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

[Mulligan]

Freedom, did you mistype on JPM "cutting preferred dividend"? They can never cut a preferred divi, just suspend with a non payment. For me, I think it is also to buy with a purpose and goal also. Take my CNIGO purchase. It is a simple buy and hold until maturity in 2023. This purchase wont really be monitored, just collect divis until I get my $25 back. Other purchases have different goals or expectations that hopefully work out.

 

[Freedom56]

Freedom, did you mistype on JPM "cutting preferred dividend"? They can never cut a preferred divi, just suspend with a non payment. For me, I think it is also to buy with a purpose and goal also. Take my CNIGO purchase. It is a simple buy and hold until maturity in 2023. This purchase wont really be monitored, just collect divis until I get my $25 back. Other purchases have different goals or expectations that hopefully work out.

Okay you are correct. I should have stated suspend. But when a preferred dividend is suspended, it's game over. Even if the market thinks they will suspend, they start getting clobbered. I have a lot of notes maturing in 2019, 2020, 2022, 2024. I just monitor them for any adverse headlines and plan to hold them to maturity and roll the funds over to whatever gets me the best yield with some safety.

 

[Mulligan]

I agree....Finding a preferred that is about to suspend ita divi is not one of my investing goals, too!

 

[Texas Proud]

Um, wow, your common's down 5%? Not sure what you have but DOW only down 1.3%, so not sure what you have.

I get your position though, but you can't look at one day to measure your return. I'd guess that the drop today in common are give up from YTD gains. How'd they look on YTD basis?

And not all common div's are bad. As example, here's one of my favorite common div stocks:

ARCC 1/3 - $15.92 Today $16.765 - 7% gain YTD and it also has a current div yield of 9.27%. Calculating the div's paid YTD that's almost 17% return.

Another favorite:

VZ 1/3 - $52.54 Today $55.48 - 5.6% gain YTD and it's also has div yield of 4.38%. Calculating in the div's paid YTD that's a 12% return.

I also like JPM, it's down slightly today, but still up for the year and pays a div (yield 2.79%). YTD return as of today would be about 9.5%.

Comparison, my favorite preferred, ALLY-A. It's basically flat on price has a nice floating rate (currently 7.55%), overall YTD is up about 8%, so below my common w/div.

I'd guess that if you look at some of your preferred's on a YTD basis you'll find they are down from Jan (due to FF rate increase), some maybe barely break even when you factor in their div. I looked back and see you held C-N (don't know if you still do), but it looks like it's down about 3.5% YTD, with it's dividends it's about 4% return YTD. And we'll just ignore what PFH has done.

Point being, I'd be cautious on just giving advise to move to preferred's. It's more about doing the right due diligence and find the right mix.

I have a lot of JPM myself... so not against holding shares that pay a good yield for common... but the reference to the 5% drop was my testosterone account... not that much invested but some individual ones I bought... yes, they are up for the year... heck, I am up 26% from when purchased and that is not that long ago... just showing volatility of common vs pref....


Just checked and it has recovered a bit... now only 4% drop... the big holding is NVDA...


I agree it is the mix... I am holding these instead of a high yield fund... they are doing what I want as I do plan on holding them long term... that is also what I am telling my sister... that you need some balance in investments... one big advantage she has is a decent pension that I PVd at about 1/3rd of her total assets with it included... so she has a lot covered there... also when you add both of their SS numbers when they turn 70 they will be over $100K per year!!! (wish I would be there)....



But almost all of the money they are investing is in common stock... and it looked like they did not invest for growth but yield... I want to change a bit of their thinking so they invest in growth knowing they have yield with the prefed/bonds...

 

[bobandsherry]

Another day like yesterday and you may find some bargains in preferred's as people sell off to cover margin calls.

 

[Mulligan]

Another day like yesterday and you may find some bargains in preferred's as people sell off to cover margin calls.

Where is my margin calls Bob? Maybe I should just buy more ALLY-A, collect the cash and not worry....Wow, been busy didnt know there was another bigly down day. No home run play, but got back in BANFP today at 26.73. Sold at 28 not too long ago. This has been one I wanted to hold but kept flipping because it was too easy. Maybe I will be forced to hold if it drops, lol...

 

[Mulligan]

Where is my margin calls Bob? Maybe I should just buy more ALLY-A, collect the cash and not worry....Wow, been busy didnt know there was another bigly down day. No home run play, but got back in BANFP today at 26.73. Sold at 28 not too long ago. This has been one I wanted to hold but kept flipping because it was too easy. Maybe I will be forced to hold if it drops, lol...

Maybe I will get to hold, lol....A prearranged 3000 share dump on this issue right at close down to 26.06... I really want to hold this long term, so maybe market is trying to help me do it, ha!

 

[bobandsherry]

Where is my margin calls Bob? Maybe I should just buy more ALLY-A, collect the cash and not worry....Wow, been busy didnt know there was another bigly down day. No home run play, but got back in BANFP today at 26.73. Sold at 28 not too long ago. This has been one I wanted to hold but kept flipping because it was too easy. Maybe I will be forced to hold if it drops, lol...

Heh - guess that people in the market aren't as leveraged as the media would like to indicate. Or maybe they just shoot for the high flyer pref's.... I didn't look outside my little cluster as to what prices did yesterday.

 

[Mulligan]

Heh - guess that people in the market aren't as leveraged as the media would like to indicate. Or maybe they just shoot for the high flyer pref's.... I didn't look outside my little cluster as to what prices did yesterday.

I tried to snag some more BANFP at yesterdays close, but couldnt snag any. Darn thing is up almost 30 cents more than I paid for mine yesterday and over 90 cents above the end of day close.

 

[Coolius]

Interesting trades in the CLP issues today. Someone bought 700 CNLPL @ $55.98, when there was a seller of CNTHP @ $55.75.


CNTHP has better yield, strange why the buyer did not take the 200 shares offered at $55.75 but chose to pay more for the sister issue?

 

[Golden sunsets]

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

Interesting that CNLPL, CNTHP, AILLL and WFCpL barely budged over the past 10 days. Thanks Mul for schooling me on these illiquids and keeping this thread alive for so long. It must be setting some sort of record?

And thanks to Coolius as well[emoji122]

 

[bobandsherry]

Interesting trades in the CLP issues today. Someone bought 700 CNLPL @ $55.98, when there was a seller of CNTHP @ $55.75.


CNTHP has better yield, strange why the buyer did not take the 200 shares offered at $55.75 but chose to pay more for the sister issue?

Look at the dividend dates of the two, may tell ya something.

 

[bobandsherry]

Interesting that CNLPL, CNTHP, AILLL and WFCpL barely budged over the past 10 days. Thanks Mul for schooling me on these illiquids and keeping this thread alive for so long. It must be setting some sort of record?

And thanks to Coolius as well[emoji122]

Something to be said for illiquids if you plan to just hold. But could get caught in a squeeze if you needed to unload them quickly, may not be able to fill or if you do not at a price you are happy with. Just part of the trade off with having low volumes helping to maintain the price. Another tool to help you balance your portfolio for good and bad times.

 

[Golden sunsets]

Look at the dividend dates of the two, may tell ya something.

Well maybe dividend rates are around 6.25%.

 

[Golden sunsets]

Something to be said for illiquids if you plan to just hold. But could get caught in a squeeze if you needed to unload them quickly, may not be able to fill or if you do not at a price you are happy with. Just part of the trade off with having low volumes helping to maintain the price. Another tool to help you balance your portfolio for good and bad times.

Yup. Sock drawer stuff. Also a tiny portion of investments, but consistent dividend payers with a 15% QDI tax.

 

[bobandsherry]

Well maybe dividend rates are around 6.25%.

I didn't say rates, the dates. CNLPL pays a month before CNTHP. There's value in getting the div 33 days earlier.

 

[Mulligan]

Been buying into sell pressure on BANFP. Got 300 more at 26.16 and it went lower to 26.05 on 12,000 shares (probably averages less than a 1,000 shares) Huge sell imbalance, down to 5 year low. Was a bit too early, but am fine holding. My main concern is walking into a call, not price drop. Waiting for liquidity to dry up. The thing was bouncing up and down all day, and would drop when more dumps occurred.

 

[bobandsherry]

Been buying into sell pressure on BANFP. Got 300 more at 26.16 and it went lower to 26.05 on 12,000 shares (probably averages less than a 1,000 shares) Huge sell imbalance, down to 5 year low. Was a bit too early, but am fine holding. My main concern is walking into a call, not price drop. Waiting for liquidity to dry up. The thing was bouncing up and down all day, and would drop when more dumps occurred.

There ya go, majority shareholder of yet another company's preferred issue In rising rate environment you think there's a high risk of call?

 

[Mulligan]

I hope the hell not, but one never knows. Its true cost of capital is sub 5.5% so no benefit in redeeming on surface. Not to mention it has been past call for almost 10 years. Hit a 5 yr low yesterday. Sellers still out but buyers are holding it up today for now.

 

[Mulligan]

Drawn to the light like a fire fly bought 200 more BANFP at 26.10 today... Also reentered LANDP at 25.40 for 400 shares and goes exD tomm. Not a bad place to hide out with the 2021 redemption. If they dont redeem it goes over 9%. That would be nice too.

 

[Running_Man]

OK... I have help one of my sisters get her finances straight... found out she was a millionaire... did not know it until I added everything up...


BUT, her and her DH are buying common for yield!!! I want her to move some over to pref or bonds... probably BB+ or above... some being term dated but I am not picky as I do not think she will ever need to sell.... so, people with some of these holdings, what would you suggest?


The only one I hold is C-N, but it is over par and I do not want to put her at call risk if I can help it...

For credit quality and long term viability of a company I would utilize PSA & Wells Fargo preferred issues, myself I am expecting a rather significant downdraft on the Wells Fargo issue and a bit further on PSA, it's preferred dropped on the stock drop after analysts downgraded to sell but both have rock solid financials and potential to get 5 3/4% payout for a long time.

 

[Mulligan]

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

There ya go, majority shareholder of yet another company's preferred issue [emoji4] In rising rate environment you think there's a high risk of call?

Bob, I dont think this is a good issue for most because they dont like call losses hanging over their heads. But for relative value rising rate or not its good relative yield on a regular stable normalized trade day. You got a 7.2% yield from Oklahoma’s largest state chartered bank that was issued when 10 year was 4.08%. Last trade was bought with a YTM of 6.74% (current yield 6.88%). So you have a yield with 6.5% less than issued but 10 year is 22% lower. Plus you have cut duration risk in half. So these are issues one can hold without a major beat down and collect the income.

 

[Texas Proud]

Well it looks like I am going to have to take my lumps on my last two flips... both are losses and one is getting close to my 30 day max holding... the other is a week behind....


This will bring my YTD annualized return down to 21%.... still I cannot complain about that can I?


But, 2 months in a row having losses... small in Aug but bigger in Sept... have not done anything yet this month...

 

[Mulligan]

I didnt want to, but cant refuse free money. Bought my AWRY at $108, 2 weeks ago and sold yesterday at $112. I wanted to keep it as a souvenir issue, but in reality at $112 it is just a 5.33% perpetual. I can find too many safe issues with yields well above that. So I need to buy something Monday.

 

[MooreBonds]

Bob, I dont think this is a good issue for most because they dont like call losses hanging over their heads. But for relative value rising rate or not its good relative yield on a regular stable normalized trade day. You got a 7.2% yield from Oklahoma’s largest state chartered bank that was issued when 10 year was 4.08%. Last trade was bought with a YTM of 6.74% (current yield 6.88%). So you have a yield with 6.5% less than issued but 10 year is 22% lower. Plus you have cut duration risk in half. So these are issues one can hold without a major beat down and collect the income.

But didn't you point out that some of these Trust Preferreds may be on borrowed time, due to the changes coming in 2019 regarding how they are treated on the balance sheets? Or is that only for preferreds issued in 2008-2010 era?

I cut my risk over the past few months and sold some of my bank overhang issues (like C-N, half of my ALLY-a, BOFIL, one or two others))