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

[Golden sunsets]

Mulligan and Coolius; You will both be proud of me. I dipped my toe into the pond and bought CNLPL yesterday. Yield 6.248799. Bought at .01 above redeemable price. This is the first time I've bought by putting in a limit order. I checked yesterday and saw that the trade went through after languishing for a few days. Interesting experience.

[Coolius]

Congratulations!

I am sure you will not regret the purchase. Just regard it as a CD of indefinite duration, paying you over 6%.

Note that because CNLPL trading is so thin, most brokerage and financial websites rarely display the correct price. I used to get freaked out until I realized that.

Dividends are also QDI, meaning that if you are within the 15% tax bracket, they are exempt from Federal Tax. If you are in higher brackets, they are taxed at a lower rate.
So your effective yield is a little better than what you got.

I have a lowball bid in; hoping to get more to make it an even round number of shares.

[Mulligan]

Yes, Golden you got a keeper there IMHO. It is by far my second biggest holding and will remain that way. Take the 81 cents every 3 months and move on!
Coolius's comment about price discrepancies is correct. I bought a small preferred utility this week that showed 3 different prices (100,102, and 108) from three different sites. You want to talk about illiquid....It has traded only 5 times in 30 months for a grand total of 573 shares traded. I put in a bid for 100 shares, but only got 73. I love the 7.18% perpetual yield. My only worry on it is what you now do not have to at $51.85.....a call since I had to go over par to get it.


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[Golden sunsets]

Is your " full position" in any particular preferred based on a percentage of your portfolio or a dollar amount? I would subscribe to a no more than x% for total Preferred's in a portfolio and then another smaller % for individual holdings. I don't think I would go as high as 10% for total Preferred's, but I think a dollar limit of $5,000 per issue seems too small to make a dent.

[Mulligan]

Quote:

Originally Posted by Golden sunsets Is your " full position" in any particular preferred based on a percentage of your portfolio or a dollar amount? I would subscribe to a no more than x% for total Preferred's in a portfolio and then another smaller % for individual holdings. I don't think I would go as high as 10% for total Preferred's, but I think a dollar limit of $5,000 per issue seems too small to make a dent.

Some people have a system and stick to it. Many income investors will buy dozens and dozens for diversity purposes. I live off my pension not my investments so I do not feel I have to be as disciplined. A "full position" to me is as transitory as being "full" is after dinner. I get hungry soon and usually buy more of the same thing!
I got about 10 issues but 4 of them probably represent 85% of my preferreds. One of them and its sister issue is around 40% of the entire pot.
So no rhyme or reason or consistency other than the fact I would rather go down swinging in what I know and want than to diversify just to diversify.
Preferreds in total are around 75% of my portfolio. I would say you are thinking correctly in keeping it around 10%. Like I said, I don't have to follow the rules because I assume my pension manager is!
You mentioned $5k as being small entry points and that is true. But be aware of liquidity issues if you ever plan to sell. 1000 shares of CHSCL would be fairly easy to be rid of. 1000 shares of CNLPL may be harder to sell at the exact price you wanted. But if you do not plan to sell which is mostly my plans, it doesn't really matter then.


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[Coolius]

My definition of a "full" position is 500 shares, regardless of price, I consider this as complete and will not seek to add more unless there is a real "back up the truck" opportunity.

Obviously, I have violated my own rule many times, and still do. At present 4 issues are above this figure, but they are strong companies and highly unlikely to cut the dividend, and I have no intention of selling.

Some issues, like WFC-L, which are very high priced ( WFC-L is $1,175 a share ), I have far less, but certainly would be nice to have a "full" position of it.

[Mulligan]

Golden Sunsets, I thought of you the other day while tracking my preferred stock list. The Central Maine Power issue (CTPPO) that you wanted to buy but couldn't get a buy finally traded a couple days ago. A whopping total of 22 shares at $101. The bid was 200 shares I believe but only 22 shares were released. This can happen frequently due to lack of share availability. If you don't want this to happen you have to put in an "all or nothing" bid. I have been trying to shake a few nuts out of a tree myself and got 73 shares one time and 40 another. Trying for more again. It increases your transaction costs, but that is the only way you can accumulate some of these issues. I still have not figured out who or why someone would sell 22 or 73 shares. It could just be the market makers selling them also I guess.


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[alaska55]

How's everyone's Perferred shares doing, my mostly investment grade shares are barely down, less than 1%. My portfolio 35% VTI, 65% perferred is doing good, it's down but all due to VTI.

[Winemaker]

Mine are holding fairly steady; it's the inflation protection part of the portfolio that's killing me softly....oil, precious metals, commodities and energy.

[Mulligan]

Except for a few very small but still dumb forays into preferred shipping stocks that I have sold, my preferreds have done excellent. Doing what they are supposed to do .....snore and pay nice dividends. Though CHSCL was a little frisky dropping 33 cents yesterday. Still I am way ahead on that one for the year, buying near $25.


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[Golden sunsets]

Quote:

Originally Posted by Mulligan Golden Sunsets, I thought of you the other day while tracking my preferred stock list. The Central Maine Power issue (CTPPO) that you wanted to buy but couldn't get a buy finally traded a couple days ago. A whopping total of 22 shares at $101. The bid was 200 shares I believe but only 22 shares were released. This can happen frequently due to lack of share availability. If you don't want this to happen you have to put in an "all or nothing" bid. I have been trying to shake a few nuts out of a tree myself and got 73 shares one time and 40 another. Trying for more again. It increases your transaction costs, but that is the only way you can accumulate some of these issues. I still have not figured out who or why someone would sell 22 or 73 shares. It could just be the market makers selling them also I guess. Sent from my iPad using Tapatalk

Interesting Mulligan! I have not looked at the prices of our individual holdings for a bit and frankly have not even looked at the total drop in our investments. That's been my method of dealing with market drops over the years. So you actually own any CTTPO or are you just monitoring it. I agree that I don't want to buy such small amounts, so I will take your advice and limit any future orders to whole or none.

[Mulligan]

Quote:

Originally Posted by Golden sunsets Interesting Mulligan! I have not looked at the prices of our individual holdings for a bit and frankly have not even looked at the total drop in our investments. That's been my method of dealing with market drops over the years. So you actually own any CTTPO or are you just monitoring it. I agree that I don't want to buy such small amounts, so I will take your advice and limit any future orders to whole or none.

Probably a smart thing not to look, unfortunately looking is a bad hobby for me! But the good thing about the preferreds I own is you get "nervous" when they drop a nickel!
I just have CTTPO on my watch screen. It only traded once and just those 22 shares. Though with only 2,000 shares left outstanding that was 1% of the total shares though. The thing is about low volume small lot issues is, if you want to acquire them you have to be willing to take what you can get whenever you can. I would not have 113 shares of my issue I bought if I had done "all or nothing". It only has 4500 shares left outstanding but its good as gold safe 7.18% yield (7.75% par). I shook 73 loose at $108 and 40 at $108.50. Tried to get more at $109 which is $9 over par and nothing shook lose for a month before I threw in the towel. I seen somebody else is trying now at same $109 and isn't getting anywhere either. So you do have to be patient or lucky to get these illiquid utility preferreds.


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[Coolius]

My main Portfolio, which is mostly Preferred Stock, plus some Corporate Bonds, went down less than 2% since last week when the carnage started.

And the income stream is not affected.

I also have a IRA portfolio of " Total return " with blue chips, growth, and a few speculative issues. Now, that one got slammed, and slammed good.
Fortunately, I'm several years away from RMD, so have the time to recover.

Along with Mulligan and the rest of you stalwarts, I'm a firm believer in income investing.

[capjak]

Bought OSBCP 500@ 9.84 not much $$ but its a start. I guess

[Mulligan]

Quote:

Originally Posted by capjak Bought OSBCP 500@ 9.84 not much $$ but its a start. I guess

Several of us here have that one, so you are not alone my friend! I dont consider it one of my safe elite ones, but when your yield is almost 8% you have to suck it up a little bit. Its been acting goofy lately then rebounds. The common stock OSBC was actually up on fridays slaughter day and today also. OSBCP did rise today. Anytime it drifts into the 9.70's it gets bought back up. Bank been improving and bought out their TARP preferreds. Should be good I hope for a couple years until they can finally call it, and being under par you are fine. I usually try to buy these types in about 5k allotments like you did, but I felt frisky and bought 1100 of them. Its my biggest "risky play".


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[Coolius]

Quote:

Originally Posted by capjak Bought OSBCP 500@ 9.84 not much $$ but its a start. I guess

Good for you on OSBCP.

My buy was at $10 even, and a second lot at $9.96, so you're well ahead of me. the only risk we have is if the Bank goes belly-up, and with the background info Mulligan has supplied, the risk is reasonable, IMO.

[Mulligan]

Quote:

Originally Posted by Coolius Good for you on OSBCP. My buy was at $10 even, and a second lot at $9.96, so you're well ahead of me. the only risk we have is if the Bank goes belly-up, and with the background info Mulligan has supplied, the risk is reasonable, IMO.

Coolius, I will gladly take the credit if it pans out. If it blows up on us, don't expect me to tell the truth and admit it was my fault....Besides if it goes back into suspension, you have to keep the arrows in the quiver aimed at me for 5 years because they are not in violation of the payment covenants until then. That leaves plenty of time for me to get out of Dodge.


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[Coolius]

Quote:

Originally Posted by Mulligan Coolius, I will gladly take the credit if it pans out. If it blows up on us, don't expect me to tell the truth and admit it was my fault....Besides if it goes back into suspension, you have to keep the arrows in the quiver aimed at me for 5 years because they are not in violation of the payment covenants until then. That leaves plenty of time for me to get out of Dodge. Sent from my iPad using Tapatalk

If they ( OSBCP ) announce a suspension, that's a signal for me to say bye-bye. I would hope not, but one never knows. QOL says the next div payment is Sep 30, with expected ex-div on Sept 25. Once we get that one, I will feel better.

[capjak]

Well Mulligan has me buying these things now:

AILLL 400 shares @25.60 waiting on 100 more

CNLPL 400 shares @ 52.70 waiting on 100 more

OSBC 500@ 9.79

Think I will take a rest for awhile now.

[Mulligan]

Quote:

Originally Posted by capjak Well Mulligan has me buying these things now: AILLL 400 shares @25.60 waiting on 100 more CNLPL 400 shares @ 52.70 waiting on 100 more OSBC 500@ 9.79 Think I will take a rest for awhile now.

Have someone keep an eye on OSBCP, while you take a Rip Van Winkle nap on the other two. All of the juicy dividends will be there safely in your money market account when you awake 20 years from now!


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