portfolio that will provide 6% income on cost for a long time
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Old 03-20-2017, 09:17 AM   #1744
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You guys are terrific,

I’ve learned more about Preferred from you than anyone else
I have been reading your posts for months and took Mulligan’s advice and read A Value Opportunity in Preferred Stocks | PHILOSOPHICAL ECONOMICS and learned about WFC-L and BAC-L
I know I have a lot more to learn, but you have given me the confidence to buy my first two Preferreds
My plan is to have 10% of my portfolio with 10 different Preferreds yielding around 6% for the long term. I am thinking that the first two will be WFC-L and BAC-L

What do you think?

Thanks
Ric Dee

Glad to have you join us, Ric.

I have held WFC-L and BAC-L for a while now. Big mistake when I sold off most of my holdings late last year. But I'm accumulating again - this time will resist urge to sell ( but buy more instead ) at the next dip.

Look at MTB-. This is callable in Nov 2018, but has a yield of about 6%, and a good rating. It is very illiquid, and difficult to get. But worth keeping an eye on. If the price dips to $1,020 and below, a good opportunity to get a few shares. I own a handful, bought at $1,019.
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Old 03-20-2017, 10:56 AM   #1745
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Welcome Ric! Just be prepared to catch some arrows and an occasional javelin!
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Old 03-20-2017, 11:51 AM   #1746
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Welcome Ric! Just be prepared to catch some arrows and an occasional javelin!


Hopefully Winemaker you mean the stocks and not us forum members.
My only suggestions Ric would be as you look to purchase more consider diversifying the sectors from which you purchase. Prices will always be interest rate sensitive but avoiding too much in one sector is prudent. And remember you are investing for long term income not cap gains. You will need a rate shock or individual company financial scare to dive in on cap gains from preferreds. Welcome to our little club and stay with us!
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Couple of questions for the seasoned preferred buyers
Old 03-20-2017, 09:52 PM   #1747
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Couple of questions for the seasoned preferred buyers

Hi,

Been a lurker on this thread for quite some time. As with all threads on this site the amount of knowledge here is remarkable (as well as the common sense). I'm looking to change my investment strategy (to a safer type of investing) and have a couple of questions.

1) Noticed a few pages back in this thread a very brief discussion of preferred interest/dividends in relation to traditional IRAs. Does anyone have information on the tax consequences of buying preferreds in IRAs, as well as ROTHs?

2) Have noticed that $5k seems to be a sort of limit on how much some posters on the board are putting into each preferred. If you were to break it down to a % of total holdings, what would you put the % into each at? Was thinking 5% into each holding would be a good number, but that could exceed $5k.

Thank you!
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Old 03-20-2017, 10:21 PM   #1748
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Welcome, gooddog. Hope you find this thread useful and profitable.

My guess at one reason for having REITs and REIT preferreds in tax deferred accounts is because mostly their dividends are not QDI ( qualified ).

Other types such as financial preferreds may or may not be QDI. QuantumOnline is a good site where one can determine if a particular issue's dividends are QDI or not.

This is just my opinion, which may be completely wrong. Not the first time, and definitely not the last !
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Old 03-21-2017, 05:47 AM   #1749
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Hi,

Been a lurker on this thread for quite some time. As with all threads on this site the amount of knowledge here is remarkable (as well as the common sense). I'm looking to change my investment strategy (to a safer type of investing) and have a couple of questions.

1) Noticed a few pages back in this thread a very brief discussion of preferred interest/dividends in relation to traditional IRAs. Does anyone have information on the tax consequences of buying preferreds in IRAs, as well as ROTHs?

2) Have noticed that $5k seems to be a sort of limit on how much some posters on the board are putting into each preferred. If you were to break it down to a % of total holdings, what would you put the % into each at? Was thinking 5% into each holding would be a good number, but that could exceed $5k.

Thank you!
Welcome to the thread.

I have all my preferreds in IRAs and Roths; there has been no tax consequences. Some preferreds are baby bonds or trust issues. They pay interest not dividends, interest is taxed higher in a taxable account than dividends. As Coolius mentioned, REIT preferreds are not QDI, as they are pass thru entities, the REIT pays no tax, but you do not in a tax deferred account.

As far as the $5,000 limit, I use it to purchase 200 shares of each security, and I always buy under par. (usually under $25.00) If I have held a security for a long time and feel comfortable with it, I will buy more if it goes below my original basis. I consider my preferreds part of my bond/fixed income portfolio, and I buy and hold. Some others here are dividend miners, and arbitrage dividends/stocks and trade frequently between issues. Anyway is right as long as you make money!
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Old 03-21-2017, 06:39 AM   #1750
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Hello Gooddog. I think your tax reference was about the MLP preferreds. These are the only type of preferreds that could cause a tax issue inside a tax deferred account. So you may want to be mindful of that if you are looking at MLP preferreds. There are not a lot of those issued though.
Remember (assuming you are in a higher tax bracket than 15%) the QDI preferreds such as utilities and banks generally are perfect income investment vehicles outside retirement accounts due to 15% tax rate. The full rate taxable issues I keep in my retirement accounts.
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Old 03-21-2017, 09:42 AM   #1751
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There are some MLP preferreds that pay "guaranteed income " and not affected by issues such as depletion, recapture, or UBTI. Examples are PAGP, LGCYP and others. The income is reported on K-1, but in a taxable income is considered an interest payment and taxed accordingly

As MLPs enjoy tax deferred and other benefits, the "conventional wisdom" is to keep these in a taxable account. Hence MLP preferreds who do not have the same benefits are usually in a tax-deferred account.

If MLPs are kept in a tax deferred account and UBTI exceeds $1,000, there will be tax due. Best to Google for this subject if you think you might be affected. It is very complex.
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Old 03-21-2017, 09:48 AM   #1752
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Thank you for the responses, that clears up the tax issues end of it. I'm not planning on getting into any MLPs, just want to go the preferred stock route, and a couple of regular dividend stocks like AT&T.

Not a fan of bonds, and looking at doing a 75% pref / 25% stock mix. That said - that 75% would leave a lot of 5k chunks to be bought, which brought up the question of what % of a total portfolio should each individual pref be. As an example, if a person has 100k to invest, then it is feasible to have 20 5k positions. What if a person has 1,000k to invest? That would be 200 positions. At this point is it better to just go into pref ETFs? Asking this because I noticed that 5k seems to be a position forum members are comfortable with. There must be some logic behind it. Again, want to thank you guys, when I had questions a few years ago, your input was very well thought out and helpful.
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Old 03-21-2017, 11:32 AM   #1753
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Thanks Coolius,
Is this the MTB you posted about
$63.75/$1075 = 5.9%
M&T Bank Corp., 5.00% Fixed Rate Cumulative Perpetual Preferred Stock, Series A
Ticker Symbol: MTB- CUSIP: 55261F609 Exchange: NYSE
https://www.nyse.com/quote/XNYS:MTBp
RicDee
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Old 03-21-2017, 12:37 PM   #1754
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Thanks Coolius,
Is this the MTB you posted about
$63.75/$1075 = 5.9%
M&T Bank Corp., 5.00% Fixed Rate Cumulative Perpetual Preferred Stock, Series A
Ticker Symbol: MTB- CUSIP: 55261F609 Exchange: NYSE
https://www.nyse.com/quote/XNYS:MTBp
RicDee


Yessir! That's the one.

The yield is higher than face coupon rate because the rate reset to a higher level in 2013. Perhaps this has kept the issue off some screens and under the radar - could be a reason for the very illiquid action.

Note that this is a Cumulative issue - a rarity in the Financial Preferred sector.

Gives me a rush of Adrenalin when I see the price drop by huge amounts in a single trade. I see it is down $44.80 now, -4.17%, on 25 shares.

Live dangerously!!
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Old 03-21-2017, 04:44 PM   #1755
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Good dog, I wouldn't be afraid to just put it all in one issue. Buy 1 share of WFC_L to get the ball rolling. Of course I am more a utility honk. May times though they need a 100 share bid to get noticed if you don't pay ask which usually isn't prudent. But I buy issues so safe usually I would lose no sleep having all my dough in an Ameren Illinois preferred. As far as a 1000 goes, ya gotta start somewhere. Heck today I only landed 12 shares today on an old issue. But it hasn't traded a 100 shares since 2002. And with good reason....There are only 800 shares left outstanding .😁
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Old 03-21-2017, 05:53 PM   #1756
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Thank you for the responses, that clears up the tax issues end of it. I'm not planning on getting into any MLPs, just want to go the preferred stock route, and a couple of regular dividend stocks like AT&T.

Not a fan of bonds, and looking at doing a 75% pref / 25% stock mix. That said - that 75% would leave a lot of 5k chunks to be bought, which brought up the question of what % of a total portfolio should each individual pref be. As an example, if a person has 100k to invest, then it is feasible to have 20 5k positions. What if a person has 1,000k to invest? That would be 200 positions. At this point is it better to just go into pref ETFs? Asking this because I noticed that 5k seems to be a position forum members are comfortable with. There must be some logic behind it. Again, want to thank you guys, when I had questions a few years ago, your input was very well thought out and helpful.
I would be extremely reluctant to put more than 5->10% in preferreds, because I am a long term investor, and I believe (and could be wrong) that over 20 years an investment in VTI will outperform a bunch of preferreds paying 6% currently.

Because if rates do go up 2% over the next few years, preferreds will probably act like infinity bonds and drop a lot

If you are looking for a bond type thing, you could also consider BSJJ
which has a yield of 4.94% (or pick a different similar collection). These are a fund of bonds that all mature the same year and then return your purchase price of the bonds that survived to you. Similar to yourself buying a 100 or so bonds and holding to maturity.

Of course I do have some preferreds because its possible interest rates will stall or rise slower than expected.
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Preferred Stock Investing-The Good , The Bad and The In Between
Old 03-21-2017, 06:03 PM   #1757
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Preferred Stock Investing-The Good , The Bad and The In Between

That is always good info to remind, Sunset, for new readers not following the whole old thread. They are not panaceas. And one needs a specific need for them. I am retired and am looking for an income spigot to open up if ever needed. As of now I just reinvest. I am not in preferreds to beat commons, but the past three years I have spanked the S&P pretty good. But it was all by accident.
Interest rate guessing game is impossible. And even then if they do who knows. The long bond is up what 70% from its lows last year in yield, and most of my preferreds are still probably too high.
If I was a long term investor and without my pension I would invest differently. But I sure wouldnt want to. I like buying issues that are near 100% payment certainty and possibly some may never trade again, lol.
Financial experts also suggest no more than the allocation you recommend, too. Of course many things come into play over all this, but they are not "gold mines" that is for sure!
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Old 03-21-2017, 06:11 PM   #1758
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Mulligan & Sunset,

Thanks for the replies. Will look into what you suggested. You two were part of the group that helped me out a few years ago when I first posted on this site as a new member (but long time lurker). Regarding VTI outperforming preferreds, I'm OK with that. A safe 6%/year is fine by me, and when the market does its next tank, it is easy enough to pull 30% or so out of the safe preferreds and dump it into something like TNA and ride it up a bit.

Mulligan, what utilities are you into. I ask, because utilities were a very large part of my investment strategy up until a year or so ago. Just felt they got a bit too expensive relative to historical norms. That said, if there is some prefs out there that are good - all for that.

Thanks again!
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Old 03-21-2017, 06:42 PM   #1759
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Gooddog, my opinion means nothing, but I dont blame you exiting common stock utes. I never had interests in the commons. If Im investing for yield, by golly, Im gonna get some yield, not 3% from slow to no growth utilities.
Utility preferreds are a dying trade. Few are issued anymore, some get called and not replaced, and the ones left are mostly illiquid. But I highly value them, and Coolius aint far behind, lol.
My personal favorites are AILLL, CNLPL, and CNTHP. I also think ALBMP is a good one to take a flyer on. At $25.58 you do have 6 months call protection here unlike the others (though they have been past call for decades). Alabama Power finances is so strong its parent Southern doesnt even provide financing assistance. They take care of it all on their own. And it shows...AL Power preferreds have a higher Moodys "debt rating" than many of the parent companies bonds.
I own a couple water utilities. Though lower yielding they are gold. Considering they own monopolies and have regulated profits they will pay forever unless people start boycotting the use of water!
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Old 03-21-2017, 07:13 PM   #1760
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+1 on Mulligan's mentions of AILLL, CNLPL & CNTHP.

I have full positions of all three. They are all past call; but, like Mulligan, I feel the likelihood of redemption is low. Note that the redemption price of CNLPL & CNTHP is higher than their $50 par value.

Also have some ALBMP, at average cost basis of $25.42. Last week a seller appeared with several thousands on ask, and ask price has come down over the past several trading sessions, on volume far less than the original ask amount (IIRC, more than 4K shares )

I think the seller has not yet sold all that he wants, and selling pressure should continue, particularly in the light of the gloom & doom we experienced today.

If the price goes down below $25.50, will buy more to make up a full position.
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