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

[Running_Man]

I knew it was convertible, but I didn't think conversion date was anytime soon.

The conversion date in October 2018. There should be 5 more dividends of $1.21875 remaining on this preferred and then it converts (almost assuredly) into common at a rate of :

KMI $25& Below: 1.8142 shares per share of preferred
25-30 : 1.6667 shares per share of preferred
35 & Above: 1.544 shares per share of preferred

Based on the closing price of 19.67 the present value of the preferred shares is $41.95 @ 43.50 the preferred is overpriced by $1.50. Basically this is a long term option on KMI @ 35 for 15 months as over 35 you are making money on the stock. Personally I loved this investment though I have been out of it for a while.
and don’t find it particularly interesting at the present time. By the way present value at KMI 25 = 51.02 @ conversion and 59.70 @ 30. If stock were to fall to 15 preferred value falls to 32.88. All those values include the values of the remaining dividend. following is value you get at conversion for the preferred
15: 27.51
20: 36.28
25: 45.36
30: 50.00
35: 54.04
40: 61.76

 

[jimnjana]

The conversion date in October 2018. There should be 5 more dividends of $1.21875 remaining on this preferred and then it converts (almost assuredly) into common at a rate of :

KMI $25& Below: 1.8142 shares per share of preferred
25-30 : 1.6667 shares per share of preferred
35 & Above: 1.544 shares per share of preferred

Based on the closing price of 19.67 the present value of the preferred shares is $41.95 @ 43.50 the preferred is overpriced by $1.50. Basically this is a long term option on KMI @ 35 for 15 months as over 35 you are making money on the stock. Personally I loved this investment though I have been out of it for a while.
and don’t find it particularly interesting at the present time. By the way present value at KMI 25 = 51.02 @ conversion and 59.70 @ 30. If stock were to fall to 15 preferred value falls to 32.88. All those values include the values of the remaining dividend. following is value you get at conversion for the preferred
15: 27.51
20: 36.28
25: 45.36
30: 50.00
35: 54.04
40: 61.76

Thanks. I ended up selling a few days ago for a small gain. When I bought it, I didn't understand the conversion implications and timing. So for now I will stay away from convertibles until I understand them better.

 

[Coolius]

Wow, words fail me.... someone bought CNLPL @ $56.97. Trade was for 210 shares.

Nosebleed territory, for sure......

 

[Coolius]

It is with great sadness, and a heavy heart, that I report the departure of a beloved resident of my Sock Drawer Community.

This member joined the community earlier this year, taking up residence right beside her sister AILLL. She was immediately welcomed by neighborhood regulars like the CLP triplets, the HE-U ohana, IPWLK and many others.

But today, I could not resist, fell for the siren song of undeserved profit, and sold my entire position of AILNP at $129.99.

So hard to turn down an opportunity to secure 2 full year's worth of dividends above my cost basis, plus I had already enjoyed a dividend.

AILNP will be sorely missed, but one can always hope that, perhaps, one day, she will return. It will be a joyous welcome, for sure.

Fare ye well, my dear.

 

[Mulligan]

Coolius, I joined you dumping the rest I owned.... Sold some off a few months ago at $119... Had to take the easy profits...And I mean easy...About $22 a share in addition to the divis over this time... Bought 1000 shares of TFC-B today. People sold off thinking call was imminent, but management stated otherwise it isnt happening just yet. Huge discrepancy between B and C issue. Cannot lose money no matter what on a call, and a 7.5% par issue provides huge backside support. Would rather own these types than nose bleed buys.
I have moved some money around to other issues last few weeks. I will post what I got soon. But I still need to push back 20k more into something and dont have a plan...But day to day ya never know...I had $25k with no where to go until Moorebonds tipped me off about TCF. Researched conference call which gave me the info about the preferred I needed, which luckily occurred yesterday. Suddenly, I got an issue I really am pleased to own.

 

[Coolius]

Mulligan,

I took a look at TCF; seems a steady company at a brief glance, but hopefully I'll be able to peruse their Financial statements soon.

However, as with our previous strategies, buying below par+1 div will not lose, especially in TCF's case, the next div is already declared for XD 8/11, and payment 9/01.

Joined you in buying a few hundred shares @ $25.44. Declared dividend is $0.4688, so in the worst call scenario, I still make 2.88 cents/share.

If the stock price continues to go down tomorrow, I am tempted to buy another lot. No lose situation, as long as they are held through August 11th.

 

[Mulligan]

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

Its a bank, so faith is always needed here when money is backed by levered money. But.... Unless management outright lied yesterday, they really havent even begun to seriously look at a call. Starting next Tuesday one is already starting to accrue the following divi.... So in essence you are getting 2012 yield at 2017 horrific prices. I will take that and let it play out. 3 months, Im happy, 6 months to a year w/out call, I am ecstatic about the trade. Of course it is all about ones goals, and it is clear what I worry about.

 

[Mulligan]

Golden Sunsets, if you are still following I bought your preferred you mentioned a long time ago....CTPPO...Tried for 100 but got 60. Considering only 250 shares have traded in past 3 years. Into the sock drawer you go.
Flipping the last month or two has made me quite a bit of money. Ever time I think I am done, I do it some and it becomes profitable entertainment. Some I bought and sold already and havent even mentioned. Acquired 300 more TCF-B today. Sitting at 1300 shares now, really love this short term, let it play out trade.
This is what I own now off memory....GBLIL, LANDP, NSS, TCF-B, AILLL, BURCP, CTWSO, FIISO, MH-A, ABRN, CTPPO, CRLKP, CNIGO, CNTHP, CNLPL, WGLCP

 

[aja8888]

Golden Sunsets, if you are still following I bought your preferred you mentioned a long time ago....CTPPO...Tried for 100 but got 60. Considering only 250 shares have traded in past 3 years. Into the sock drawer you go.
Flipping the last month or two has made me quite a bit of money. Ever time I think I am done, I do it some and it becomes profitable entertainment. Some I bought and sold already and havent even mentioned. Acquired 300 more TCF-B today. Sitting at 1300 shares now, really love this short term, let it play out trade.
This is what I own now off memory....GBLIL, LANDP, NSS, TCF-B, AILLL, BURCP, CTWSO, FIISO, MH-A, ABRN, CTPPO, CRLKP, CNIGO, CNTHP, CNLPL, WGLCP

Mul, what's the trading symbol for TCF-B?

Thanks

 

[Mulligan]

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

Aja, I bought in two of my accounts... One was TCF-B, and the other was TCF_PB .... Try TCF-PB, TCF.B, TCF-PRB, TCF_PRB... It depends on what symbols your brokerage uses.. The trade on this simple... Starting next Tuesday it starts accruing the following dividend. 46.88 cents is in the bag, so buying below $25.46 ensures no loss as it pays the divi. But management came out in conference call this week saying they havent done anything with the issue yet. I will ride this horse until the call. Look at its sister issue TCF-C... Total preferreds of the company consume only about 7% of after tax income... Plenty of safety here to ride it to its conclusion. Kicks out the divi Sept. 1, and goes exD August 11.

 

[aja8888]

Aja, I bought in two of my accounts... One was TCF-B, and the other was TCF_PB .... Try TCF-PB, TCF.B, TCF-PRB, TCF_PRB... It depends on what symbols your brokerage uses.. The trade on this simple... Starting next Tuesday it starts accruing the following dividend. 46.88 cents is in the bag, so buying below $25.46 ensures no loss as it pays the divi. But management came out in conference call this week saying they havent done anything with the issue yet. I will ride this horse until the call. Look at its sister issue TCF-C... Total preferreds of the company consume only about 7% of after tax income... Plenty of safety here to ride it to its conclusion. Kicks out the divi Sept. 1, and goes exD August 11.

Thanks! I'll look at it as I have some spare cash in my Schwab IRA.

 

[CoolChange]

TCF-B vs. TCF-C

Aja, I bought in two of my accounts... One was TCF-B, and the other was TCF_PB .... Try TCF-PB, TCF.B, TCF-PRB, TCF_PRB... It depends on what symbols your brokerage uses.. The trade on this simple... Starting next Tuesday it starts accruing the following dividend. 46.88 cents is in the bag, so buying below $25.46 ensures no loss as it pays the divi. But management came out in conference call this week saying they havent done anything with the issue yet. I will ride this horse until the call. Look at its sister issue TCF-C... Total preferreds of the company consume only about 7% of after tax income... Plenty of safety here to ride it to its conclusion. Kicks out the divi Sept. 1, and goes exD August 11.

I've been looking for issues that I felt comfortable enough with to start building a modest portfolio of these prefereds. TCF-B was the one that finally drew me in for 400 shares. (Yep; I am starting small hoping to learn more as I go.)

Can any explain to me why TCF-C (which has similar characteristics as mentioned above) is trading at a higher price with a lower dividend/yeild? This doesn't make sense to me; so, I assume I am missing something obvious. Otherwise, why would anyone by the TCF-C shares at the higher price?

 

[Coolius]

Thanks! I'll look at it as I have some spare cash in my Schwab IRA.

aj,

Schwab has it under TCF+B

 

[aja8888]

aj,

Schwab has it under TCF+B

Thanks!

 

[Mulligan]

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

I've been looking for issues that I felt comfortable enough with to start building a modest portfolio of these prefereds. TCF-B was the one that finally drew me in for 400 shares. (Yep; I am starting small hoping to learn more as I go.)



Can any explain to me why TCF-C (which has similar characteristics as mentioned above) is trading at a higher price with a lower dividend/yeild? This doesn't make sense to me; so, I assume I am missing something obvious. Otherwise, why would anyone by the TCF-C shares at the higher price?

Hello Cool, the reason is the market "knows" TCF-B should be called. Its call date is upon it now. TCF-C is still call protected so the management cant yank it from you. But the price you pay is lower yield for call protection. One who is less worried about long term share price movement and more just on income would be more interested in C as it may not ever be called. B is the issue to buy to protect capital and take the higher yield for as long as they are willing to let it trade. For me, if I get 3 months Im happy. If it goes a year, I am thrilled. Get 7% for a year and my money back, I am very pleased with that. Meanwhile while I am tied up safely in B, maybe some other issues will drop and I can flip into them at a better price point down the road.

Useless info...CTPPO...Once again Quantumonline is wrong...They are a good source but never trust them without original source info...They list CTPPO as callable $110... That is incorrect per Central Maine filings. Notice that the company OWNS but has not retired 70% of the float...Only 1921 shares are actual tradable on the market.

At December 31, 2014 and 2013, our consolidated 6% noncallable preferred stock, which has no mandatory redemption features, was $571 thousand.
At December 31, 2014 CMP had 2,300,000 shares of $100 par value preferred stock authorized but unissued.
CMP’s 5,713 shares outstanding include 3,792 shares owned by CMP.

 

[Coolius]

Mulligan makes a good point.

Buying TCF-B now is a reasonably safe "gamble".

If it is called now, we receive $0.4688 + par for a total of $25.4688. Buying below that price assures a gain ( but one has to consider taxes & trade commissions ).

The Q&A session with the CEO implies they are not yet considering calling the issue, so review the transcript and make your own conclusion accordingly.

If it is not called, we receive an annual yield of 7% until such time as it is called, which might be 3 months to years, no one knows. Sure beats a CD, eh!

I choose to look at it from the CD perspective - I'm getting a CD of indefinite duration at a 7% APY.

Now, that isn't too bad, correct?

 

[CoolChange]

One More TCF-C Question

Hello Cool, the reason is the market "knows" TCF-B should be called. Its call date is upon it now. TCF-C is still call protected so the management cant yank it from you. But the price you pay is lower yield for call protection. One who is less worried about long term share price movement and more just on income would be more interested in C as it may not ever be called. B is the issue to buy to protect capital and take the higher yield for as long as they are willing to let it trade. For me, if I get 3 months Im happy. If it goes a year, I am thrilled. Get 7% for a year and my money back, I am very pleased with that. Meanwhile while I am tied up safely in B, maybe some other issues will drop and I can flip into them at a better price point down the road....

Mulligan,

Thank you for the quick response. But, I am either dense or pricing risk differently than the market at large (which is also considered dense in some circles). Can you tell me where I am off base in my analysis of these two securities?

• TCF-C looks to me like it is callable this year, December 12, 2017.

• If I understand correctly, we are now virtually guaranteed the TCF-B dividend for August.

• Isn’t the market paying dearly (in terms of stock price / yield) for four (4) months of call protection?

Again, sorry to be dense; but, this thread is by far the best resource I have found for delving into the intricacies of preferreds.

Many thanks to all who have contributed to this excellent knowledge base.

 

[Mulligan]

Cool, you are not dense....I explained very poorly....We really have two situations occurring with TCF-C. The major reason (and the one I left out, lol) is the market "knows" TCF cant call TCF-C....Not enough savings will occur. TCF while a good bank is not a "great bank or financially powerful" one. It is not a USB, BAC, or WellsFargo. So it wouldnt be able to call and reissue a sub 6% issue. It simply costs too much money to call and reissue one 25-50 basis points cheaper. Market knows this so at present rate environment it can trade higher and get away with it. I suspect after if becomes callable it may drift a bit lower than present price though.
This is why TCF hasnt been very excited about calling "B". Management inferred in conference call they dont know how much of a savings would occur after paying all the "ransom" underwriting fees.

 

[Coolius]

As a rule of thumb, companies call a pfd and re-issue a new series if they can do so at 75 bps ( or more ) below the old yield.

So, if they wanted to replace TCF-B, they have to be able to issue a new series at 6.75% or lower - certainly possible, and likely one factor behind its present price.

But to be able to replace TCF-C, they will need to issue at 5.7%, with their BB+ rating, that is highly unlikely.

So TCF-C is regarded by the "market" as being not callable for all intents and purposes. Hence it commands a higher premium for that reason - call risk is close to zero.

 

[Mulligan]

Mulligan makes a good point.

Buying TCF-B now is a reasonably safe "gamble".

If it is called now, we receive $0.4688 + par for a total of $25.4688. Buying below that price assures a gain ( but one has to consider taxes & trade commissions ).

The Q&A session with the CEO implies they are not yet considering calling the issue, so review the transcript and make your own conclusion accordingly.

If it is not called, we receive an annual yield of 7% until such time as it is called, which might be 3 months to years, no one knows. Sure beats a CD, eh!

I choose to look at it from the CD perspective - I'm getting a CD of indefinite duration at a 7% APY.

Now, that isn't too bad, correct?

Coolius, I know some people dont want or need to invest with short term horizons, but you understand clearly my point I am making with this. Some people on SA when I mention these kind of trades just dont "understand" or "get it". This is a very strong candidate for putting idle cash to work, with reasonable expectations the capital stays supported by price. No way this thing can go below par in present yield environment and assuming continued bank viability which from their earnings is not an issue.

 

[Coolius]

Well, it looks like TCF-B has settled around the $25.45 - $25.49 range.

Was hoping to grab more this morning, but that seems to be beyond reach, at least for the moment.

Definitely not paying more than $25.46. And I doubt we'll see a print below $25.43 at worst. I have a GTC at $24.43, just trolling and hoping for a bite.

 

[CoolChange]

Mulligan and Cullius,

Thank you again for the extended explanation of the TCF issues. The lightbulb over my head has finally lit (at least on this matter).

Now, I just need to find more TCF-B like isssues for my idle cash. (I also keep hunting for the kind of illiquids that have been the subject of so much discussion here; but, I have not been able to get anything at what I considered a resonable price & risk yet.)

Again, many thanks for everything you post here.

 

[aja8888]

Bought 200 TCF+B @$25.46 and 75 MO @$66.00 on the bad news dip.

(Just adding to my MO pile as I have been for a decade. My average price is under $20 and it has been one of the best stocks I have ever owned (in and out several times since 1982).)

 

[Coolius]

Bought 200 TCF+B @$25.46 and 75 MO @$66.00 on the bad news dip.

had a cash-secured Put on MO @ $70 strike, so I'm resigned to own 200 shares MO at about $69.75 next week.

still, no worries. I will simply sell covered calls at $70 strike and, if the stock recovers slowly over time, crank up the strike price. Will have a consolation prize of a 3.5% dividend while playing around.

On another issue, TCF-B, looks like my $25.43 bid will not fill. Will try again Monday. I'm confident patience will win out eventually, will let the board know if it happens.

 

[Mulligan]

Aja, I am disappointed in you. I was assuming you were going in for 5,000 shares of TCF-B.
Coolius, it looks like the floor wall has been set at $25.44 today. It keeps creeping up a penny or so every day. Hopefully u get your price before calendar flips as the wall will move up quicker as 8/11 begins to approach.
Cool Change, I bought another one of these issues the other day...MH-A for 700 shares....Not as optimistic on this one as management already stated they would call it. Im just hoping for a 30 day drag out. They dragged out a call a few months on last issue. I got in at $25.41, but had a chance at $25.39 and blew it. Pennys matter on these trades.
You, are right to wait on what you want to hold at what price...I kind of play on all ends of duration and various levels of yield. Like the CTPPO...It wont trade much and it certainly isnt a cap gain trade. The 5.45% is nothing to beat my chest with either. But these are small trades that just get stuffed in the drawer. Most preferreds on market outside illiquids may be covered on earnings by single digits of 2-6 times coverage. Central Maine only has this last tiny preferred left and wont be issuing anymore. Its dividend coverage is 3,294 times. In other words I will never pay attention to companies earnings. My more aggressive trades such as ABRN I keep a closer eye on.