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

[KenZ71]

Trying to follow Buffet's steps is very difficult if not impossible. By the time it is known what he did the price is most likely higher & flip side for exit.

If he is doing preferred or private placement no way we can get similar terms.

Having said above we can emulate his style. That is buy well run companies & hold long term. Also the contrarian value playbook helps a lot.

 

[bobandsherry]

What is the groups thought on the Gabelli Go Anywhere Puttable preferred?

Recent write up, Tim's assessment is not very favorable. Our own Mulligan (as he's known here) gets a call out.[emoji3]

https://innovativeincomeinvestor.com/gabelli-go-anywhere-fund-cumulative-puttable-preferred-stock/

 

[Mulligan]

Bob, I sometimes get the impression the Gabelli funds common is being used to serve the purpose of the preferreds. And not the other way as it should. They just milk the hell out of the common with high expense fees combined with poor performance.

 

[Mulligan]

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

Trying to follow Buffet's steps is very difficult if not impossible. By the time it is known what he did the price is most likely higher & flip side for exit.

If he is doing preferred or private placement no way we can get similar terms.

Having said above we can emulate his style. That is buy well run companies & hold long term. Also the contrarian value playbook helps a lot.

Ken, you are 100% spot on. We have to take the terms offered to buy. Buffet dictates the terms he gets. I remember a few years ago whenever he was being on CNBC we would never skip the chance to crow about his 8% Dow preferred he had or his 10% BAC preferred....I thought he was going to cry when he mentioned his 8% Dow was going to be redeemed (or converted cant remember).
Its funny how CNBC reporters never follow up or even acknowledge his preferred comments. And preferreds are never mentioned ever by them. I dont know if its from their small capitalization sizes or just lack of basic knowledge of them...
I remember a couple years ago, a talking head mentioned something in general about buying preferreds...And Kelly Evens response was...They are those THINGS that Warren Buffett buys arent they...Hardly incite full in-depth understanding I would suggest, lol...

 

[Mulligan]

Algonquin Ute is putting to market a 6.2% baby bond that in 5 years goes 4.1% plus Libor. It should have a trading ticker next week. I bought 800 shares via the bond desk this week at 25.35. Something to watch. These recent utility preferreds coming to market have all been lay up city out of the IPO gate. DUK-A, NI-B were easy money lay-ups. SR-A is already creeping towards $26. This issue should in time head that direction also. The issue is BB+ and they recently got a credit upgrade. I wasnt missing out on this action, since the others were such layups for me also. Play the game until the rules change....

 

[thepalmersinking]

I don’t have time for all the details that go into picking individual preferreds. Is PFD a decent fund?

 

[Mulligan]

I don’t have time for all the details that go into picking individual preferreds. Is PFD a decent fund?

It is one of the more respected ones, certainly. But look at its 5 year price chart.....All funds suffer from... lazy fund managers that buy liquid issues to keep the fund allocated...Hold often until redemption of issues (ie, call losses) that were obviously going to be called...Track bogus index preferreds that are constantly rejiggering it forcing them to dump and drive prices down when selling then buy in quantities driving price up while accumulating...Rinse and repeat. Plus the expense ratios of paying the “hard working” managers further drains returns.
If you buy preferreds from companies with investment grade type bonds the preferreds are going to be fine.
People get in trouble when they think they are smart and “know financials”.
Just my opinion and I am sticking to it..

 

[Free To Canoe]

Bought some EBGEF last month at 20. Thinking of buying 500 more shares for the sock drawer at 19 today. Maybe share price is falling because of the declining 3 month t-bill and the bad news about the Mackinaw straits pipe line.

I guess there needs to be a certain amount of trust with regards to them converting from series 5 to series 6 shares because I cannot find series 6 defined anywhere.

 

[Free To Canoe]

Being tied to the tbill, the value of the stock will rise as interest rates rise. The opposite of most preferred issues.

 

[Mulligan]

Free to Canoe, just to clarify its tied to 5 year US T Note not 3 month unless it gets converted. And at reset time the owners get to vote on going to 3 month. But if less than a million (I think going from memory) vote to convert company blocks conversion.

 

[Free To Canoe]

Thanks for clarifying.

 

[BrianB]

Vereit Preferred "F" partial redemption

Vereit is redeeming 9% of the shares of their Preferred "F".

I'm sorry to see this, it's been a reliable monthly payer for me. Any indications that they will be redeeming more in the future? I haven't found any good buys (within one quarters dividend of par) that I could replace it with.

Edit: Here's a link to a story about the redemption:

https://www.prnewswire.com/news-releases/vereit-announces-partial-redemption-of-6-70-series-f-cumulative-redeemable-preferred-stock-300862900.html

 

[Coolius]

I have a position in VER-F, and like Brian, am sad to see 10% gone.


The issue is a big one, so unless the company can come up with lots of cash, I am of the opinion there will be no more redemption ( partial or full ) for the rest of the year.


As they reported, the redemption cash is coming from an event that completed in May. If we see another similar event happening, then the odds of more redemption will certainly increase.


But for now, I sit tight, and enjoy the income stream as long as it lasts.

 

[Texas Proud]

CUSIP 13123X409 in the , is scheduled to be called

CALLON PETROLEUM CO CUMULATIVE PFD SER A 10%, 13123X409, , is scheduled to be redeemed on 2019-07-18.

 

[BrianB]

It looks like I won't get paid for the VER-F for a few weeks, but I'm looking for someplace to get a replacement (plus add some $ that are ready to go to work).

Can't find any preferreds in the REIT area that appeals to me, but over at the Fidelity investors forum someone mentioned a new issue from BAC, the Preferred M.

Fidelity lists it as BACPRM, but they have no details. Quantum Online doesn't even show it. According to the forum poster it is 5.375%, paid quarterly, and first call is 5 years. Price today is $24.92 and par is $25.00

Anyone have any thoughts on this, or at least know where I can get more details? I'm looking for a "sock drawer" issue that is at or under par.

 

[KenZ71]

Analy Capital - a Mortgage REIT - is issuing a new preferred. Currently trading as ACAXP but will most likely goto NLY-I

$1.6875 annually just below par. Pricing sheet: https://www.sec.gov/Archives/edgar/data/1043219/000119312519177721/d766392dfwp.htm

 

[Coolius]

The new BAC preferred has the symbol BACPRM, or BAC-M ( different brokerages have different symbols ).


I bought some at $24.95, and my trading platform shows a close today at $24.95.


Yes, this is a low coupon of 5.375%, unfortunately. But if you are willing to accept this yield, it is a high safety issue, and dividend is not at risk.


The primary risk is if interest rates rise in future. But if you think that rates will remain low for a while ( like Japan ), then it may be a suitable investment.

 

[BrianB]

I owned a chunk of NLY common from 2011 to mid-2017. Sold it because I got nervous about something. I don't even remember now what it was - fear of rate increases or something. Mortgage REIT's in general make me a little nervous.

Looking at their common it's been a real dog over the past two years. Do you think the preferreds fit well as a buy-and-hold issue?

 

[Coolius]

Ever since I was badly burnt with MReits around the 2006 time frame, I have avoided the sector.


Hopefully someone else will be able to chime in.

 

[BrianB]

Coolius, thanks for the comments. I'm planning to buy 200 on Monday if the price stays reasonable. Do you know when the ex-div & pay dates are? It seems that most of BAC's preferreds pay end of March, June, September, and December.

One other thing I will miss about the VER-F is the new 20% tax discount on REIT dividends. I was surprised to get it when I filed for 2018 as I thought it was only for common shares.

 

[KenZ71]

I have over 15% of my total in NLY-F & NLY-I planning to hold most long term as I view it as safe stable income. I may trim it down when the prices return to typical levels.

Preferred is obviously much different than common and insulated from the volatility of common.

Just my viewpoint. Worth the cost to get it.

 

[aja8888]

The new BAC preferred has the symbol BACPRM, or BAC-M ( different brokerages have different symbols ).


I bought some at $24.95, and my trading platform shows a close today at $24.95.


Yes, this is a low coupon of 5.375%, unfortunately. But if you are willing to accept this yield, it is a high safety issue, and dividend is not at risk.


The primary risk is if interest rates rise in future. But if you think that rates will remain low for a while ( like Japan ), then it may be a suitable investment.

This is a noncumulative dividend and there is a risk. Plus, BAC does not have to redeem since it is issued as perpetual.

If BAC gets in trouble, and they are not the best out there, they could suspend dividends.

 

[Coolius]

Brian, here is something on the new BAC-M issue:

Filed Pursuant to Rule 433 ​

​

Registration No. 333-224523 ​

​

BANK OF AMERICA CORPORATION ​

​

PREFERRED STOCK, SERIES KK ​

​

$1,325,000,000 ​

​

53,000,000 Depositary Shares, Each Representing a 1/1,000th Interest in a ​

​

Share of Bank of America Corporation 5.375% Non-Cumulative Preferred Stock, Series KK ​

​

FINAL TERM SHEET ​

​

Dated June 18, 2019​

​

Issuer: Bank of America Corporation

Security: Depositary Shares, each representing a 1/1,000th interest in a share of Bank of America Corporation 5.375% Non-Cumulative Preferred Stock, Series KK

Expected Ratings: Baa3 (Moody’s) / BBB- (S&P) / BBB- (Fitch)

Size: $1,325,000,000 ($25 per Depositary Share)

Over-allotment Option: The underwriters also may purchase up to an additional 7,950,000 Depositary Shares ($25 per Depositary Share) within 2 days of the date of the final prospectus supplement in order to cover over-allotments, if any.

Public Offering Price: $25 per Depositary Share

Maturity: Perpetual

Trade Date: June 18, 2019

Settlement Date: June 25, 2019 (T+5)

Dividend Rate (Non-Cumulative): 5.375%

Dividend Payment Dates: March 25, June 25, September 25, and December 25 of each year beginning on September 25, 2019, each subject to following unadjusted business day convention

 

[Coolius]

aja,


I would agree the risk is definitely not zero, but there are many opportunities for an astute investor to detect signs of strain in the bank - for example, if they cut or eliminate the common dividend, then the next victim will be the preferred dividend.


There are several other Preferred series of BAC with higher coupon rates, and lots of corporate bonds - if those start seeing price deterioration, along with the common, they would be early warning signs that something's amiss.

 

[aja8888]

aja,


I would agree the risk is definitely not zero, but there are many opportunities for an astute investor to detect signs of strain in the bank - for example, if they cut or eliminate the common dividend, then the next victim will be the preferred dividend.


There are several other Preferred series of BAC with higher coupon rates, and lots of corporate bonds - if those start seeing price deterioration, along with the common, they would be early warning signs that something's amiss.

I agree, just making a point that these BAC preferreds are not risk free. I did look at the list of their preferreds and it is quite lengthy. I have a handful of preferreds and may pick up a couple of hundred of these to add to my meger collection.