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

[bobandsherry]

FYI - GLP-A redemption....

Global Partners LP (NYSE: GLP) (“Global”) today announced that it intends to redeem all $69,000,000 of its 2,760,000 issued and outstanding Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the “Series A Preferred Units”) (CUSIP: 37946R208).

The redemption date will be April 15, 2024 (the “Redemption Date”). The Series A Preferred Units will be redeemed at a redemption price of $25.00 per share, plus an amount equal to all unpaid and accrued distributions thereon to, but excluding, the Redemption Date, less any applicable tax withholding as required by law (the “Redemption Price”), which will be payable in cash on the Redemption Date.

https://www.businesswire.com/news/h...AM, Mass.--(BUSINESS WIRE,) (CUSIP: 37946R208)

 

[Texas Proud]

FYI - GLP-A redemption....

Global Partners LP (NYSE: GLP) (“Global”) today announced that it intends to redeem all $69,000,000 of its 2,760,000 issued and outstanding Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the “Series A Preferred Units”) (CUSIP: 37946R208).

The redemption date will be April 15, 2024 (the “Redemption Date”). The Series A Preferred Units will be redeemed at a redemption price of $25.00 per share, plus an amount equal to all unpaid and accrued distributions thereon to, but excluding, the Redemption Date, less any applicable tax withholding as required by law (the “Redemption Price”), which will be payable in cash on the Redemption Date.

https://www.businesswire.com/news/h...AM, Mass.--(BUSINESS WIRE,) (CUSIP: 37946R208)

Well, crapola.... lost over $1,000 on my holdings today as it was over the call price... and it was yielding 11.5% on my cost basis...


Now have to find something else to buy

 

[AboutThere]

Perhaps this has been asked before, but is there a "how to get started in preferred stocks" thread?

I've looked at outside sources but only get generalities.

 

[pb4uski]

I'd suggest that you start here

https://www.early-retirement.org/fo...bad-and-the-in-between-2015-2020-a-77428.html

https://innovativeincomeinvestor.com/income-securities-education-items-and-articles/
https://innovativeincomeinvestor.com/a-very-basic-preferred-stock-primer-video/
https://innovativeincomeinvestor.com/definitions/

But I'm not sure what specifics that you are looking for so ask away.

I tend to limit my preferreds to investment grade credits. Further, if the preferred is callable I limit call risk by focusing on preferreds that are trading near to or below par so even if it gets called soon after I buy it then I still don't have a loss.

The funky thing about preferreds is that they trade "flat" like commons stocks do... there is no accrued dividend akin to accrued interest on a bond. So if a preferred is a couple days away from it's ex-dividend date it is theoretically more valuable that a similar preferred that just went ex-dividend since you will receive a dividend shortly. Similarly, when a preferred goes ex-dividend the market price of the preferred declines by about the amount of the dividend paid, similar to common stock.

 

[Texas Proud]

/snip/



The funky thing about preferreds is that they trade "flat" like commons stocks do... there is no accrued dividend akin to accrued interest on a bond. So if a preferred is a couple days away from it's ex-dividend date it is theoretically more valuable that a similar preferred that just went ex-dividend since you will receive a dividend shortly. Similarly, when a preferred goes ex-dividend the market price of the preferred declines by about the amount of the dividend paid, similar to common stock.

Yes... for awhile I was trading preferred shares that were about to go ex-divi... buy them a week or so before ex and sell soon after.. the price would drop the day of ex but would recover about half the price within a week...



At one time my return was 33%... but I did get stuck with one that did not recover and actually went down a bit so dropped to about 20% annual return... I decided it was more like work after doing it about a year or so, so I stopped... it was fun for that time though...

 

[Texas Proud]

FYI - GLP-A redemption....

Global Partners LP (NYSE: GLP) (“Global”) today announced that it intends to redeem all $69,000,000 of its 2,760,000 issued and outstanding Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the “Series A Preferred Units”) (CUSIP: 37946R208).

The redemption date will be April 15, 2024 (the “Redemption Date”). The Series A Preferred Units will be redeemed at a redemption price of $25.00 per share, plus an amount equal to all unpaid and accrued distributions thereon to, but excluding, the Redemption Date, less any applicable tax withholding as required by law (the “Redemption Price”), which will be payable in cash on the Redemption Date.

https://www.businesswire.com/news/h...AM, Mass.--(BUSINESS WIRE,) (CUSIP: 37946R208)

Just got my payment for my shares. I will keep in cash as I want to get a bucket for the next years expenses as my bucket was empty.

 

[brokrken]

Just got my payment for my shares. I will keep in cash as I want to get a bucket for the next years expenses as my bucket was empty.

Yeah, my cash bucket is getting way too large. Although, with MM paying me 5.25% I don't have much motivation to take risk

 

[pb4uski]

Yeah, my cash bucket is getting way too large. Although, with MM paying me 5.25% I don't have much motivation to take risk

Yeah, I hear you. but on the other hand that 5.25% isn't going to last forever.

While I still have a lot of liquidity, I've bought 37 different, mostly investment grade, preferreds over the last 6 months that collectively yield 6.89% so absent any credit events I'll have not only that 6.89% yield but also perhaps some share appreciation if/when rates drift higher.

Some are callable but in most cases I have bought significantly below stated value so a call would be welcome.

BTW, my favorite is ALL/PRB or ALL-B... a variable rate baby bond issued by Allstate, a BBB-/Baa1 rated credit, that currently pays a 8.84% coupon and yields 8.53% at $25.84. While I wouldn't buy at this $25.84 level... my average cost is $25.17... it is something to add to your watchlist and buy when the price drifts down to $25/par plus accrued interest. YMMV.

 

[Texas Proud]

So what is your 2nd and 3rd?


I have All-B from (probably) your recommendation earlier...



It is my 3rd largest preferred holding behind CUBI and NSS... both pay higher but do not have ratings..

 

[pb4uski]

So what is your 2nd and 3rd?


I have All-B from (probably) your recommendation earlier...



It is my 3rd largest preferred holding behind CUBI and NSS... both pay higher but do not have ratings..

No other particular favorites but looking at my holdings US Bancorp USB/PRA is a BBB/Baa2 credit, trades at a discount $874 vs $1,000 stated value and yields 7.85% (I bought in a 8.272% yield). I also like KTN, a BBB/Baa3 structured trust preferred with Aon as the underlying credit, non-callable, that has a 8.205% rate and yields 7.74% (I bought in a 7.822% yield).

I don't get very junky... my lowest rated holdings are Goldman Sachs, Wells Fargo, Capital One, Jackson Financial and Assurant.

Thanks for asking because in the process of looking I discovered that an issue that I bought just yesterday that I already had a full position in. Happens occasionally if you have positions across numerous accounts.

 

[Texas Proud]

No other particular favorites but looking at my holdings US Bancorp USB/PRA is a BBB/Baa2 credit, trades at a discount $874 vs $1,000 stated value and yields 7.85% (I bought in a 8.272% yield). I also like KTN, a BBB/Baa3 structured trust preferred with Aon as the underlying credit, non-callable, that has a 8.205% rate and yields 7.74% (I bought in a 7.822% yield).

I don't get very junky... my lowest rated holdings are Goldman Sachs, Wells Fargo, Capital One, Jackson Financial and Assurant.

Thanks for asking because in the process of looking I discovered that an issue that I bought just yesterday that I already had a full position in. Happens occasionally if you have positions across numerous accounts.

LOL, I just looked and see that I sold a couple of positions that I still had on my worksheet... so it can happen..



I am looking at getting rid of some of my lower yield BBB holdings like a JPM issue that is around 6%... so 7.85% looks good..

 

[pb4uski]

... I am looking at getting rid of some of my lower yield BBB holdings like a JPM issue that is around 6%... so 7.85% looks good..

You may also want to look at EICC. Not rated, but it is a BDC preferred which are generally considered pretty secure... 8% coupon and 8.06% yield at $24.77. There are EICA and EICB too. Of course, do your own diligence and YMMV.

 

[Texas Proud]

Thanks... bought some EICC...


Having problems buying USB-A at Vanguard... also was looking at LNC-D, but it is over $25 so not sure but also Vanguard would not let me buy..

 

[pb4uski]

From Fidelity. In addition to preferreds, they mention short-maturity high-yield corporate bonds, floating rate loans and MLPs.

While Treasurys may present a unique opportunity as the second quarter of 2024 begins, Kramer also says a wide variety of income assets may deliver stock-like returns with less potential volatility than stocks. That's especially a consideration if the economy does in fact slow down from its current late-cycle state. Stocks have historically outperformed both bonds and cash but during recessions, both bonds and cash have performed better than stocks.

Opportunities to do more with less are not secrets, but not all investment managers focus their attention on finding them. "Every manager's looking at stocks and investment-grade bonds," says Kramer. "Not as many are doing the work on other securities, but if we do the research, we can find opportunities."

One opportunity may exist in fixed-to-floating preferred stocks. Despite their name, preferred stocks are actually hybrid securities that in some ways resemble bonds but also represent equity shares in the companies that issue them.

Kramer likes preferred stocks of investment-grade US utility companies, master limited partnerships (MLPs), and big US banks, particularly those whose interest rates are either rising now or are scheduled to do so in 2024. "I think that those may be great ways to earn high, single-digit yields now while you wait for their prices to rise. Right now, you can buy them for less than their face value and their issuers can choose to buy them back from you for face value. If they don't choose to do that, the interest rates that they pay may increase and you could earn a higher return that way. If you're looking for income, you'd probably rather collect an 8% or 9% current yield on these fixed-to-floating preferreds than a 3% dividend yield from the stocks of these same companies."

Source: Income investing outlook: Treasurys, high-yield bonds, and more | Fidelity