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

[RicDee]

Mulligan,
I still have a lot to learn so the no BS answer is - I don’t know
I am looking to buy and hold for 10 years and have for an income stream of 6%
I would be comfortable buying a 6% current yield at one dividend over par if there is good chance it would not be called in less than a year
And a 7% current yield for two dividends over par if there is good chance it would not be called in less than 5 years
I would feel comfortable buying CNTHP if it came down
Does that give you a sense of my risk level?

 

[capjak]

Mulligan,
I still have a lot to learn so the no BS answer is - I don’t know
I am looking to buy and hold for 10 years and have for an income stream of 6%
I would be comfortable buying a 6% current yield at one dividend over par if there is good chance it would not be called in less than a year
And a 7% current yield for two dividends over par if there is good chance it would not be called in less than 5 years
I would feel comfortable buying CNTHP if it came down
Does that give you a sense of my risk level?

I guess I am similar. For example, AILLL the price could go down from $25 Par to $12 and I would not care (well I may buy more if interest rates are still 1/2 the dividend %) because I do not intend to every sale it. I just want to keep collecting the 6% annuity (I mean dividend).

Now if I thought I might sale it in the future that would be a different story or might need the $$$.

 

[Mulligan]

I guess I am similar. For example, AILLL the price could go down from $25 Par to $12 and I would not care (well I may buy more if interest rates are still 1/2 the dividend %) because I do not intend to every sale it. I just want to keep collecting the 6% annuity (I mean dividend).



Now if I thought I might sale it in the future that would be a different story or might need the $$$.

Cap, that is what concerns me recommending to Ric....If he had your mentality, there are a lot of good ones to buy. But to ensure capital protection in 10 years or so requires a term dated one or baby bond. And some of these may be higher risk than he may want to get the yield. And I dont really follow the beaten path always. For example after 4-5 long years of fruitless chasing I finally snagged WELPM a bit over $113 today. Last trade was back at $118. It is still only 5.3% or so, but A3 rated and non callable. I will keep it because its payments are safe and well, I just wanted it, lol....But then I will flip trade also. I bought CPE-A again 3 days ago and held it for 2 and sold it again for 45 cent gain. After a month ago holding for a couple weeks and selling for $1.40 or so gain per share....And then there are give up trades...I bought C-L at $25.78 today...If they call in 2/2019 I eek out a small gain and move on. If they keep it outstanding it will trade better do to its higher par yield. I literally have all types...perpetual non callables, fixed to float, term dated, past call, call protect, mid term maturities. I just kind of move around and balance out and hope for the best between some income streams like you mentioned and sometimes flippers.

 

[Mulligan]

Mulligan,
I still have a lot to learn so the no BS answer is - I don’t know
I am looking to buy and hold for 10 years and have for an income stream of 6%
I would be comfortable buying a 6% current yield at one dividend over par if there is good chance it would not be called in less than a year
And a 7% current yield for two dividends over par if there is good chance it would not be called in less than 5 years
I would feel comfortable buying CNTHP if it came down
Does that give you a sense of my risk level?

Ric what is your capital risk level? Even CNTHP traded down in lower $30s back in periods of higher interest rates of years gone by.

 

[Mulligan]

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

Mulligan,
I still have a lot to learn so the no BS answer is - I don’t know
I am looking to buy and hold for 10 years and have for an income stream of 6%
I would be comfortable buying a 6% current yield at one dividend over par if there is good chance it would not be called in less than a year
And a 7% current yield for two dividends over par if there is good chance it would not be called in less than 5 years
I would feel comfortable buying CNTHP if it came down
Does that give you a sense of my risk level?

Ric, this is what I own... NGL-B, NS-C, NS-A, CTV, FIISO, WELPM, IPWLK, HE-U, RILYL, CTGSP, EGRKM, EGRKI, EGRKH, MSEXP, C-L, CNIGP, KTBA, BRG-A, and PFX. Not uniform in allocation. Its hard for me to recommend what I dont own (there are many good ones) since I dont track them as much. Many of the above do not fit your criteria. I got some more HE-U at 25.85 yesterday and it did sell cheaper a few days prior. For your needs it comes closest. If you can get in at $25.80, it goes exD end of month so you claw back half the over par money in a couple weeks. Survive 3.5 months and you are free and clear until redemption. It has a 2034 maturity which will serve as a backstop as time goes by plus its past call which helps (been callable for almost 10 years). Remember this ute holding company also generates a fair amount of its profits from the Hawaii bank it owns. This is debt so HE has to go bankrupt to ultimately not get paid.
C_L I find compelling as a hold. If they call 2/2019, a small gain occurs. If rates rise just enough it may not be worth their time to call and you have a higher yielder that wouldn’t be as loss exposed as 6% par QDI Preferred would have.

 

[Coolius]

Hello to everyone after a rather long absence. For the past couple months, have been providing physical and emotional support to a close family friend in the final stages of cancer, helping the family prepare for the inevitable.


Because of this, have not been active in market; but was able to buy couple of preferreds - a new issue RNREF, and BAC-B, both right around par.


I second Mulligan's rec on HE-U, it has a monopoly on electric power in the state, plus an incredibly wide moat ( the Pacific Ocean ). The Bank was a drag on performance in the past, hopefully getting back to profitable level for HE now. The unsuccessful merger attempt by NEE showed that HE does not really have cash flow strength to call this issue, although we can never be certain; but I feel confident call risk is relatively low.


Another interesting one to consider is Invesco Income 2023 Target fund IHIT, designed to return a defined amount at termination in 2023. Monthly payer, 6% yield. Bought a full position in my IRA.

 

[bobandsherry]

You noticed normally it would be exD in less than 10 days and not a peep of a divi declaration? My bet is its all cleaned up at same time, divi declaration, exD, and redemption notice...

Saw div declared on 13th. Any word on this being called? No horse in this race as just not what I'd want to be holding if it wasn't called, but interested to see how it plays out and hoping to see a big win for ya.

 

[Mulligan]

I have heard nothing Bob. These things drag out with big Utes. It took a process with the other subsidiaries when they did this. I wont get too nervous until Sept. They just take their time. It has more to do with ridding themselves of the restraints than call savings.

 

[Mulligan]

Saw div declared on 13th. Any word on this being called? No horse in this race as just not what I'd want to be holding if it wasn't called, but interested to see how it plays out and hoping to see a big win for ya.

Bob they are using the exact playbook to redeem these as they did the 6.08 and 6.45 issue...Issuing a bond and "intent" wording in this bond offerring is plagerized to a T from the ones 2 years ago. Problem is these are delisted securities so they will probably just be yanked without any media or SEC filing.

 

[bobandsherry]

Bob they are using the exact playbook to redeem these as they did the 6.08 and 6.45 issue...Issuing a bond and "intent" wording in this bond offerring is plagerized to a T from the ones 2 years ago. Problem is these are delisted securities so they will probably just be yanked without any media or SEC filing.

When it gets called, I'm sure you'll be buying you and your GF a really nice steak and wine dinner

 

[bobandsherry]

I must be looking at something wrong, but FTRPR is converting on 6/28 to FTR stock. With the reverse split of FTR a while ago (1:15) it muddles the conversion, but if I calculate it correctly it's 1.333333 shares for FTR for every one of FTRPR. Just past ExD date, and FTRPR didn't drop.

FTR right now is $7.70, so getting 1.33333 shares is equal to $10.25, yet FTRPR still trading at $12.93. It's like traders have ignored that it's ExD. Or is my conversion/pricing just wrong?

 

[Mulligan]

When it gets called, I'm sure you'll be buying you and your GF a really nice steak and wine dinner

And if they dont and I sell for a loss she may be getting McDonalds for a long time.Gotta make up for the losses somehow, lol.

 

[Texas Proud]

I must be looking at something wrong, but FTRPR is converting on 6/28 to FTR stock. With the reverse split of FTR a while ago (1:15) it muddles the conversion, but if I calculate it correctly it's 1.333333 shares for FTR for every one of FTRPR. Just past ExD date, and FTRPR didn't drop.

FTR right now is $7.70, so getting 1.33333 shares is equal to $10.25, yet FTRPR still trading at $12.93. It's like traders have ignored that it's ExD. Or is my conversion/pricing just wrong?

I was thinking about buying into this one to flip, but I was not confident enough that it would bounce back since it is being converted so soon...


Are you sure that it went ex divi yesterday? I saw that on dividends.com, but it might have been wrong... have to go with the official announcement... the price is right if the divi is still attached...

 

[RicDee]

Thanks Mulligan,
I'll check out HE-U

 

[bobandsherry]

I was thinking about buying into this one to flip, but I was not confident enough that it would bounce back since it is being converted so soon...


Are you sure that it went ex divi yesterday? I saw that on dividends.com, but it might have been wrong... have to go with the official announcement... the price is right if the divi is still attached...

So I went looking and looks like you are right. Dividend is still attached.

Frontier had originally announced on May 1st:

The Board of Directors has declared a regular and final quarterly dividend on the Convertible Preferred of $2.78125 per share, payable in cash on June 29, 2018 to holders of record at the close of business on June 15, 2018. The Convertible Preferred will convert to common stock on June 29, 2018.

Frontier Communications Reports 2018 First Quarter Results | Frontier Communications

But see there's an updated release on May 3rd:

As an update on Frontier’s press release issued on May 1, 2018, the Preferred Dividend will be payable in cash on June 29, 2018, the day the Preferred Stock converts into common stock, and the Preferred Dividend is payable to the holders of Preferred Stock presenting such shares for conversion on June 29, 2018.

Frontier Communications Declares Dividend on Preferred Stock | Frontier Communications

Not much meat left on that bone to consider flipping, trading right at conversion price. Glad I got in early and then flipped out when there was the surge in price after earnings announcement. Sold most of my shares at $17.38, be kicking myself if I held them for ride back under $13 today. Even without the last dividend I still ended up $1.70/sh ahead of the game.

 

[Freedom56]

Hello to everyone after a rather long absence. For the past couple months, have been providing physical and emotional support to a close family friend in the final stages of cancer, helping the family prepare for the inevitable.


Because of this, have not been active in market; but was able to buy couple of preferreds - a new issue RNREF, and BAC-B, both right around par.


I second Mulligan's rec on HE-U, it has a monopoly on electric power in the state, plus an incredibly wide moat ( the Pacific Ocean ). The Bank was a drag on performance in the past, hopefully getting back to profitable level for HE now. The unsuccessful merger attempt by NEE showed that HE does not really have cash flow strength to call this issue, although we can never be certain; but I feel confident call risk is relatively low.


Another interesting one to consider is Invesco Income 2023 Target fund IHIT, designed to return a defined amount at termination in 2023. Monthly payer, 6% yield. Bought a full position in my IRA.

Sorry for your family friend health issues. Unfortunately, many of us have and will encounter the same issues as time passes. With respect to IHIT, it's an okay CEF. They have zero leverage now but I don't understand what the interest expense is about. Credit quality is okay.

https://www.cefconnect.com/fund/IHIT

It would be a good move to buy this one below the $9.83 projected liquidation price for capital protection.

"The Funds investment objectives are to provide a high level of current income and to return $9.835 per share to holders of common shares on or about December 1, 2023."

it's a far better option than most bond funds and bond ETFs.

I just picked up $100K of Ally 4.15% 8/15/19 notes this past week at 99.65 (YTM of 4.5%) and it pays monthly. The default risk for Ally in the next 14 months is nil. This limit order took 2 weeks to execute. It's a nice premium over a 1 year CD or treasury.

 

[Coolius]

Freedom56, the redemption obligation of IHIT is what attracted me; assurance that management will try to achieve the $9.83 level as 2023 approaches - if shares are purchased below that price, risk of capital loss is fairly low.


I purchased the bulk of my shares at $9.86 before XD last Wednesday, intending to hold till maturity.


The ALLY notes you describe are interesting, can you provide the CUSIP? I might grab some for my IRA.

 

[Freedom56]

Freedom56, the redemption obligation of IHIT is what attracted me; assurance that management will try to achieve the $9.83 level as 2023 approaches - if shares are purchased below that price, risk of capital loss is fairly low.


I purchased the bulk of my shares at $9.86 before XD last Wednesday, intending to hold till maturity.


The ALLY notes you describe are interesting, can you provide the CUSIP? I might grab some for my IRA.

Wait in line. I'm trying to grab more.

Coupon Rate
4.150 %
Maturity Date
08/15/2019
Symbol
ALLY4153829
CUSIP
02006DER8
Next Call Date
07/15/2018
Callable
Yes

It's callable but the call risk is low. They key is to buy below par.

 

[aja8888]

Wait in line. I'm trying to grab more.

Coupon Rate
4.150 %
Maturity Date
08/15/2019
Symbol
ALLY4153829
CUSIP
02006DER8
Next Call Date
07/15/2018
Callable
Yes

It's callable but the call risk is low. They key is to buy below par.

Searching Vanguard this morning (using CUSIP #) shows no market for this bond....none available for sale?

 

[Freedom56]

Searching Vanguard this morning (using CUSIP #) shows no market for this bond....none available for sale?

Fidelity has $100K for sale and they will be mine soon. All Ally notes trade on very thin volume if they trade at all. The issue sizes are small and most investors hold to maturity.

 

[Mulligan]

Well I did some McDonalds flipping today. Back all in NSS at 25.75 and 25.69 today after selling all over $26 a couple weeks ago. Bought NS-C and A with proceeds of that sell and sold them all over 25 cent per share profit. So essentially willbe getting a double divi, since my cost basis from the flipping past 2weeks is 50 plus cents cheaper now.
Also I sold 300 shares of HE-U at $26.15 and bought back over 500 of them around $25.85 with blended purchase. I got a decent amount of these now. Somewhere around 800 I think. Also dabbled in FPI-B at $24.76 for 200 shares. It essentially has a 2024 put on issue as it goes to 10% in 2024 if not called then.

 

[Mulligan]

Thanks Mulligan,

I'll check out HE-U

Ric, you may want to study FPI-B a bit as a preferred. Its a 6% par, but goes to 10% in 2024 if they dont redeem. I just bought 200 shares.

 

[Texas Proud]

Well I did some McDonalds flipping today. Back all in NSS at 25.75 and 25.69 today after selling all over $26 a couple weeks ago. Bought NS-C and A with proceeds of that sell and sold them all over 25 cent per share profit. So essentially willbe getting a double divi, since my cost basis from the flipping past 2weeks is 50 plus cents cheaper now.
Also I sold 300 shares of HE-U at $26.15 and bought back over 500 of them around $25.85 with blended purchase. I got a decent amount of these now. Somewhere around 800 I think. Also dabbled in FPI-B at $24.76 for 200 shares. It essentially has a 2024 put on issue as it goes to 10% in 2024 if not called then.

LOL... going to the dark side!!!


I just completed my 12th flip since April 2nd... total earned is almost $2,100... investing about $24K..... only 1 loss of the 12...



Kinda becoming a hobby....

 

[Mulligan]

LOL... going to the dark side!!!


I just completed my 12th flip since April 2nd... total earned is almost $2,100... investing about $24K..... only 1 loss of the 12...



Kinda becoming a hobby....

I keep thinking I am done flipping and then I go back.. HE-U was a fluke. I am hoping I hold these as 6.3% past call and a 2034 backstop with lower investment grade debt makes for a durable hold. Keeping those 800 shares is another 20k that stays out of relative trouble.

 

[Texas Proud]

I keep thinking I am done flipping and then I go back.. HE-U was a fluke. I am hoping I hold these as 6.3% past call and a 2034 backstop with lower investment grade debt makes for a durable hold. Keeping those 800 shares is another 20k that stays out of relative trouble.

Oh, I still have my portfolio of prefs that I plan on keeping... unless called of course...



My flipping is just play money and as long as it is fun I will do it... but it is a planned flip.... get in, get out and hope to make some money...



At first I was like you... hey, this stock has gone up a divi or two... why not sell and find something else and maybe get back in at a cheaper price... but I have stopped that for now... then again, just looked and I have none that would be worth it anyhow... in fact, losses in 4 of my 7 holdings...