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

[Mulligan]

WIshed it was me...Everything seems to be stabilizing....What the hell just bought 400 at 25.08 a few minutes ago whike we are sitting on the clubhouse waiting to tee off.

When I saw common trading up and preferred up but NSS going down at the time I had.to jump back in...Im still not at the position size I was 2 days ago...And dont plan to again either.

 

[Freedom56]

Freedom their bonds have basically been fine. The 2027 maturity that is a yield of sub 6% is trading at $99. So the debt rollover doesnt appear to be a problem and has been in the forefront for some time.

Mulligan, as you know, you can't compare a short term corporate note with a preferred because of where they are in the capital structure. The Nustar notes have a Bank letter of Credit backup option. Without digging into more details, it could explain the reason for the much lower yields. See the attached under "options".

 

[Mulligan]

Oh I totally agree Freedom. Maybe i did a poor job of explaining my thoughts. There definitely is a reason. The gap has always been huge with NS debt and preferreds. Wouldnt want their sub 6% 9 year debt at all.

 

[bobandsherry]

Don't know what the sell off was based on Mulligan, but glad I stuck with my hunch. Looks like everything coming back with NSS and even NS and preferred's. Higher than average volumes on the preferred's including NSS. Someone's interested.

 

[bobandsherry]

I dont blame you for dabbling into FTRPR at this point. You didnt buy early and get smoked like most did. It does appear to be gaining some traction in this price area.

Still a ways off before conversion date, but so far the gamble is looking good. At today's price for FTR up over 30% return or over 70% annualized. Given that, here's your chance to short FTR as given my luck this will tank to $5 before conversion date ($5.50 would be a break even).

Depending on risk tolerance, still some decent meat on the bone for short term cash.

 

[Texas Proud]

OK... you all got me looking at my NSS...

There is a reason that the rate is high, it is not the most stable of companies, which is why it is rated B1....

I was curious about the other issues and noticed that they are selling under par and have a higher yield than NSS, even though they have not yet reached their variable period... I might have to sell NSS and buy one of the others... the question is will LIBOR go up enough to take out the difference soon...

 

[brokrken]

OK... you all got me looking at my NSS...

There is a reason that the rate is high, it is not the most stable of companies, which is why it is rated B1....

I was curious about the other issues and noticed that they are selling under par and have a higher yield than NSS, even though they have not yet reached their variable period... I might have to sell NSS and buy one of the others... the question is will LIBOR go up enough to take out the difference soon...

Texas, I assume the slightly lower yield on NSS compared to the other is do the higher ranking of this debt vs the preferreds.

 

[Freedom56]

Anyone hear about Qwest 7.5% notes (CTW) being called for June? I just got an email from someone who thinks so.

 

[MooreBonds]

Interesting development across the pond with an insurer's preferred (Aviva). Apparently, even though the preferred isn't redeemable, the insurer actually has the gall to try and cancel the issue ("it's not a redemption" is their argument). Will be an interesting legal fight. The preferred dropped overnight from 175/share down to a little above 120 (par is 100). Wonder if any companies have the cojones to try that over here?

https://www.bloomberg.com/gadfly/articles/2018-03-09/aviva-s-fight-to-redeem-the-irredeemable

 

[Freedom56]

Interesting development across the pond with an insurer's preferred (Aviva). Apparently, even though the preferred isn't redeemable, the insurer actually has the gall to try and cancel the issue ("it's not a redemption" is their argument). Will be an interesting legal fight. The preferred dropped overnight from 175/share down to a little above 120 (par is 100). Wonder if any companies have the cojones to try that over here?

https://www.bloomberg.com/gadfly/articles/2018-03-09/aviva-s-fight-to-redeem-the-irredeemable

I have read about Canadian companies offering to buy back rate reset preferred stock at 50% below par. I'm surprised Aviva would do this. They are a pretty good company. I had their preferred stock a couple of years ago. It had a coupon over 8% and was rated BBB+ but it got called.

 

[Coolius]

Interesting development across the pond with an insurer's preferred (Aviva). Apparently, even though the preferred isn't redeemable, the insurer actually has the gall to try and cancel the issue ("it's not a redemption" is their argument).

That is definitely NOT good news. Gotta hope the common shareholders will vote against it, and preserve the integrity of the entire preferred infrastructure.

If they succeed, I bet the folks over here will try it. And lots of investors will sour on that class of securities.

Perhaps investing too heavily in preferred issues is not as secure as it should be.

 

[Texas Proud]

Texas, I assume the slightly lower yield on NSS compared to the other is do the higher ranking of this debt vs the preferreds.

Is this debt? I need to look....

Just did a few seconds and NSS is guaranteed by two NS companies..

NuStar Energy L.P. and NuStar Pipeline Operating Partnership, L.P. ​

Will still need to look further.... I like the variable since I do not have interest rate risks... wish I could find a few that were not in potential trouble...

​

 

[bobandsherry]

Will still need to look further.... I like the variable since I do not have interest rate risks... wish I could find a few that were not in potential trouble...

The the nature of the beast when stretching for above market rates. Gotta be at least one, and sometimes more reason..... Interest rate risk, credit risk, call risk, liquidity risk, etc. You could risk and get into an index like PFF or maybe a variable rate preferred index like VRP, but how much fun is that?

 

[Mulligan]

The the nature of the beast when stretching for above market rates. Gotta be at least one, and sometimes more reason..... Interest rate risk, credit risk, call risk, liquidity risk, etc. You could risk and get into an index like PFF or maybe a variable rate preferred index like VRP, but how much fun is that?

Thats half the battle is the fun, Bob. To above poster NSS is debt. But the bottom dirty dingleberry version of debt...Subordinated debt, with a 5 year deferral of interest payment clause. It is such low rated debt, rating agencies have actually rated it the same level as the preferreds even though they sit above them.
As you can see NSS can have interest payments suspended at same time preferreds have their distributions suspended. And they can defer for 5 years without covenant defaults. Of course the preferreds could be suspended until the end of time on earth theoretically.

 

[brokrken]

Is this debt? I need to look....

Just did a few seconds and NSS is guaranteed by two NS companies..

NuStar Energy L.P. and NuStar Pipeline Operating Partnership, L.P. ​

Will still need to look further.... I like the variable since I do not have interest rate risks... wish I could find a few that were not in potential trouble...

​

​

Yes, it is debt. Unsecured subordinated note, but still ranked just ahead of the preferreds.​

 

[Texas Proud]

[/CENTER]

Yes, it is debt. Unsecured subordinated note, but still ranked just ahead of the preferreds.​

Thanks... just had to look at the description...

 

[Freedom56]

To all income investors. Verify that you are receiving the correct interest in accordance with your security. I have caught a 4th discrepancy, in the last 12 months. I contacted the company, and they confirmed that the correct amount was transferred to DTC (depository trust company) and are working with them to correct the problem. In all 4 cases DTC was at fault. This is happening too frequently with DTC and on securities that have been outstanding for years. I filed a complaint with the SEC to investigate this matter to ensure that the trustee is not skimming interest or dividend payments from unsuspecting investors.

 

[Golden sunsets]

To all income investors. Verify that you are receiving the correct interest in accordance with your security. I have caught a 4th discrepancy, in the last 12 months. I contacted the company, and they confirmed that the correct amount was transferred to DTC (depository trust company) and are working with them to correct the problem. In all 4 cases DTC was at fault. This is happening too frequently with DTC and on securities that have been outstanding for years. I filed a complaint with the SEC to investigate this matter to ensure that the trustee is not skimming interest or dividend payments from unsuspecting investors.

Kind of scary Freedom. Did you miss the coupon entirely or was it a matter of an incorrect (lesser?) amount?

 

[Sunset]

To all income investors. Verify that you are receiving the correct interest in accordance with your security. I have caught a 4th discrepancy, in the last 12 months. I contacted the company, and they confirmed that the correct amount was transferred to DTC (depository trust company) and are working with them to correct the problem. In all 4 cases DTC was at fault. This is happening too frequently with DTC and on securities that have been outstanding for years. I filed a complaint with the SEC to investigate this matter to ensure that the trustee is not skimming interest or dividend payments from unsuspecting investors.

Good advice.
Care to share the names of likely suspects ?

 

[Freedom56]

Latest was with CTW. I have this one for over 4 years now. It has been through 2 partial calls and there is about $163,500,000 outstanding. The coupon is 7.5% or $0.46875 but $0.4375 was paid for the first time on on 3/15/18. The 0.5% difference may seem small but over the outstanding balance, investors are being shorted $8175000 per year just with this small issue. Previously I had similar issues with Bank of America 2019 notes, GE 2022 notes, and Seagate technology 2025 notes. In all cases it was a small amount that could easily be overlooked.

 

[Mulligan]

I just eyeball math my dividends. They all seem correct. Maybe I will inspect closer. Havent bought anything since MER-P a few weeks ago. Everything is just going well so reason to sell anything.

 

[njhowie]

Interesting development across the pond with an insurer's preferred (Aviva). Apparently, even though the preferred isn't redeemable, the insurer actually has the gall to try and cancel the issue ("it's not a redemption" is their argument). Will be an interesting legal fight. The preferred dropped overnight from 175/share down to a little above 120 (par is 100). Wonder if any companies have the cojones to try that over here?

https://www.bloomberg.com/gadfly/articles/2018-03-09/aviva-s-fight-to-redeem-the-irredeemable

I am in complete shock - this is a company playing dirty pool against their own investors. I might expect something like this from a fraudulent company with a penny stock, but not from a large reputable insurer where lots of institutions are investors.

And the funny thing here is that it was likely very necessary at the time to issue the preferred shares with the high coupon and as perpetual non-redeemable because of problems the company was having at the time that they could not get better financing terms.

Regardless of the outcome, I think this will backfire on Aviva, if not directly by legal action preventing them from doing it, then by negative actions against them in any future financing from equity or credit markets.

 

[Mulligan]

I agree. But between stock holders, bond holders, and preferred holders, the preferreds are the bastard childs of "company ownership".

 

[njhowie]

To all income investors. Verify that you are receiving the correct interest in accordance with your security.

Well, since you brought this up, let me throw my question out there, because it has been bothering me for a while now.

When you are paid a dividend, or interest on a bond or CD, on the payment date (or maturity date for a bond or CD) are your cash funds supposed to be available in your account on the morning of payment/maturity date, or at the end of the day?

Here's the "issue". I have accounts with Fidelity and Etrade (well, until a week ago). In my Fidelity account, interest, dividends, and funds from maturities/redemptions are all available first thing the morning of the payment/maturity/redemption date. However, with Etrade, it is the morning of the following day. Now, it may seem like a technicality, but either Fidelity is being generous or Etrade is skimming cash daily from their account holders having free use of their money for the day on all interest/dividends/payouts. Something tells me that a broker would not be generous in this regard, so I have to believe Etrade is not on the up and up. I've thought about floating an email to one of the class action attorneys to see what they think.

Any thoughts?

 

[Mulligan]

Same here Howie, different brokerages. When I have same ticker in both accounts, Vanguard releases a day earlier than Ally TradeKing.