Preferred Stock Investing-The Good , The Bad and The In Between 2021

[Mulligan]

I have only ever slightly began reentering fixed perpetuals. Im mostly only interested the old subsidiary ute ones that creep over 6%. Did recently buy some BBB rated fixed Canadian Utilities at almost 7% and around $12 USD. Also some Fortis reset preferreds at 8.2% that just reset. Have live floaters that I keep running with. With no guarantees of rates peaking these are still the safer ones nearer term.
That being said I still have more money in CDs, IBonds, and Treasuries than I do those. Still waiting and patient.
I do small ball trade perpetuals but they arent long term holds. Just catching market volume imbalances here and there for tough steak meat dinners.

 

[bobandsherry]

Dang we are all getting quiet...is there no great thing to pick right now? I just got some LHX, seems like my buy for COF.PR.I will hit soon, and I need some other good ideas as CD's mature. Where the conversations!!

It's been a game of seeing some shiny babbles and picking up a few, holding an assortment of preferred now, mostly floating.... AGNCN, ALL-B, AQNA, ATLCL, CSWCZ, CUBI-F, FTRSF, GLADZ, GLOP-B, LBRDP, MS-A, NIMC, NLY-G, NS-A, NS-B, NSS, PACWP, PSEC-A, SOHOB, USB-A, WFC-L.

I'm looking that short term rates remain low, but now looking at what beaten down issues with relatively low fixed coupon to move money to when rates move down to pick up some capital gains.

 

[tizod]

My urstadt biddle is now regcp. Did anyone track this? I did some homework when announced, didn't come to any decision, and forgot about it till it cleared! It seems it tracked through the same? Any comments to help - I'm away for a bit and will likely not look this up for awhile.

 

[Winemaker]

My urstadt biddle is now regcp. Did anyone track this? I did some homework when announced, didn't come to any decision, and forgot about it till it cleared! It seems it tracked through the same? Any comments to help - I'm away for a bit and will likely not look this up for awhile.

I'm holding my REGCP after the merger. i have held the Urstsadt for 3 years, and will contiue to hold for now.

 

[perrytime]

NYCB-U,
Appears from last earnings NYCB is doing well. NYCB-U price has been on decline for some reason. The description on quantumonline is confusing to me, seems more than simple preferred, and that concerns me. the 8% div seems safe from suspension. $50 par, trading below 35. Anyone have thoughts?

 

[Mulligan]

NYCB-U,

Appears from last earnings NYCB is doing well. NYCB-U price has been on decline for some reason. The description on quantumonline is confusing to me, seems more than simple preferred, and that concerns me. the 8% div seems safe from suspension. $50 par, trading below 35. Anyone have thoughts?

Its really a trust debt preferred. Its a bit complicated because it was issued with warrants at IPO. But bottom line it matures at $50 par if common doesnt reach conversion strike price. And that is way out of the money.

 

[imbatman]

IDK been a long time since I looked at preferreds but FWIW, I don't love that the "sole assets" backing the issuance (the warrants) are now worth MUCH less than when issued (each $50 share now has a $15.91 warrant instead of $50 when issued). Looks like it had a B+ (well into Junk) rating in Jan 2023 before it was withdrawn. Then there is the ability to defer interest for 5 years.

8% yield is good but when I can get a 5% money market or 6.77% AAA Agency Bond, I wouldn't feel the yield is increased enough for the level of increase in risk. FWIW, S&P and BOA show NYCB parent stock as Medium Risk stock that is more fairly valued at this point compared to some other banks.

 

[Mulligan]

IDK been a long time since I looked at preferreds but FWIW, I don't love that the "sole assets" backing the issuance (the warrants) are now worth MUCH less than when issued (each $50 share now has a $15.91 warrant instead of $50 when issued). Looks like it had a B+ (well into Junk) rating in Jan 2023 before it was withdrawn. Then there is the ability to defer interest for 5 years.



8% yield is good but when I can get a 5% money market or 6.77% AAA Agency Bond, I wouldn't feel the yield is increased enough for the level of increase in risk. FWIW, S&P and BOA show NYCB parent stock as Medium Risk stock that is more fairly valued at this point compared to some other banks.

Its not trading on the value of the conversion anymore. Its trading off the yield of the credit quality. With a slight discount because of “phantom income tax” if held in a taxable account to due to OID from the warrants. If you held to maturity (if still alive) it actually has a fair YTM. I dont own it however.
Im actually toeing back into depressed HQ perpetual preferreds now. Getting at turn of the century pricing. But it still could be early.

 

[Texas Proud]

Wow... a lot of my preferred and bonds getting hit today...


Looks like 10 year rate is going up fast...


All good though as I will hold what I got to maturity (unless I get a big gain that is)

 

[jim584672]

WFC-PL is almost 7% now, $1,079.20 with a $75 coupon is 6.94%.

 

[Mulligan]

Yes, sharp upswings on low end are tough on fixed perpetuals. I dont have many but I have toed back in. I really cant go hog wild even if I wanted to because I need some CDs to start maturing early next year before I can get more serious….or not…Still not willing to sell my live floaters as they are still doing just fine.

 

[bobandsherry]

Algonquin Power & Utilities Corp. Announces Redemption of its 6.875% Fixed-to-Floating Subordinated Notes - Series 2018-A due 2078

https://www.prnewswire.com/news-rel...notes--series-2018-a-due-2078--301949902.html

 

[Texas Proud]

Algonquin Power & Utilities Corp. Announces Redemption of its 6.875% Fixed-to-Floating Subordinated Notes - Series 2018-A due 2078

https://www.prnewswire.com/news-rel...notes--series-2018-a-due-2078--301949902.html

WOW, these were not out there long... kinda surprised they were callable so soon...

 

[pb4uski]

I'm not complaining but does anyone have a guess why ALL-B hasn't been called yet?

 

[Mulligan]

I'm not complaining but does anyone have a guess why ALL-B hasn't been called yet?

Its adjustment is fairly low, so when Fed lowers short end it will drop also. I suspect they need the capital now, and any call and refinance would be of negligible value presently. But I still respect the call risk. Dumped mine well over $26, and just started repurchasing Friday at $25.24.

 

[pb4uski]

I have an average cost of $24.92 so I'm happy to just collect the ~9% dividend for as long as they are willing to pay it.

 

[Texas Proud]

I am at $25.15 so also will hold as long as I can...

 

[Mulligan]

I am at $25.15 so also will hold as long as I can...

Nothing wrong with a hold here. A solid issue provided Fed stays higher for longer. Down the road one may need to be wary of short end being dropped while long end stays higher. Anything is possible. ALL-B has been a very good trading vehicle on short bounce grinds. I have used it to my advantage. I have been in and out of it a couple thousand shares at a time so much past year, I couldnt begin to say what cost basis I have. Except its way under par.

 

[dobig]

Loading up on WFCPRL and BRCPRL. I remember Mulligan saying preferreds could get hit if the economy falters and credit spreads widen but I've decided I can deal with that if I'm getting 7% dividends.

 

[Coolius]

Loading up on WFCPRL and BRCPRL. I remember Mulligan saying preferreds could get hit if the economy falters and credit spreads widen but I've decided I can deal with that if I'm getting 7% dividends.

Good for you, I have owned both WFC-L & BAC-L for a few years now, bought at much higher prices around $1,170.


I do not intend to sell. Even if the conditions make a mandatory conversion possible, the conversion will still be worth about $1,300.


I intend to add to my holdings if it swings below $1,010

 

[dobig]

Good for you, I have owned both WFC-L & BAC-L for a few years now, bought at much higher prices around $1,170.


I do not intend to sell. Even if the conditions make a mandatory conversion possible, the conversion will still be worth about $1,300.


I intend to add to my holdings if it swings below $1,010

Not sure what the conversion is for the BACPRL but for the Wells Fargo, if I'm reading it right, it is 130% of the conversion price of $156.71 after 20 of 30 consecutive trading days. I don't see that happening.

https://www.quantumonline.com/search.cfm?tickersymbol=WFC-L&sopt=symbol

 

[BrianB]

We own a few shares of WFC-L. I'm considering adding some more, and maybe some BAC-L. Just one thing bothers me: WFC-L and BAC-L are non-cumulative.

If the big guys at Corporate HQ just decide to stop paying the dividends, there isn't any recourse.

Is this a concern for any of you looking to start a position or add more?

BrianB

 

[dobig]

We own a few shares of WFC-L. I'm considering adding some more, and maybe some BAC-L. Just one thing bothers me: WFC-L and BAC-L are non-cumulative.

If the big guys at Corporate HQ just decide to stop paying the dividends, there isn't any recourse.

Is this a concern for any of you looking to start a position or add more?

BrianB

Yes it is a slight concern which is why I'm only buying these from the #2 and #4 banks in term of size in the US. I would imagine if any of these large banks suspended or just decided they didn't want to pay these dividends any longer it would be extremely detrimental to any future debt issuance.

 

[bobandsherry]

We own a few shares of WFC-L. I'm considering adding some more, and maybe some BAC-L. Just one thing bothers me: WFC-L and BAC-L are non-cumulative.



If the big guys at Corporate HQ just decide to stop paying the dividends, there isn't any recourse.



Is this a concern for any of you looking to start a position or add more?



BrianB

WFC didn't suspend dividends in the prior economic crisis events, can't imagine they'd tarnish their reputation as a major financial institution unless it was really, really bad and then suspension of dividend would be least of your concern. That's my insight/opinion. Not financial advice.

 

[Mulligan]

WFC didn't suspend dividends in the prior economic crisis events, can't imagine they'd tarnish their reputation as a major financial institution unless it was really, really bad and then suspension of dividend would be least of your concern. That's my insight/opinion. Not financial advice.

I by emotional behavior mostly dont like bank preferreds. I have recently jumped back into WAFDP though with a small position as the 9.5% is just too tempting to not get back in….But, that being said Bob, you are 100% correct…The Board of ANY bank deciding just not declaring a divi because they decide not to or try to screw over preferred shareholder is just entirely “fake news”. It just doesnt happen.
If they wouldnt ever pay its because they would be in violation of some regulatory capital guidelines in times of financial stress.