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

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

Off the golf course....Ric, one of the benefits of a QDI issue is its tax rate. So the 15% should be desirable outside of tax free accounts. But I own some QDI inside my tax free also. My tax bracket is 25% also, but my tax free space isnt so big. So I dont really study much non QDI issues. Only about 4-5 I really pay attention to at all. Right now I am loaded to the gills in CFC-B. Like $75k which aint a drop in the bucket for my stash. But its high yield and price stability has made it my "money market" account. I make some boredom change flipping it and using the excess I own to sell to buy the new issue. But I may have my 3k shares in 6 months or I may have none at all. It isnt one of my "tossed in sock drawer preferreds" like my electric and water ute preferreds.

I would suggest just focus on buying 1 or 2 issues in about 10k allotments and then slowly think and plan. They arent going to run away north in price anyways. Having a good thought out plan and slowly implementing is more prudent than rushing in to fill your set quota. I have to agree with Coolius, it is your money and your call.
This is what happened to me.....Moorebonds introduced me to income issues. I didnt really have a philosophy. I bought some he suggested and they were excellent suggestions. The more I studied the more I realized I was a chicken investor who craved security over yield. So I found the undiscovered unpromoted world of illiquid utility preferreds. I knew I found my niche. The higher yield just isnt my calling (well I got a few, as Moorebonds left a scar that can never be totally removed, lol). He has done very well in that area over the years. Some other income investors on other forums make Moorebonds look like a widow and orphan investor. So there is all types of investing styles each with different and sometimes unrelated risks.
My first "safe" income issues purchased were MET-B (since called after I flipped a few times) AILLL, and CNLPL.

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

Coolius said:

I got the annual report, which included an invite to the shareholders meeting in St. Louis, MO.

Unfortunately, since I did so badly in the Beat Boho contest and had to pawn my private jet, I would have to hitchhike all the way from California to Missouri, my thumb cannot take the strain.

But that is in your neck of the woods, so you should go and give 'em hell. Tell them to issue more AILNP & AILLL, with assurances of no call for the next 30 years.

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No such call letter Sunset! I suspect some of these will never be called (I hope) since the company owns most of the issues....Actively owns them, not retired.... Oddly enough though, I have found no proof they own any AILLL. The shares outstanding today appear to match the share amount issued.
Coolius, save the hitch hike trip to STL. Since the parent owns 99% of all votes possible, I doubt we could join forces to impact any meaningful change. Its a steam rolling meeting. Everything decided before the vote, lol.

RicDee said:

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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RicDee, was that you who bought the 20,000 shares of MTB- today, at $1,030/share?

I figured it was probably you, spending a little pocket change.....

And after hours, 20,000 shares were sold for $1,032.50. So if that was you, you made $50,000 in a day. Good going!!

Coolius said:

RicDee, was that you who bought the 20,000 shares of MTB- today, at $1,030/share?

I figured it was probably you, spending a little pocket change.....

And after hours, 20,000 shares were sold for $1,032.50. So if that was you, you made $50,000 in a day. Good going!!

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So that would be $20,600,000 ......... wow....

Coolius and Sunset
Sorry not me.
But if it were I would pay for you all to go to all the shareholders meetings anywhere you wanted
Ric

Thanks for the advice,

Over the next month or so I plan to buy $10,000 each of 2 preferreds through my non retirement accounts.
And then over the next several months continue to read the posting here and buy another 8 more at $10,000 each.
I like the idea of security over yield will take my time and look into illiquid utility, bank and CFC-B preferreds

Thanks again,
Ric

Strange trading pattern on MTB-. noting done for ages, then yesterday a single trade of 20,000 shares, followed by another 20,000 shares traded after hours, and back to nothing again.

Bid $1,031 ask $1,200. Maybe I'll put my 10 shares up for sale at $1,199 and see what happens?

Ric, I wouldnt buy CFC-B over $25.55 just for call risk. I just sold some today at $25.74 I bought at $25.51 a week or so ago. Still got a good slug left.

Runningman you will appreciate this trade as I already told Coolius. I found this old illiquid water utility MSEXP from Middlesex Water Company. Only 800 shares outstanding and hasnt traded but twice (74 shares total) since 2003. So after months of playing at 100 share bid at $132 ($7 par $100 issue noncallable) I put a $165 share bid of one share to wake it up as bid was 1 share at $180. It hit but only charged me $132 and also 11 shares at $132. So now I got 12 at $132. Then yesterday I put a one share bid at $175 and it hit but no other sells for my $132.... Bummer trade... But then I noticed a $175 one share bid replaced my sell instantly.
So I thought about this when I woke up today and decided to put up my 13 shares at $175. Guess what? That one share bid guy was hiding more and bought them all at $175. This is crazy. I made over $500 in my roth flipping an issue in 2 days that had not traded in YEARS. Was this a front running computer momentum bot that bought these you think? No person could have put a bid in instantly after mine. Especially since no bids have been actively posted since I tracked it.

That is interesting perhaps it is a preprogrammed bot looking for opportunities and they just haven’t refined the programming for such minimal action. Good $500 action too bad if you actually wanted the utility long term

Running_Man said:

That is interesting perhaps it is a preprogrammed bot looking for opportunities and they just haven’t refined the programming for such minimal action. Good $500 action too bad if you actually wanted the utility long term

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I suspect the 13 shares was all I was getting unless I wanted to pay $180, as only 787 shares were left somewhere. At $132 I was only looking at a 5.3% or so yield. I got 5 years of dividends in 2 days, lol.

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

Mulligan said:

Ric, I wouldnt buy CFC-B over $25.55 just for call risk. I just sold some today at $25.74 I bought at $25.51 a week or so ago. Still got a good slug left.

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Ric I sold more at $25.78 also. I beat this thing like a red headed step child as often as I can. When it gets near $25.50 I load up and when it approaches 2 divis above par I sell. Still have a decent slug, but due to its heightened call alert, it may not be your best entry position. Some people who only know casually about preferreds and relationship long yields do not understand the "back side put" these issues have that were issued in higher rate eras. They dont understand when "Taper Tantrums" or "Trump Tantrums" occur they barely budge while the new market issues blow a gasket when this occurs. But...To buy this bit of protection one must deal with the specter of a call. Im not sure that is something you want right out of the gate.

Mulligan said:

Runningman you will appreciate this trade as I already told Coolius. I found this old illiquid water utility MSEXP from Middlesex Water Company. .......

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They do say that ?SEX? sells

Sunset said:

They do say that ?SEX? sells

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That was my favorite preferred ticker symbol, lol.

Mulligan, Thanks, but don’t worry, I won’t be considering anything like CFC-B for several months. Right now I am looking to start with one long term preferred yielding 6% that makes me feel secure. WFC-L and BAC-L were featured in the report you recommended, and there are positive posts here and no negative posts.
One of those might be right for me, but I am open to suggestions.
Any ideas? (Anybody)
Ric

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

That is not a bad place to start. Buying good issues and buying at correct price points along with ones particular aversion/indifference to calls all factor in ones decision. Not to mention QDI versus Non QDI needs.
For example me yesterday.... I bought 650 shares of ALBMP yesterday. 500 at $25.55 and 150 at $25.60. I bought this for back side price support as market yield is very strong for a high investment grade issue. Of course its call protection ends 2 divis from now. Not much meat on bone if they call. But if they dont its a place you want to be. It traded over $27 a year ago when it was longer call protected. Not all companies call immediately, especially utes. If rates can move a bit more it may become call protected. This is an example of buying a perpetual and wanting yields to go up...To protect the above market yield it generates.
Some people dont understand the counter intuitive thinking. I submit to you IPL-D as comparison... Call protected utility lower debt rating than ALBMP and a yield 20% lower at 5%.

Just to make sure you understand call forces, let me say this...Compare BAC-L to CFC-B. CFC-B is debt and significantly safer than a non cum preferred. Yet CFC-B yield is significantly higher. Something safer has a lot higher yield from same company? That makes no sense....But yet it does. CFC-B is not call protected and BAC-L is. If CFC-B was call protected it would be near $27 or more instead of $25.80 ish.

Ric,

For WFC-L & BAC-L, keep in mind that they are often looked at as perpetual bond proxies, and would be affected by the long end of the yield curve.

Should there be a steepening of the yield curve, and long term yields go up, that might have an adverse effect on these securities.

However, as an income investor, I try to focus on the income stream and its reliability/sustainability. And for both of these issues, it is a SWAN holding, as long as there are other resources from which to raise emergency cash..

Moved a few things around. Cut my CFC-B exposure in half and bought a few issues...ALLY-B as it dropped over car loan values, replaced MHO-A with FCH-A. It is comparable risk and higher yielder but uncallable and goes exD in 2 weeks. Bought tiny 100 share lots of FBPRO and HAWLM, well just because...
Bought a decent chunk of ALBMP last week at $25.55.
So my roster is now AILNP, AILLL,FIISO,CFC-B, ALBMP, SPLP-A, CNIGO, CNIGP, CNLPL, CNTHP,FCH-A, CTWSO, CTWSP, ALLY-A, FBPRO, and HAWLM.

Coolius, I dont know how all of your preferred distributions are sequenced, but I am about to get motherlode next month. 12 of my 16 are either going exD or paying in next week or so. Im going to get a huge haul. Unfortunately from now on it will be pretty slim pickings the following 2 months.

Mulligan said:

Coolius, I dont know how all of your preferred distributions are sequenced, but I am about to get motherlode next month. 12 of my 16 are either going exD or paying in next week or so. Im going to get a huge haul. Unfortunately from now on it will be pretty slim pickings the following 2 months.

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I have an Excel spreadsheet that indicates the monthly dividends for each month, and I simply color the box blue when a div is actually deposited into my brokerage account.

My best months are 3, 6, 9, 12. Compared to that, the other 8 months are pretty skimpy. Yours look like the big months are 1, 4, 7, 10.

Just my thoughts on preferred stocks and interest rates

Now is not the time to buy. Most investment grade preferred stocks with coupons above 6% are trading above par. I would wait until they drop below par before buying. They do that about 2 to 3 times per year every time bond yields spike about a 1/2 a percent over a short period of time. Redemptions of ETFs such as PFF, PGX, PFS (which make up a significant portion of the preferred stock universe) result in a liquidation of their holdings. The last big sell-off was just last November through December 2016. Before that it was February 2016. PFF is massive in terms of AUM (over $17 billion). PFF holdings include a lot of investment grade preferred stocks as well as a lot of garbage such as FTRPR with a 24% yield. PFF holds a lot of convertible preferred stocks which makes it vulnerable to market corrections. This explains the poor performance of PFF relative to other preferred ETFs (such as PGX). Barrons just wrote an article on PFF last week:
Is PFF Getting Too Big for the Preferred Market? - Income Investing - Barrons.com

In my IRA which I do not plan to take distributions from for another 14 years, I let my cash accumulate and buy only when I see bargains. I don't see any currently in high quality preferred or exchange traded notes.

In my taxable investment accounts, I sweep up the cash dividends to pay bills and any excess is transferred to money market account that pays about 1% until I find something worth buying.

On the issue of interest rates, I don't believe any of this inflation trade that has been going on post election. It's a lot of fairy dust sprinkled by wall street. As I wrote in a post back a few months ago regarding empty shopping centers in Palm Beach Florida, we are seeing what is happening to the retail sector. It is a complete mess. There are too many retail malls and too many stores competing for too few people. I expect store closures to accelerate over the next few months and this will impact the employment numbers. Later this summer (or sooner) we will probably see the rally unwind as reality sinks in. Don't hold you breath for tax reform.

The oil patch is another mess with excess capacity. In my opinion, Chevron and Exxon are two of the largest Ponzi schemes out there. They are selling assets or issuing debt to cover their dividend. How long can they do that for?

I just don't see interest rates going too much higher from here. Rates in the rest of the world are much lower and will hold ours down. The 30 year bond just dropped below 3% again.

Just my thoughts.

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

Hi Freedom! Good points. Cant disagree.. Like you I dont get the oil trade. I bought Chevron 3 years ago at $105 when oil was over $100 a barrel. Its price is insane now in relation to commodity prices.
I also dont disagree with what you said about the 6% issues you mention except, I dont buy those. Though they are the ones that are certainly traded the most.
Take ALBMP which is trading at $25.60 and is a 6.45% par. Except is was issued when 10 year was 4.58%. It isnt going under par. Its came down 8% already because call date is approaching. If they dont call it will be a relative rock price wise at this price point.
If I was looking at issues that were recently issued and/or inside PFF I would be sharing your concerns. By owning illiquids that I mostly own, you side step the stampede if it ever occurs.

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

Mulligan said:

Hi Freedom! Good points. Cant disagree.. Like you I dont get the oil trade. I bought Chevron 3 years ago at $105 when oil was over $100 a barrel. Its price is insane now in relation to commodity prices.
I also dont disagree with what you said about the 6% issues you mention except, I dont buy those. Though they are the ones that are certainly traded the most.
Take ALBMP which is trading at $25.60 and is a 6.45% par. Except is was issued when 10 year was 4.58%. It isnt going under par. Its came down 8% already because call date is approaching. If they dont call it will be a relative rock price wise at this price point.
If I was looking at issues that were recently issued and/or inside PFF I would be sharing your concerns. By owning illiquids that I mostly own, you side step the stampede if it ever occurs.

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Freedom, I have to confess, I have looked at FTRPR. And over the past year its a good thing all I have ever done is look and not buy, lol. Wow that thing has done nothing but break peoples hearts and wallets.

Mulligan said:

Hi Freedom! Good points. Cant disagree.. Like you I dont get the oil trade. I bought Chevron 3 years ago at $105 when oil was over $100 a barrel. Its price is insane now in relation to commodity prices.
I also dont disagree with what you said about the 6% issues you mention except, I dont buy those. Though they are the ones that are certainly traded the most.
Take ALBMP which is trading at $25.60 and is a 6.45% par. Except is was issued when 10 year was 4.58%. It isnt going under par. Its came down 8% already because call date is approaching. If they dont call it will be a relative rock price wise at this price point.
If I was looking at issues that were recently issued and/or inside PFF I would be sharing your concerns. By owning illiquids that I mostly own, you side step the stampede if it ever occurs.

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ALBMP is likely to be called. I would be very surprised if it was not called. It's a high quality preferred. But then again I thought MHNB (an 8% coupon) was going to be called and it's still trading. I own 1800 shares of it all purchased below par and I'm not complaining.

Mulligan said:

Freedom, I have to confess, I have looked at FTRPR. And over the past year its a good thing all I have ever done is look and not buy, lol. Wow that thing has done nothing but break peoples hearts and wallets.

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Yes just like the common stock, it is wiping out a lot of income investors. The problem is Frontier Communications does not earn any money. My general rule is I don't buy preferred stocks of companies that are losing money. The dividend on the common stock is not sustainable. ETFs like PFF, SPFF and others own a lot of FTRPR and other convertible garbage such as SWNC. This is why I don't buy ETFs. The fund managers are playing with other peoples money and don't care about what they are buying.