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

[Coolius]

When its time to sell, what if nobody wants to buy it, and you end up waiting for a long time?

Just askin...


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In my case, I am expecting that such a decision will most likely be made by my kids..........

 

[Mulligan]

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

In my case, I am expecting that such a decision will most likely be made by my kids..........

Do them a favor Coolius, and tell them specifically in the will to not sell by "market order".


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[Texas Proud]

Do them a favor Coolius, and tell them specifically in the will to not sell by "market order".


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First off, I will say thanks to all about this issue..... I think I will buy 200 to 250 shares... converting some of my high yield fund to this.... seems like it is better yield and safer.... what is not to like about that...


But, also wanted to say that when I was trying to put in an order, it would ONLY let me put in a limit order... something about pink sheet issue...

So, will have to wait for the HY fund to sell before buying... hope some is still there....

 

[Mulligan]

First off, I will say thanks to all about this issue..... I think I will buy 200 to 250 shares... converting some of my high yield fund to this.... seems like it is better yield and safer.... what is not to like about that...


But, also wanted to say that when I was trying to put in an order, it would ONLY let me put in a limit order... something about pink sheet issue...

So, will have to wait for the HY fund to sell before buying... hope some is still there....

It is broker specific on market orders though most do force you to make limit ones I believe. You just have to be patient, every few months you get a dump like this. You just have to wait for it...For example CNTHP traded 2000 shares today, but the 90 day average shows 93. CNLPL had 4800 trade today but its 90 day average is 345. CNLPL is a bit bigger of an issue ($16 million in value versus $10 million). Only caveat is next dividend has not been announced. That typically happens about first of April. Since exD of CNTHP is second week of April or so, next dividend is all but assured. All issues are past call but they have been that way since the 70's.


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[Coolius]

First off, I will say thanks to all about this issue..... I think I will buy 200 to 250 shares... converting some of my high yield fund to this.... seems like it is better yield and safer.... what is not to like about that...


But, also wanted to say that when I was trying to put in an order, it would ONLY let me put in a limit order... something about pink sheet issue...

So, will have to wait for the HY fund to sell before buying... hope some is still there....

You should never put in bids at Market for any of these issues. Some of the spreads can be horrific, like AILNP where bid is $100, ask is $1000 !!

Unfortunately, AON bids will almost never get executed. Used to submit AON bids because I didn't want to get stuck with 1 or 2 shares and pay full trade commission. Quickly realized AON orders will sit there and die of old age. So you might have to bite the bullet and take it as a cost of investment _ I usually call CS and ask them to waive the commission, and most times they do, if the trade was for only a few shares.

 

[Slow But Steady]

So Capjack, Slow and Steady, and Jim do you all have any other preferreds now? Did you have any of the CNLPL/CNTHP prior to this purchase?

I own half a batch of EYMXP.

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.

I had half a batch of CNTHP bought a few months back, and added another batch yesterday.

 

[Mulligan]

I own half a batch of EYMXP.

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.

I had half a batch of CNTHP bought a few months back, and added another batch yesterday.

I was out golfing today and missed the continued controlled sell off. I got a bit more of stray cash laying around...May go back in for 100 more.. Heck half my stash is in either Amerens or Light & Power already...Whats a meaningless $5k more added to the mix!


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[Texas Proud]

OK.... which one would you recommend as the 'best' for a newbie?

Should have $12K to invest tomorrow... like the safer yield.....

 

[Mulligan]

OK.... which one would you recommend as the 'best' for a newbie?

Should have $12K to invest tomorrow... like the safer yield.....

If you are willing to take the call risk as next dividends have not been declared, you cant go wrong in long terms of safety with CNLPL/CNTHP at prices bought yesterday if you can get them.
Any electrical utility preferred paying over 6% ( which are few) are the sandbox I play in.


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[Coolius]

OK.... which one would you recommend as the 'best' for a newbie?

Should have $12K to invest tomorrow... like the safer yield.....

Looks like market for CNLPL/CNTHP has been bumped up a little - last year Prices were generally around $52.20-$52.70. They seem to be mostly hanging around $52.70-$53.00 now.

Still a good buy for a long term hold. As Mulligan said, the major risk is not the integrity of the company, or suspension of dividend; it is a call for redemption. But be aware that the redemption price of both these issues is higher than its par value ( CNLPL redeems @ $51.84, CNTHP redeems @ $51.44 ), so that sweetens the pot somewhat.

AILLL is another solid Ute Preferred, if bought below $26. But I've been trying to do that for a long time, with no success.

 

[Mulligan]

CNTHP is trading again late today...Snagged me some more at $52.83


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[Texas Proud]

Thanks guys.... I do like the CNTHP and tried to put in an order today... but Vanguard will not let me do it on the computer... will have to wait till tomorrow to do it... will have to call it in...


I do like these better than the HY fund.... much better credit quality and little downside risk.... just thinly traded... but I plan to hold them anyhow so no big deal....

 

[Mulligan]

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

Thanks guys.... I do like the CNTHP and tried to put in an order today... but Vanguard will not let me do it on the computer... will have to wait till tomorrow to do it... will have to call it in...


I do like these better than the HY fund.... much better credit quality and little downside risk.... just thinly traded... but I plan to hold them anyhow so no big deal....

They are grade A turds....self appointed baby sitters....Once they read you the prospectus and enter order for you, your account should be free and clear to buy most illiquid preferreds...They just want to make sure you are not an idiot and buying something you know nothing about...
I had to go through the process myself...The poor guy I dealt with didnt know a 1/10 what I did about them...


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[Coolius]

Vanguard did not allow me to buy WFC-L in my IRAs.

But since the dividends are QDI, I bought in my Taxable accounts for a greater benefit.

Yeah, not happy with Vanguard Brokerage services. I also sell cash-secured puts, and they actually move the cash to where I can't use it for the entire duration of the Put.

Because of this, I use Vanguard only for equities and individual bonds, as well as their Mutual Funds. No preferred and options for me there.

 

[jim584672]

Vanguard did not allow me to buy WFC-L in my IRAs.

That is strange, I did WFC-L for my tIRA with Vanguard. I had to go through the bond desk, total pain in the rear.

They do not know what they are doing over there.

 

[Coolius]

That is strange, I did WFC-L for my tIRA with Vanguard. I had to go through the bond desk, total pain in the rear.

They do not know what they are doing over there.

Oh yeah, my bad. So sorry.

I could not buy WFC-L using the online website approach. And I did not try their bond line, so never found out that they could do so there.

Thanks for clarifying.

 

[thepalmersinking]

Why not just a preferred ETF like PFF. It seems a lot easier?


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[Coolius]

Why not just a preferred ETF like PFF. It seems a lot easier?


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My own opinion only: yes it is easier - but not optimum from my point of view.

The funds have fees. They also use leverage to juice returns which increases risk. They invest in many stocks, some of which might be very risky in order to increase their return.

To me, the risks associated can be avoided to a big extent if I select my own preferred stocks. And, being retired, I have the time to monitor my investments that folks who are still working would not have.

But again, that's my opinion. Others here will beg to differ, and that's perfectly ok. That's what makes a market !

 

[Mulligan]

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

Why not just a preferred ETF like PFF. It seems a lot easier?


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1) You are getting mostly bank noncumulative issues as financial preferreds constitute 80% of preferred stock issuance. I do not like financial preferreds because they are non cumulative and are backing a leveraged company (banks), so if crap hits the fan, one will either lose by price drop and/or dividend suspension with no "make whole" provision if company returns to profitability.
2) You get a mish mash of issues that is bought for "liquidity" purposes, not quality. They cannot buy the quality issues I buy.
3) By purchasing individual issues you can get higher quality issues with a higher yield than what PFF holds as expense ratios drag it lower also.

 

[tmm99]

1) You are getting mostly bank noncumulative issues as financial preferreds constitute 80% of preferred stock issuance. I do not like financial preferreds because they are non cumulative and are backing a leveraged company (banks), so if crap hits the fan, one will either lose by price drop and/or dividend suspension with no "make whole" provision if company returns to profitability.
2) You get a mish mash of issues that is bought for "liquidity" purposes, not quality. They cannot buy the quality issues I buy.
3) By purchasing individual issues you can get higher quality issues with a higher yield than what PFF holds as expense ratios drag it lower also.

I could be wrong, but I thought you said your mom had PFF and another fund?


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[Mulligan]

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

I could be wrong, but I thought you said your mom had PFF and another fund?


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I did with my dad....He is pretty astute and has been a lifelong investor, though never involved with preferreds. It goes back to what Thepalmer said...."Its alot easier".... He does have some individual preferreds, but he got tired of buying them and just bought PFF and PFXF to finish out his allotment of money to spend. He also bought 60 shares of WFC-L. I personally wouldn't do it, but that is what he wanted. I dont know his passwords so he did it all himself.
I admittedly am a bit more paranoid and seek a few more protections than most. But like Coolius, I actually enjoy buying some of these illiquids and adding to collection. After my dad realized how much work it was to get his 500 shares of AILLL, he quickly lost interest. Though he bought a big slug CHSCL near par when it came out too, but buying $50,000 of that issue was done in a few minutes.

 

[tmm99]

I did with my dad....He is pretty astute and has been a lifelong investor, though never involved with preferreds. It goes back to what Thepalmer said...."Its alot easier".... He does have some individual preferreds, but he got tired of buying them and just bought PFF and PFXF to finish out his allotment of money to spend. He also bought 60 shares of WFC-L. I personally wouldn't do it, but that is what he wanted. I dont know his passwords so he did it all himself.
I admittedly am a bit more paranoid and seek a few more protections than most. But like Coolius, I actually enjoy buying some of these illiquids and adding to collection. After my dad realized how much work it was to get his 500 shares of AILLL, he quickly lost interest. Though he bought a big slug CHSCL near par when it came out too, but buying $50,000 of that issue was done in a few minutes.

Thanks. I for some reason thought it was your mom and you helped set her up with PFF. My mistake.


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[Mulligan]

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

Thanks. I for some reason thought it was your mom and you helped set her up with PFF. My mistake.


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Close enough! .... I had to explain what they were...The PFXF is kind of a counter balance to PFF. It doesnt hold bank preferreds, so he split the rest of the money 50/50 in both funds. I think that is smarter than just going PFF.... But he also said he doesnt care if the stocks go to a penny as long as he gets his 6% dividends. Im not like that. I like illiquid, stable 6% issues that dont move much. I wish all mine were like AILNP. It hasnt traded since the last time I was able to get some and that was back in July.
Added thought... There 2 big benefits to the "preferred mutuals" that may be important to some, but are personally not to me... 1) Easier liquidity to sell 2) Diversification (though some of that is negative) that cant be ignored. If an issue blew up in the fund, it wouldnt register a big hit. If one of mine broke historic ground and didnt pay for the first time in history of Utility preferreds, it would blow a king sized hole in my stash! But I dont even spend a penny of dividends so other than making me mad, it wouldn't change my life.

 

[Coolius]

It might be an interesting exercise to poll the other members of this board - those who have bought illiquid preferred Utes like AILLL, CNLPL & CNTHP.

Could you, based on your experience holding these, answer the following questions:

1) Are you satisfied with your purchase?

2) Do you find the thin trading to be a negative attribute of your stock ?

3) Does the volatility ( or lack thereof ) of the stock concern you ?


Here are my answers:

1) Yes. Not only with the 3 mentioned, but also with HE-U, GLFPO, EYMXP and couple others.

2) I find it to be a negative when trying to buy at a "reasonable". I have sold some on a couple occasions, when a bid appeared at a good price. I suppose if I were forced to sell for whatever reason, the price would be much lower than desired.

3). I am very comfortable with the lack of volatility. My non-preferred holdings exhibit enough volatility to keep me unglued and anxious during the trading day.

 

[Texas Proud]

Just a question on what (free) site is one that gives info on the preferreds?

When I look at Yahoo or other sites, I do not see any info on the shares concerning call price, if cumulative or not, etc. etc....


I would like to be a bit more informed on the actual shares I am buying.