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

[Sunset]

Post above mine - NLY-F

The stock itself pays 13.5%

 

[perrytime]

I see aja8888 post a lot, so respectfully, I thought the very definition of cumulative shares was they have to be paid eventually, the company cannot pay regular share dividends until preferred have been paid. Every web site that describes preferred says that. NLY is big, 9 billion $ company.
NLY has cut dividend of regular stock before, no thanks to owing it.

 

[aja8888]

I see aja8888 post a lot, so respectfully, I thought the very definition of cumulative shares was they have to be paid eventually, the company cannot pay regular share dividends until preferred have been paid. Every web site that describes preferred says that. NLY is big, 9 billion $ company.
NLY has cut dividend of regular stock before, no thanks to owing it.

I'm just suggesting you read the offering document to be sure there are no exception situations mentioned where the cumulative dividend payment would be suspended or cancelled permanently. Stranger things have happened with preferreds.

 

[Mulligan]

Post above mine - NLY-F

Aja, I know as much about Mreits as I do the Russian language…So that means not much…Outside of “nyet”, ha.
I have chronically been an all in preferred investor. But I am well under 40% now and a lot of that really isnt preferreds such as ALL-B and TANNZ/TANNI (being bought out by BP Petroleum). I also have a lot of GJT which is a synthetic adjustable created off the 2036 5.9% par A rated senior unsecured AllState debt.
Its 3 month Tbill plus 80 bps. So at present pricing your getting almost 7% off a 5.9% par bond that is already trading almost 10% over par.
If they ever dissolved the counter party swaps your “stuck” with a 5.9% par yielder at over 15% discount to par in terms of yield. So in other words you lock in almost 7% yield off a fixed and not adjustable. If brokerage called it to get a 10% sell premium by selling the bonds, you get a sweet $3.70 cap gain. So those negatives are actually positives. The main negative is a collapse of the 3 month treasury yield.

 

[Free To Canoe]

Just taking a moment to appreciate all the help and benefit received from the Preferred Stock threads. Back in the olden days investors at ER.org looking for an edge were actually considering investing in Crowd Sourcing and Church Bonds. Hard to believe.
Illiquidity and small money issues can work to the advantage of the small investor.
We have hit a lull in the bargains but better days are coming.
Thanks, Mark

 

[dobig]

I'd like to get into a few preferreds and was thinking of the Wells Fargo (WFC.PRL) and BAC (BAC.PRL) as their prices are starting to look attractive and I like they are perpetual unless the common stock hits what I consider is unrealistic levels. It seems utilities are the most popular preferreds here but I just don't know enough to feel comfortable dipping my toes in. I swear, I start reading these preferred threads from the beginning and soon I have a list of 20 that sound good but then just get overwhelmed. I need something simple, safe, reliable and longer term to start out with.

Would 5% in each the Wells Fargo and BAC preferreds be a reasonable allocation?

 

[Mulligan]

I'd like to get into a few preferreds and was thinking of the Wells Fargo (WFC.PRL) and BAC (BAC.PRL) as their prices are starting to look attractive and I like they are perpetual unless the common stock hits what I consider is unrealistic levels. It seems utilities are the most popular preferreds here but I just don't know enough to feel comfortable dipping my toes in. I swear, I start reading these preferred threads from the beginning and soon I have a list of 20 that sound good but then just get overwhelmed. I need something simple, safe, reliable and longer term to start out with.



Would 5% in each the Wells Fargo and BAC preferreds be a reasonable allocation?

5% of your entire stash in each issue? For a LTH that is a bit rich for my blood personally in terms of concentration and market risk. As largely these 2 issues are in bed together having same market and sector risk despite being different companies. The preferred market especially in regional banks is under a lot of stress now. Preferreds in the TBTF category havent been stressed nearly as much.

 

[dobig]

Thank you for chiming in Mulligan. If I'm not mistaken didn't you put your father into PFF for simplicity and diversification? That might be a better route for someone like me. Even with the expense ratio it's still yielding 6%.

I do have buy orders on your Connecticut Power preferreds but they never seem to sell.

 

[Mulligan]

Thank you for chiming in Mulligan. If I'm not mistaken didn't you put your father into PFF for simplicity and diversification? That might be a better route for someone like me. Even with the expense ratio it's still yielding 6%.

I do have buy orders on your Connecticut Power preferreds but they never seem to sell.

No, we never got into owning funds, just individual issues. There are getting to be some nice price drops in many different preferreds now. But during times of volatility they can drop more, especially if a recession hits as that would cause credit spreads to widen more.
There are certainly ones that pay more, or yield more, and definitely more safer, but I have been buying up Pacific Gas and Electric preferreds getting more 7.4%. Moodys all but guaranteed a credit upgrade at some point, and common is about to start getting a divi soon.
Anyhow, PFF is heavily concentrated in banks. PFXF if I have ticker correct is like PFF except it doesnt have banks.

 

[BeachOrCity]

Anyone keep a list of banking preferreds that are cumulative? With the banking stresses ongoing I would imagine some of these could be attractive, but want to hedge my risk on divvys being paid.

 

[bobandsherry]

Anyone keep a list of banking preferreds that are cumulative? With the banking stresses ongoing I would imagine some of these could be attractive, but want to hedge my risk on divvys being paid.

I don't think those exist.

 

[BeachOrCity]

I don't think those exist.

Thanks. Kind of hard after Credit Swiss to know how protected everything really is.

 

[tutan]

Anyone keep a list of banking preferreds that are cumulative? With the banking stresses ongoing I would imagine some of these could be attractive, but want to hedge my risk on divvys being paid.

I know one: BACRP. But you will pay a hefty premium to even get a few shares. Its price acts more like a say collectible than a mere stock.

 

[Mulligan]

I know one: BACRP. But you will pay a hefty premium to even get a few shares. Its price acts more like a say collectible than a mere stock.

I bought some in $130s and sold in $200s a few days later this year. Thought I struck it “rich” until some are selling around $300 at times now, lol… The only QDI cumulative preferred besides that one that I am aware of is FIISO and it trades very rarely. Now there are plenty of “trust preferreds” that are cumulative because they are subordinate debt. Things like MER-K (Bank of America) and CUBB for example.

 

[youbet]

Had an interesting discussion with Schwab today. I noticed on their site they were showing JPM/PRC as having a maturity date of 3/1/24. Quantum shows it as being perpetual. I checked the IPO and while it did not specifically say the issue was perpetual, it did not mention a maturity date.

The Schwab rep seemed disinterested and said she would elevate my concern but was unsure whether they would work on it or not.

Anyway, I think that issue is perpetual regardless of the Schwab site giving it a maturity date. But can someone verify that?

It looks like Schwab is labeling the first call date the maturity date.

Edit: It looks like Quantum is a bit thick-skulled too. They show the call date as 3/21/24, probably a data entry typo, since that date is 3/1/24.

Where can be get correct data?

 

[Mulligan]

Had an interesting discussion with Schwab today. I noticed on their site they were showing JPM/PRC as having a maturity date of 3/1/24. Quantum shows it as being perpetual. I checked the IPO and while it did not specifically say the issue was perpetual, it did not mention a maturity date.

The Schwab rep seemed disinterested and said she would elevate my concern but was unsure whether they would work on it or not.

Anyway, I think that issue is perpetual regardless of the Schwab site giving it a maturity date. But can someone verify that?

It looks like Schwab is labeling the first call date the maturity date.

Edit: It looks like Quantum is a bit thick-skulled too. They show the call date as 3/21/24, probably a data entry typo, since that date is 3/1/24.

Where can be get correct data?

Its definitely perpetual (or in other words optional for JPM to redeem anytime after first call date). The best source as always is the issues prospectus (the legal doc of this preferred).

Optional Redemption

At the option of our board of directors or any duly authorized committee of our board of directors, we may redeem, out of assets legally available therefor, the Preferred Stock on any dividend payment date on or after March 1, 2024, in whole, or from time to time in part, at a redemption price equal to $10,000 per share (equivalent to $25 per depositary share), plus any declared and unpaid dividends on the shares of Preferred Stock called for redemption up to the redemption date. Subject to irrevocably setting aside or depositing funds necessary for redemption, dividends will cease to accrue on such shares on the redemption date, without accumulation of undeclared dividends.
https://www.sec.gov/Archives/edgar/data/19617/000119312519012162/d676915d424b2.htm#supp676915_6
Added thought…Many of these reps dont understand or have a clue about preferreds or their prospectus.

 

[youbet]

Its definitely perpetual
Optional Redemption

Thanks for verifying.

Added thought…Many of these reps dont understand or have a clue about preferreds or their prospectus.

So I'm learning! Generally I've been pleased with the phone reps at Schwab over the decades. I do get to use the "preferred customer" phone number. I think it's called Pinnacle or something like that. I seldom call but it does seem like the percentage of time I'm disappointed with the results has been increasing the past couple of years.

Just to clarify, my issue here wasn't so much the lack of knowledge by the rep as I don't expect someone answering a general inquiry line to be an expert on everything (even if it's the preferred customer general inquiry line). She did call some other folks for more information and then called me back promptly. It was the response that doubted I could be correct and they have a mistake on their web site that bothered me. This morning, their site is still incorrect.

And, to be fair, the Quantum site is still incorrect regarding the date of first call which they state as 3l21l24 instead of 3l1l24.

You're right. Going to the prospectus seems to be the only way you can really trust if the issue is important and it matters.

 

[Texas Proud]

Had an interesting discussion with Schwab today. I noticed on their site they were showing JPM/PRC as having a maturity date of 3/1/24. Quantum shows it as being perpetual. I checked the IPO and while it did not specifically say the issue was perpetual, it did not mention a maturity date.

The Schwab rep seemed disinterested and said she would elevate my concern but was unsure whether they would work on it or not.

Anyway, I think that issue is perpetual regardless of the Schwab site giving it a maturity date. But can someone verify that?

It looks like Schwab is labeling the first call date the maturity date.

Edit: It looks like Quantum is a bit thick-skulled too. They show the call date as 3/21/24, probably a data entry typo, since that date is 3/1/24.

Where can be get correct data?

Decided to look.... I do not see what you see...


It states the next call date is 3/1/24. I do not see anywhere they have a maturity date...


Call Type Callable exclusively into cash Next Call Date Mar 1, 2024 Call Timing On payment dates only


Opps... now I see the maturity date over to the left... probably a programming problem... and of course the call center would not know this or care...

 

[youbet]

Decided to look.... I do not see what you see...


It states the next call date is 3/1/24. I do not see anywhere they have a maturity date...


Call Type Callable exclusively into cash Next Call Date Mar 1, 2024 Call Timing On payment dates only


Opps... now I see the maturity date over to the left... probably a programming problem... and of course the call center would not know this or care...

Here ya go. You have to look at the field which states the maturity. (Bold mine)

The call center contacted the folks who should care that important info on their site is incorrect. She called me back and informed me that they questioned whether I actually had my info from the prospectus. She said she was not sure there would be further follow-up.

I'm generally a happy Schwab customer (for several decades) but this particular incident is something I find disgusting. Missing information is bad enough but at least you know you have to go look someplace else. Wrong information coupled with a nonchalant attitude about investigating and fixing it is unacceptable. Mulligan's point that one really needs to check the prospectus directly before making a purchase seems spot on, especially considering that Quantum also had a mistake on their sheet for this issue.

Shares Outstanding 74.00M
Original Coupon 6.00%
Face Amount at Issue $25.00
Maturity Date Mar 1, 2024
CUSIP 48128B648

 

[mailbagman]

Anyone keep a list of banking preferreds that are cumulative? With the banking stresses ongoing I would imagine some of these could be attractive, but want to hedge my risk on divvys being paid.

Here is a list to check out. https://innovativeincomeinvestor.com/bankinsurancepreferreds-listing/

 

[d.davis]

Here is a list to check out. https://innovativeincomeinvestor.com/bankinsurancepreferreds-listing/

Nice website. Thanks

Sent from my moto g power using Early Retirement Forum mobile app

 

[Mulligan]

If one is willing to take on a little risk, one may consider KMPB. Its a subordinate note from insurer Kemper. Its a 5.875% par reset trading around $17.35 for a current 8.47% and will go exD next month. It resets in 2027 with a 4.14% adjustment plus 5 year US Treasury yield.
Like most, the P&C and auto insurers have taken on some losses. But they will be filing increases to claw it back.

 

[Texas Proud]

If one is willing to take on a little risk, one may consider KMPB. Its a subordinate note from insurer Kemper. Its a 5.875% par reset trading around $17.35 for a current 8.47% and will go exD next month. It resets in 2027 with a 4.14% adjustment plus 5 year US Treasury yield.
Like most, the P&C and auto insurers have taken on some losses. But they will be filing increases to claw it back.

Thanks for the tip.... have been looking for some other to buy...


Probably going to look to buy some BBB or above for some safety... lots of mine are lower rated.

 

[Texas Proud]

Wow... putting my pref shares and bonds in a worksheet and some really interesting things show up..


I have some with big gains where the yield has come down on the current value to less than I would want.. I will have to look at redeploying that money to a better investment..


As an example, I have SPLP.A with an $11K gain... current yield is 6.47%... for some reason Vanguard has it at 9.57%.... wonder if that is YTM...

 

[pb4uski]

Schwab says 6.48% as well and that is what I get.. $25 par * 6% dividend rate is $1.50 dividend annually; divided by $23.14 = 6.48%