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

[Coolius]

Quote:

Originally Posted by Golden sunsets Mulligan has taught me a lot about Preferred's. Is AILL a T & D only?

Yes, AILLL is a Transmission & Distribution provider.

You might notice this morning, when Preferred stocks are taking big hits because of the strong jobs report, "Trapped Preferreds" such as AILLL, CNLPL, BGLEI are stable. These are typically thinly traded, and suitable for an income-oriented portfolio ( until they are called, of course ).

[Mulligan]

Quote:

Originally Posted by Golden sunsets Mulligan has taught me a lot about Preferred's. Is AILL a T & D only?

Yes Ameren Illinois will always be a T&D. They own no power sources.
Many major power producers have been buying up T&Ds companies, so they can get guaranteed profits from regulated environment.
It gets kind of interesting with debt and preferreds in dealing with the Holding Companies. Traditionally exchange traded debt has higher standing than preferreds, but it actually is the opposite in dealing with Holding company debt and the owned companies under them.
Take SO (Southern Company), they just issued a nice debt offering that I should have bought but didn't.
Anyhow, their major profit sources are the dividends they receive from the bought out utilities. However, they cannot get that source of revenue (the bought out common share dividend) until the preferred owners of the bought utility get their dividend. So in instances like this my take is the preferreds of the acquired company are safer than exchange debt of the holding company.


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[Mulligan]

Quote:

Originally Posted by Totoro I really think Mulligan should try and write a book about preferreds, and self-publish. Maybe with additional input from others here. To help more ppl understand, Wall Street won't do it (too much of a niche). Just rearranging the stuff he has already written here and you are 80% there. Maybe organize some seminars and do TV appearances with Kramer (ok, that is a joke, otherwise I am serious). Then again, drawing unwanted attention might spoil the party.

Kramer, there are others on this forum that know just as much as I do. The trouble is they read other forums and know you can get BBQ'd suggesting such a purchase. At least Coolius will stand up and raise his hand that he drinks the koolaide!
I have heard one comment ever on preferreds on CNBC. On advisor briefly mentioned he was buying them and Kelly Evens responded..."Arent those things Warren Buffet buys"? She obviously knows nothing about them, but the market is rather small in the investment world.


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[Coolius]

Quote:

Originally Posted by Mulligan Kramer, there are others on this forum that know just as much as I do. The trouble is they read other forums and know you can get BBQ'd suggesting such a purchase. At least Coolius will stand up and raise his hand that he drinks the koolaide! I have heard one comment ever on preferreds on CNBC. On advisor briefly mentioned he was buying them and Kelly Evens responded..."Arent those things Warren Buffet buys"? She obviously knows nothing about them, but the market is rather small in the investment world. Sent from my iPad using Tapatalk

Pass the Koolaide, please.........

[pb4uski]

Don't you mean Cooliusaide?

[Coolius]

Quote:

Originally Posted by pb4uski Don't you mean Cooliusaide?

Yep, yep. Pardon the dyslexia......

It's Mulligan's home brewed stuff, anyway, a leftover from Halloween.

[Winemaker]

As one who also drinks the koolaid besides my "old grape juice", preferreds make up 75% of my fixed income side of my portfolio. Because of the buy and hold strategy with preferreds, they are not usually hyped by brokers or brokerage houses, and therefore don't generate commission income. Also, preferreds are a hybrid debt/equity security, and in the event of a bankruptcy, they are behind the bond holders in status of repayment. That usually cause them to be rated "junk" or "just above junk", even though their bond debt may be rated AA or above. This also is a deterrent to brokers and "financial planners" in case things go awry, no one wants sued for fiduciary neglect. investing in junk. Recently,Fidelity has stopped all research for preferreds.

Do your own due diligence, and back up the truck.

I mentioned in the past, I use the website dividendyieldhunter.com/preferred-stocks-trading under-par

[Mulligan]

Quote:

Originally Posted by Winemaker As one who also drinks the koolaid besides my "old grape juice", preferreds make up 75% of my fixed income side of my portfolio. Because of the buy and hold strategy with preferreds, they are not usually hyped by brokers or brokerage houses, and therefore don't generate commission income. Also, preferreds are a hybrid debt/equity security, and in the event of a bankruptcy, they are behind the bond holders in status of repayment. That usually cause them to be rated "junk" or "just above junk", even though their bond debt may be rated AA or above. This also is a deterrent to brokers and "financial planners" in case things go awry, no one wants sued for fiduciary neglect. investing in junk. Recently,Fidelity has stopped all research for preferreds. Do your own due diligence, and back up the truck. I mentioned in the past, I use the website dividendyieldhunter.com/preferred-stocks-trading under-par

You are a veteran preferred buyer so you know this...But many preferreds are actually investment grade. Most of mine are rated A2 to Baa3.... Many experts tend to lump them all together but that isnt correct. Yes, many are used solely for the purpose of avoiding debt covenants, or are just too plan risky to get conventional financing such as oil and gas drillers, and shippers. But many are very safe and just used as capital structure such as quality banks and utilities.
Besides to me, it is kind of fun digging around and finding obscure thinly traded small issues that are very safe and trying to snag them.


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[Slow But Steady]

I've read through this thread with great interest.

My first foray into preferreds was in the depths of the financial crisis, when bought Weingarten Realty F-preferreds at about a third of the issue price. With credit drying up, folks thought that many of these capital-intensive REITs might go belly up, so I had to grit my teeth while placing the order.

They had a coupon over 5%, never missed a payment, and were called this year at par value. I also bought WRI common at about 8, and it's now about 35. (I only brag about my winners.)

I recently bought the D-preferred of AHT, a hotel REIT in which I also own common shares.

After reading this thread, I jumped into CNTHP. A limit order at $52.25 was partially filled at $52.20, but only for about a third the number of shares I was hoping to buy. The next ask price was $53.50. Maybe that was one of you folks.

[Mulligan]

Quote:

Originally Posted by Slow But Steady I've read through this thread with great interest. My first foray into preferreds was in the depths of the financial crisis, when bought Weingarten Realty F-preferreds at about a third of the issue price. With credit drying up, folks thought that many of these capital-intensive REITs might go belly up, so I had to grit my teeth while placing the order. They had a coupon over 5%, never missed a payment, and were called this year at par value. I also bought WRI common at about 8, and it's now about 35. (I only brag about my winners.) I recently bought the D-preferred of AHT, a hotel REIT in which I also own common shares. After reading this thread, I jumped into CNTHP. A limit order at $52.25 was partially filled at $52.20, but only for about a third the number of shares I was hoping to buy. The next ask price was $53.50. Maybe that was one of you folks.

Thats funny you mention AHT-D. I bought a big 125 shares yesterday. I know very little about this Hospitality REIT. I usually like to hold an allusion that I actually know something about a company, but not on this one. Lord Xot, on another forum,who is a preferred guru loves it and bought more yesterday so I just dabbled in it since I had a few scraps left in my Roth.
Not me selling CNTHP. I have played around some with CNLPL as it is a bit more liquid, though I own more now than I ever have. CNTHP is usually very hard to snag 200 shares at a respectable price. There are about 4 issues I own I will never sell as they are impossible to re buy.


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[Coolius]

Quote:

Originally Posted by Slow But Steady I've read through this thread with great interest. My first foray into preferreds was in the depths of the financial crisis, when bought Weingarten Realty F-preferreds at about a third of the issue price. With credit drying up, folks thought that many of these capital-intensive REITs might go belly up, so I had to grit my teeth while placing the order. They had a coupon over 5%, never missed a payment, and were called this year at par value. I also bought WRI common at about 8, and it's now about 35. (I only brag about my winners.) I recently bought the D-preferred of AHT, a hotel REIT in which I also own common shares. After reading this thread, I jumped into CNTHP. A limit order at $52.25 was partially filled at $52.20, but only for about a third the number of shares I was hoping to buy. The next ask price was $53.50. Maybe that was one of you folks.

So very amused to read your post......

I had a bid for CNTHP in at $52.10, and was in the process of changing it to $52.20 to grab the offer, when your order took them.

I already have a full position, so still have skin in the game.

We should do well with CNTHP; as long as we are not compelled by unexpected/unforeseen emergency to sell, we enjoy the 6%+ income.

Welcome to the club !

[jim584672]

OTC Pink sheets issues makes me kind of nervous.

[Mulligan]

Quote:

Originally Posted by jim584672 OTC Pink sheets issues makes me kind of nervous.

Jim, you should only worry in the sense of making an ill advised market order purchase. The stocks we have been discussing are Fortune 500 companies...Their preferred stocks are a tiny amount of their capitalization and trade minimally. The costs to keep them registered is prohibitive to the value of the issue. So they delist them from the exchange and thus trade on the pink sheets. But they are "safer" than the common stock itself.
You can find any needed relevant information about the company through their parent company. For example with CNTHP... Owned by Eversource Energy (ES). It is a Fortune 500 company and trades on NYSE. Its preferreds just trade on the pink sheets. Since the preferreds receive payment of dividend before ES can receive their dividends from the owned common stock they bought out, they are safer than ES's common dividend. Those source of funds that ES has that is used in paying common stock dividends on NYSE are coming from the owned companies that must pay the preferreds first. They are not penny stocks that are also traded there. I do not mess with those.

Further clarification....CNTHP is actually a preferred stock of Connecticut Light and Power. CLP was then bought out by Northeast Utilities which then changed their name to Eversource. Eversource owns all the common stock of Connecticut Light and Power. Most of these bought out utilities are "ring fenced". Meaning parent company cant load their debt unto the bought out local utility so to avoid bankruptcy and power supply disruption from this possibly occurring,


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[Slow But Steady]

Quote:

Originally Posted by Coolius So very amused to read your post...... I had a bid for CNTHP in at $52.10, and was in the process of changing it to $52.20 to grab the offer, when your order took them.

Sorry about that. If it's any consolation, it was only 170 shares.

I'm not used to issues that are so thinly traded.

[RE2Boys]

Quote:

Originally Posted by Slow But Steady Sorry about that. If it's any consolation, it was only 170 shares. I'm not used to issues that are so thinly traded.

Well, only 300 shares traded yesterday, Slow got 170 and I got the other 130 at 52.20. We may be getting to a point where 5 or 6 of us are competing with each other for shares.

Seems someone out there has been doling out CNTHP over the past week or so selling a few hundred per day at 52.20........many of recent trades have all been at same price. It's on the high end of what I'm willing to pay for this issue so may start bidding for other issues.

[Mulligan]

Quote:

Originally Posted by RE2Boys Well, only 300 shares traded yesterday, Slow got 170 and I got the other 130 at 52.20. We may be getting to a point where 5 or 6 of us are competing with each other for shares. Seems someone out there has been doling out CNTHP over the past week or so sellnig a few hundred at 52.20........many of recent trades have all been at same price. It's on the high end of what I'm willing to pay for this issue so may start bidding for other issues.

That is the hesitancy I have in mentioning specific names as it is hard enough for me to 200 shares at price I want let alone, 4-5 others too. So I generally mention the good ones after I have my limit.....Usually it is significantly harder to buy any shares at a "fair price" of CNTHP. I bet the yearly average is 50 shares a day with mostly no day trades..
But there was a dump of 30,000 of them (only 190,000 outstanding) in last 2 weeks in a private placement exchange. My guess is the rest that were not transacted have been being doled out in a small manner until completely unwound.
These old utility preferreds are usually institutionalized purchases as they get a huge tax break owning them. It would be hard pressed for an individual to own 30k of them unless they were bought at the public offering in 1968. There really is very little info on these types of preferreds because they just dont trade much. But what I have read some of these are institutionally bought and just stuffed in a vault until the issue is called or the company has some liquidity issues.
It sometimes can mean the holder thinks a call is imminent and wants to leave the position. But this doesn't seem apparent here as the 30,000 share private transaction was at $51.63 average. Call price is $51.44. Accrued dividend and 30 day mandatory call announcement today would still leave break even at about $51.78. So that theory doesn't seem to hold water here. Some organization just needed the money I guess.



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[Coolius]

Quote:

Originally Posted by RE2Boys Well, only 300 shares traded yesterday, Slow got 170 and I got the other 130 at 52.20. We may be getting to a point where 5 or 6 of us are competing with each other for shares. Seems someone out there has been doling out CNTHP over the past week or so selling a few hundred per day at 52.20........many of recent trades have all been at same price. It's on the high end of what I'm willing to pay for this issue so may start bidding for other issues.

Remember that the redemption price is $51.44. You paid 76 cents over par, less than one dividend. The usual 30 day notice adds another 26 cents.

So your exposure is maxed at 50 cents. And every day they do not call, that exposure goes down by 0.89 cents.

And once they announce the next dividend, you're in the black and fully realizing the benefits of the income flow.

I am very comfortable with my position in this stock.

[Golden sunsets]

I submitted a standing order for CNTHP for 200 @ 52.00 that was filled yesterday. But now I see that the last sales were at 51.65 Oh well. Now I just need to sweat it out until the next X dividend date right, to make sure that it isn't called at 51.44? Must be sometime in January - right? Yield 6.30%

[Mulligan]

Quote:

Originally Posted by Golden sunsets I submitted a standing order for CNTHP for 200 @ 52.00 that was filled yesterday. But now I see that the last sales were at 51.65 Oh well. Now I just need to sweat it out until the next X dividend date right, to make sure that it isn't called at 51.44? Must be sometime in January - right? Yield 6.30%

You are fine, Golden. It already is accruing daily, plus there is always the mandatory call notice of 30 days, so that is more accrual. And even that doesn't matter because Eversource is not going to call a special meeting to call a minuscule 9 million dollar issue from. 1968.
Eversource's preferreds are scattered all over the 3 month period, beginning with CNTHP and ultimately ending with CNLPL. The Board only meets once every 3 months. Usually it is a few weeks before CNTHP goes exD. So it always appears to be "hanging out to dry", while CNLPL already has next dividend declared before it pays out the proceeding one. Its just the way the pattern works. No way will you incur any call loss at all from at $52 purchase. $52 is a good entry price. Just because it traded at $51.60 doesn't mean you would have got it anyways!


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[Coolius]

Quote:

Originally Posted by Golden sunsets I submitted a standing order for CNTHP for 200 @ 52.00 that was filled yesterday. But now I see that the last sales were at 51.65 Oh well. Now I just need to sweat it out until the next X dividend date right, to make sure that it isn't called at 51.44? Must be sometime in January - right? Yield 6.30%

CNTHP should be declaring its dividend sometime mid to late December.

Go to the link below, you'll see a sister issue, CNLPL, has its January dividend declared already - which provides a further degree of assurance that CNTHP will follow suit. Click on the Sept 24 CL&P dividend declared item.

https://www.eversource.com/Content/n...press-releases

Congrats on getting the shares. Your price is better than mine - my cost basis is $52.26. I'm confident we'll see the Dec dividend declaration and then its a gravy train ride until redemption - hopefully a very long ride.


Update: Noticed that Mulligan has already beaten me to the response. i tell you, that man is DA MAN for such issues !!