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

[Mulligan]

Phil, I did forget to say this...Ask your broker why he would dump a 5.5% issue on you when you can get another Wells issue that is right at 6%. If you want a fixed preferred from Wells and want best yield, you have to buy WFC-L. Its about 6%.... And on same priority as the others..It is a $1000 institutional one and misunderstood... Yes, it $250 over par, past call etc. But that means nothing!!! Wells common stock has to be around $200 before a forced conversion can occur. And you would come out ok on that also as its a conversion to common call, not a regular call. Dont hold your breath for that to happen anytime as it trades about $60 or so doesnt it?


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[Mulligan]

Sorry to hear about your loss Mul. When I read this I was reminded of this post from you that schooled me on the call danger. I diligently crossed it off my list at that time. Thanks for the warning.

Golden, you dont have to feel bad for me anymore. I have made up all the losses plus am now sitting on a small gain counting the accrued dividends sitting in my back pocket. [emoji3]I told you I was getting my money back through BGLEN. And if I lose it again, I have no one to blame but myself....a second time...As I am holding these a while and going to let things play out a bit.


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[Golden sunsets]

Glad to hear it Mul, but your efforts to do so have been positively dizzying. I can't keep up with it all

 

[Mulligan]

Glad to hear it Mul, but your efforts to do so have been positively dizzying. I can't keep up with it all[emoji72]

Yes, Golden, guilty as charged! I move them around, but mostly in the same dozen issues. Its an easy way to juice returns. They trade so slowly (except when a call is announced) it is so easy to juice returns by watching bid/spread movements. Sometimes you can cycle 2 dividends from same money if timed right and before they appreciate in expectation of it. Since my golf isnt until this afternoon I am sure I will do something today to entertain myself.


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[Texas Proud]

Yes, Golden, guilty as charged! I move them around, but mostly in the same dozen issues. Its an easy way to juice returns. They trade so slowly (except when a call is announced) it is so easy to juice returns by watching bid/spread movements. Sometimes you can cycle 2 dividends from same money if timed right and before they appreciate in expectation of it. Since my golf isnt until this afternoon I am sure I will do something today to entertain myself.


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Hey Mulligan,

Just want to ask about your approach to how you do this.

Me, if I want to try and trade a bit on spreads (which, BTW, I do not do often) I will only sell half of my holdings.... this is to protect me in case something happens and the shares skyrocket for whatever reason.... I still will own the shares I want...

Now, since I am new to the pref shares... skyrocket here means maybe a buck.... , but that is a divi or two....

 

[Mulligan]

Hey Mulligan,

Just want to ask about your approach to how you do this.

Me, if I want to try and trade a bit on spreads (which, BTW, I do not do often) I will only sell half of my holdings.... this is to protect me in case something happens and the shares skyrocket for whatever reason.... I still will own the shares I want...

Now, since I am new to the pref shares... skyrocket here means maybe a buck.... , but that is a divi or two....

Yes Texas, skyrocket is a relative term, ha! I will use an example that worked to perfection just today... A couple weeks ago I bought some EGXKP at $26.09.... Sold today in 2 lots at 26.69 and 26.85... Got almost 2 dividends in money for holding 3 weeks. Im out... Nice quick profit as I knew as it got close to declaration date someone would buy... High call risk here with 80 million issue at 6.45% utility... Dine and dash. Now 4 dividends above call. Not holding that... If it drops I may buy again...but I have a different focus for money at this second...this is an example of "juicing returns". As these are income vehicles so I view the profits in those terms.. And getting 2 divis in 3 weeks is a good trade.


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[Texas Proud]

Yes Texas, skyrocket is a relative term, ha! I will use an example that worked to perfection just today... A couple weeks ago I bought some EGXKP at $26.09.... Sold today in 2 lots at 26.69 and 26.85... Got almost 2 dividends in money for holding 3 weeks. Im out... Nice quick profit as I knew as it got close to declaration date someone would buy... High call risk here with 80 million issue at 6.45% utility... Dine and dash. Now 4 dividends above call. Not holding that... If it drops I may buy again...but I have a different focus for money at this second...this is an example of "juicing returns". As these are income vehicles so I view the profits in those terms.. And getting 2 divis in 3 weeks is a good trade.


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That is how I am looking at these also.... in terms of how many divis I need to get...

Like MNR-PA.... I sold a bit more than half of what I own for a half divi... but held one month... so it was better than a full divi for me...

Not sure how long I will hold the rest.. if prices continue to go up I will sell and take the profit and look elsewhere since we know they plan on calling next year...


Edit... while typing this... just got 150 of BGLEN.... so I am hoping this is not called!!!

 

[Mulligan]

That is how I am looking at these also.... in terms of how many divis I need to get...

Like MNR-PA.... I sold a bit more than half of what I own for a half divi... but held one month... so it was better than a full divi for me...

Not sure how long I will hold the rest.. if prices continue to go up I will sell and take the profit and look elsewhere since we know they plan on calling next year...


Edit... while typing this... just got 150 of BGLEN.... so I am hoping this is not called!!!

I agree.... Im out of MNR-A. A person probably could milk it a bit, but when CEO comes out says they are goners together (A&B) I take my profits and move on...
I have bought 180 more today... For my conservative investing goals (despite aggressive trading) this is the perfect trade....Look at sister issue BGLEH...sold 680 issues at $104 today and it is a bigger and higher yielding issue than N is. I dont see them calling before at least next divi and maybe 6 months to a year...We are one divi under par, everything else is gravy. Let the dust settle and these might be able to be flipped at $103.50-$104 also. Someone is unwinding a big position that is apparent.. It takes time... I have been doing my part the past few days to expedite their wishes....find me a 6.5% yielder going less than one div above par Baa2 utility and I will buy it instead... We already are almost 7 days into next dividend cycle allowing for 30 day call. They appear to be calling and paying cash, not reissuing...So that makes the trade more inviting as that is why they did not call all 4 at the same time. Thats my guess anyways... And I know nothing....


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[Golden sunsets]

Do you guys do this in your taxable account and incur short term gains or only in tax deferred accounts?

 

[Mulligan]

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

Do you guys do this in your taxable account and incur short term gains or only in tax deferred accounts?

I try to keep a lot of my flipping in my Roth and HSA accounts... But this purchase has bleed over... As I am not willing to part with non QDI's such as KCC, OSBCP, and SIVBO. At 680 shares now I had no choice... Those shares I will hesitate to sell...But if pushed and the price is right, I will give uncle sam his due and take the rest. 69 cents of profit out of a dollar is better than 0 cents.

Keep in mind, this BGLEN thing is only my journey...Not recommending it. But for past several years I have only stuck to mostly utilities and prefer that with a 6% floor. Options are getting very limited as I am unwilling to chase 3-4 divis above par for a past call 6% plus issues.... If they called today I would be out less than $600 ....Because I also have dividends coming from earlier purchases Monday and Tuesday.... Sent from my iPad using Tapatalk

 

[Coolius]

Was fortunate to have sold BGLEI @ $100.80 yesterday. Buyer likely is unaware that it has been called, and that he bought on exDiv day - so the poor guy is out about 75 cents/share.

 

[Texas Proud]

Do you guys do this in your taxable account and incur short term gains or only in tax deferred accounts?

All of mine are in a tax deferred account... ROTH to be specific, so I will never owe taxes on this (except for the people who think they will start to tax ROTHs someday)....

 

[Slow But Steady]

I'm about to retire and I need to decide whether to take a lump sum or a monthly pension payment. I'm leaning toward the lump sum, since (using a discount rate of 4.5%) the breakeven for taking the monthly payout is when I'm 88.

If I take the lump sum option, I might invest 25% or so in the kinds of preferred issues we've been discussing here. Perhaps 50% might be in dividend-paying stocks and 25% in corporate bonds.

I realize it might take a few months to get invested, but does such an allocation to illiquid preferreds seem imprudent? (These percentages would be of the lump sum payout. The percentage of our overall portfolio would be maybe a tenth of that.)

Friends:

Just a quick follow-up, as I've been out of town.

Though I haven't received the funds yet (as I'm working for another month) I got started on this strategy by taking a small bite of CVB and a small bite of GWSVP. These seem to me like the opposite sides of the coin, so to speak. Still have my eye on more CVB, since today I'm buying half a dividend.

I have to confess I also participated in the BGLEP debacle. Are there any of the Baltimore Gas issues that you would be buying today?

I also own a batch of AHT-D and half a batch of EYMXP.

Your comments and advice are welcome and appreciated.

Slow

 

[Mulligan]

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

You may not like this advise, but I would slap an ask at 27 or so and take the 2 dividend price appreciation on EYMXP and go. The safety of issue isnt concern its the high yield. This is an 80 million issue that screams call. If price drops you can always reenter. This is what I did. I would hate to get a 40 cent divi then lose like what happened on BGLEI... I call that system "dining and dashing". You dont want to get caught holding "the call bag" .
Now if you absolutely dont mind a call and dont like to trade I understand..
Personally for low hanging fruit, I have about 70k in BGLEN. It can be bought at $101.40 maybe lower... At minimum it goes next dividend, so if called then, you still get 36 cents. But if it carries on for another year that is 6% plus of absolute safety in the preferred world. Since they are calling with cash, logic would assume they only called the 2 highest issues because that is all the cash they are allocating to call for now. Otherwise they would have just called them all. A reissue does not appear to be happening. Of course my philosophy may be different.. I demand mostly safe issues and dont care about calls with a profit like this would be. I dont want to stretch for yield in risky issues...I stretch for yield in absolute safe issues and take the call risk that comes with it...
Another play on BGLEN could be this.. Buy let the dust settle and maybe sneak a divi in, then wait for bidding to go up in price and sell with a small cap gain too. Look at sister issue BGLEH, it is trading a dollar higher and is more of a call risk than BGLEN is...A lot of ways to play these depending on what you are comfortable doing...


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[Slow But Steady]

Thanks, Mull. I'll think about selling the EYMXP. It's in a taxable account, so it will make ST capital gains if I sell. Of course, it will do so if it's called as well.


BTW, I forgot to mention I also own a small batch of CNTHP bought at 52.82.

 

[Mulligan]

They havent declared next dividend yet, but it has to be so soon as it will have to go ExD in days... Dont give it away, collect dividend and after going exD you can look to sell then also. Or you can wait... I suspect once dividend is declared you may get buyers willing to pay more for the stock than that dividend is worth. Right now today it went down to $26.19. At that price I would hold and collect divi. You can always put $26.90 ask on a GTC order and just see if it hits sometime. Like I said I owned it and flipped for almost 2 divis holding 3 weeks...Now if I 100% knew for sure it wouldnt be called I wouldnt have sold... But I do like the issue, I just dome want to get caught holding the bag. If it goes to 25.80 or under and I have cash, I will jump at that price and risk call again.


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[Texas Proud]

Well, just got out of MNR-A....

Sold for a gain and I think a divi on half of what I purchased... still waiting for the money to find out...

Looking to pick up some more BGLEN and the low price it is going for...

Slow, I do like CVB as the yield is higher for this issue than others at its rating... but it is about 1/4 th of my HY holdings and I do not want to get more than that...

So, almost set for the rest of the year....

 

[Mulligan]

Well, just got out of MNR-A....

Sold for a gain and I think a divi on half of what I purchased... still waiting for the money to find out...

Looking to pick up some more BGLEN and the low price it is going for...

Slow, I do like CVB as the yield is higher for this issue than others at its rating... but it is about 1/4 th of my HY holdings and I do not want to get more than that...

So, almost set for the rest of the year....

In the manner of the way I see preferreds, you made a successful trade. You didnt even hold 3 months yet you got 1.5 divis for your effort. I dont mind trading...In fact today I flipped 300 shares of KCC at high price around $29.85 and then bought 100 shares of BGLEN at price around $101.20.


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[Texas Proud]

In the manner of the way I see preferreds, you made a successful trade. You didnt even hold 3 months yet you got 1.5 divis for your effort. I dont mind trading...In fact today I flipped 300 shares of KCC at high price around $29.85 and then bought 100 shares of BGLEN at price around $101.20.


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I agree... I do not mind flipping either... just wanted to get a full bucket before I started to do it... basically there which is why I flipped MNR-A...

Now I just have to watch and see what the market pulse is on these... IOW, learn when to sell and when to buy them... as you have mentioned before, you might get priced out of an issue if you sell and the price does not come back down... IMO, you need to have another issue you are willing to invest in or just be willing to carry cash for a future buying opportunity...

 

[Mulligan]

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

I agree... I do not mind flipping either... just wanted to get a full bucket before I started to do it... basically there which is why I flipped MNR-A...

Now I just have to watch and see what the market pulse is on these... IOW, learn when to sell and when to buy them... as you have mentioned before, you might get priced out of an issue if you sell and the price does not come back down... IMO, you need to have another issue you are willing to invest in or just be willing to carry cash for a future buying opportunity...

Yes, that is pretty much my strategy...My AILLL/AILNP are pretty much untouchables since I reduced some of my over par AILLL exposure. I will most likely take the call risk with the rest. But I have a dozen or so issues that I feel comfortable with and just sell ones that are high sometimes and buy the ones that dipped some. Right now I am hugely over exposed with BGLEN. So much for the 5-10% max per issue theory...Those percentages are way in the mirror. The 800 shares are a very decent chunk of this small timers stash... But the play is to grind out the next divi and then go from there. If it survives will look to pick the pocket of a bidder when things calm down. Sister issue BGLEH didnt even trade today and largely hasnt the past week (and year for that matter). If a call happens at next divi, I take my smallish but entirely safe profits and go shopping again!
I try to continually post I feel the liberty to do what I do, because I never plan on using or needing my investment money being a pensioner.


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[Winemaker]

Slow and steady wins the race; my OCT 14 preferred rollover is now at $114k and some change. Started with $100k and bought 15- some preferreds all UNDER PAR.

Mully, I sleep well and don't have to work hard to get even.

But I've taken my lumps, though with GM, Freddie and Fannie, during the Great Recession, when some of my assets went to pensions instead of higher creditors.

 

[Mulligan]

Slow and steady wins the race; my OCT 14 preferred rollover is now at $114k and some change. Started with $100k and bought 15- some preferreds all UNDER PAR.

Mully, I sleep well and don't have to work hard to get even.

But I've taken my lumps, though with GM, Freddie and Fannie, during the Great Recession, when some of my assets went to pensions instead of higher creditors.

Well in full disclosure Winemaker, you have had two advantages (intelligence issues aside which I concede) you got into different preferreds at a better price point in time. I have only been at this a few years. And If had decided to wait until they were under par before purchasing, well.....I would still be waiting as none of them have been under par or will be for years based on their initial par yields to then 4% plus 10 year treasuries. But that is the price one pays when reaching for yield in safe investment grade fixed dividend preferreds.
So I have to play a different game. When an investment grade 6.5% utility is trading 3/4 dividends over par, I have to take the cap gain as the dividend. Otherwise you hold for a whole year collect your 4 dividends and then you have nothing to show for it as the potential par call swipes all the gains away. I just have to play smart. For example today, KCC I love but over $2 over call and having "cap gained" the dividend, I sell and roll into a safe 6.6% yielder less than one divi over par.
The only issues under par basically now available I would consider buying are old 4-5% par issued utilities from the 1940s and 50s and even then I am not wanting to yet. I have darted in and out of a few adjustables such as GJP, GYC, GJT, and made quick bucks. These adjustables just drop and rise never consolidating any gains, so I buy when lower and flip when they bounce up, making more than holding for the smallish dividends.
But I also admit, I enjoy the trading squeezing out a few more bucks in the process.


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[Slow But Steady]

But I've taken my lumps, though with GM, Freddie and Fannie, during the Great Recession, when some of my assets went to pensions instead of higher creditors.

This happened to me too, with the GM baby bonds. I paid less than par, so I thought sure there were plenty of assets to keep me whole. Oh, well.

 

[Slow But Steady]

I agree... I do not mind flipping either... just wanted to get a full bucket before I started to do it... basically there which is why I flipped MNR-A...

When I take that lump sum, I think I may fill the bucket with Doubleline's DBLTX. Then I can easily move to the preferred at a manageable pace without giving up all the yield in the meantime.

 

[Texas Proud]

When I take that lump sum, I think I may fill the bucket with Doubleline's DBLTX. Then I can easily move to the preferred at a manageable pace without giving up all the yield in the meantime.

I was in Vanguard Hi Yield fund.... this is a direct replacement for my HY holdings... the result is a higher yield with also a high credit rating... and from what I can see less volatility....

Who can argue with that