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

[Sunset]

I think of preferred "stocks" as bonds, not stock.
I would be pretty fine having just preferred and zero bonds.

The yield up and down, is fake math.
I buy a Preferred at $25 yielding 5%. (thats $1.25 per yr).
The market crashes.
My preferred drops to $12.50 and now yields 10% -> wow my yield doubled and I'm earning ($1.25 per yr).
That is why I call it fake math, the yield might go up and down, but you get the same amount of dollars in your pocket for the stocks you currently own.

By the way common stock yields also rise when the market crashes, and most of the companies don't cut the dividend, unless they are heading for bankruptcy (like the banks almost did).

So if you feel safe with 40 common stock and the rest what I call "bonds" , good for you.

 

[Mulligan]

Sunset, I only call it fake math when people on other forums do this...They buy something say at $20 for 7% yield. Then it goes to $25... They like to say they are yielding 7% all while looking at their net worth as being higher...You cant have it both ways... Now, me I accept the pain and call it true math... If my 100k at 6% goes to 50k, I am getting 12% on my returns. I consider that accurate math as its only worth what one can sell at. So I would be getting 12% but still be complaining as I am down 50k in the net worth column. I keep track at both ends. And as you stated with preferreds if one is going up, the other is going down, lol.

 

[Texas Proud]

I am also in the bond boat...

Now, I am a bit different in that I have replaced these with my HY bond fund.. and I have improved my yield and rating..

I would not put any in stock bucket as the prices respond more like a bond than a stock... IOW, if interest rates were to triple, the value of these would go down... if rates stayed the same for years then the price would be stable if you take out other factors... just like a bond!!!

With a stock, the company can grow... it can double, triple, heck got 10X in earnings and the stock price will reflect it... the pref will not... it might make a slight difference on the side if the rating goes up, but that is it...


If you want to compare, compare the pref MF with a total bond fund... see what the difference is in all the ratios... probably not that much...

 

[Mulligan]

Ms. Yellen says easier monetary policy going forward....Ok...Sold my KYN-F and bought 400 shares of RILYL today...About 6.5% if they call at first call date next year, or over 7% if they wait until 2021 maturity. And I made me a small Texas Proud trade...Bought 300 shares of JBR...Lets see if JCP can hold off bankruptcy long enough for me to flip this for a buck down the road.

 

[Dan32]

I treat preferred as its own category. My current allocation is 12% preferred, 4% bonds, and 5% cash which I group together into a larger "Safer" category. My problem has been, I seem to always "need" to buy preferreds. This is due to dividend payments, stocks appreciating faster than other investments, preferreds being call, and spending less cash than we could.

 

[MichaelB]

Ms. Yellen says easier monetary policy going forward....Ok...Sold my KYN-F and bought 400 shares of RILYL today...About 6.5% if they call at first call date next year, or over 7% if they wait until 2021 maturity. And I made me a small Texas Proud trade...Bought 300 shares of JBR...Lets see if JCP can hold off bankruptcy long enough for me to flip this for a buck down the road.

I think she said monetary policy will get tighter. https://www.bloomberg.com/news/arti...udent-to-stay-on-hold-until-inflation-at-goal

Federal Reserve Chair Janet Yellen said raising interest rates gradually is the most appropriate policy stance now at a time of higher uncertainty about inflation, reinforcing the U.S. central bank’s forecast for another hike later this year.

Of course, Fed Chairs are masters of obfuscation. Rememebr Alan G saying this

I know you think you understand what you thought I said but I'm not sure you realize that what you heard is not what I meant

 

[Mulligan]

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

The dot plots just keep having less of trajectory is bottom line... But....I keep buying term dated issues as a bit of protection... Its not what they are doing that matters. It is the next guessing move after...And that trend is now dovish.

 

[capjak]

I need to buy something...Ashford Hospitality pfd A and TCF Finl A both called $25K to invest....everything I already own is expensive....


Ideas please?

 

[Mulligan]

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

I need to buy something...Ashford Hospitality pfd A and TCF Finl A both called $25K to invest....everything I already own is expensive....





Ideas please?

Punt on 3rd down and get the defense back on field. 2 yr treasury at 9 year high...Long end creeping up... Waiting wont hurt...I generally dont...Somebody wanted my CNIGO so I let them have them... Booked 10% for holding 6 months, so annualized 20% aint bad... Reloaded into KYN-F with 600 shares...I like to know on some of my money my capital will be returned... 3% for 2.5 years on an A rated sleeper wont hurt me if I hold.
Keep an eye on ABRN... Buy it under next divi price say $25.45 as it goes exD end of next month... Currently callable but mandatory maturity in 2021...One of my bigger holdings now.. RILYL is another issue with a short rope on it with a 2021 maturity. These are 7% plus yielders and short ropes attached...Not long enough to get it wrapped around your neck and hung with.

 

[Texas Proud]

I need to buy something...Ashford Hospitality pfd A and TCF Finl A both called $25K to invest....everything I already own is expensive....


Ideas please?

Why not go Ashford D?

 

[Mulligan]

Why not go Ashford D?

That issue is “Dead Man Walking”...Already has had 2 partial calls in past 7 weeks. When do companies ever do that so quickly? Management clearly is stating what their plans are with this one any time they can scratch up a spare nickel.

 

[Coolius]

I bought some RILYL today, at $25.68. XD date October 12, for $0.47.

Someone really wanted AILLL bad - 275 shares traded at $27.93. No, they were not my shares.....

I also decided not to replace the AHT-D shares called from my account. Instead, I replaced them with AHT-H.

 

[capjak]

Punt on 3rd down and get the defense back on field. 2 yr treasury at 9 year high...Long end creeping up... Waiting wont hurt...I generally dont...Somebody wanted my CNIGO so I let them have them... Booked 10% for holding 6 months, so annualized 20% aint bad... Reloaded into KYN-F with 600 shares...I like to know on some of my money my capital will be returned... 3% for 2.5 years on an A rated sleeper wont hurt me if I hold.
Keep an eye on ABRN... Buy it under next divi price say $25.45 as it goes exD end of next month... Currently callable but mandatory maturity in 2021...One of my bigger holdings now.. RILYL is another issue with a short rope on it with a 2021 maturity. These are 7% plus yielders and short ropes attached...Not long enough to get it wrapped around your neck and hung with.

KYN-F might fit my buy and hold laziness

 

[Mulligan]

KYN-F might fit my buy and hold laziness

If ya like em safe...If wont get much safer than this.... Though yield is lower...Its the series F below.....

NT RATINGS
SecurityFitch RatingKroll Rating

Senior Unsecured Notes
Series WAAAAAA
Series Z to CCAAAAAA
Series DD to GGAAAAAA
Series II to KKAAAAAA
Series LL to OOAAAAAA

MRPS
Series CAA+
Series FAA+
Series HAA+
Series IAA+
Series JA A+

 

[Mulligan]

I bought some RILYL today, at $25.68. XD date October 12, for $0.47.

Someone really wanted AILLL bad - 275 shares traded at $27.93. No, they were not my shares.....

I also decided not to replace the AHT-D shares called from my account. Instead, I replaced them with AHT-H.

Selling at 27.93 wouldnt have hurt me...But they were not mine either.

 

[Winemaker]

I consider my preferreds as bonds/fixed income.

In 2008, I withdrew $150,000 from my 401k and put it in a rollover IRA that was strictly fixed income, because my 401k did not offer much in the way of fixed income options. That did change eventually, however that $150,000 is now worth $215,000. Half of this went into preferreds, half to bonds, all way under par. All the bonds sans 2 have matured, and the remainder is going back into preferreds or baby bonds.

When I FIRED in October 2014, I repeated it again by taking $100,000 and putting it into under par preferreds. That account has grown to $121,000. Not spectacular, but 21% in three years, ain't too shabby.

 

[Mulligan]

Got more KYN-F today I see in my account as I left a $25.27 bid in before I left to golf. Got 1000 shares now...Content to leave this chunk here as my “CD”. It will sit here until some value play occurs. May be a while...

 

[Freedom56]

Got more KYN-F today I see in my account as I left a $25.27 bid in before I left to golf. Got 1000 shares now...Content to leave this chunk here as my “CD”. It will sit here until some value play occurs. May be a while...

Times are tough when you have to chase 3.5% yields on unrated securities.

Something like this may be a safer bet:

ALLY FINL INC MEDIUM TERM NTS

3.800 %
Maturity Date
11/15/2020
Symbol
ALLY4313117
CUSIP
02006DHS3
Next Call Date
10/15/2017
Callable
Yes
Moody's® Rating NR (11/23/2015)
Standard & Poor's Rating BB+ (01/26/2016)
TRACE Grade High Yield

 

[Mulligan]

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

Hmm, that is BB+, while Fitch has KYN-F “A” rated and another rating agency has them A+... And there is a reason why they are highly rated because of the legal mechanisms behind it...Plus Im getting QDI...
But, yes finding yield that is safe and term dated is hard...

 

[Texas Proud]

That issue is “Dead Man Walking”...Already has had 2 partial calls in past 7 weeks. When do companies ever do that so quickly? Management clearly is stating what their plans are with this one any time they can scratch up a spare nickel.

Yea, I got hit with those partial calls.... but it is not much more than a divi over call.... so it you want to take a chance it might be worth it.... I did buy a bit more, but I am getting this divi and I will be under par from now on...

 

[Mulligan]

Yea, I got hit with those partial calls.... but it is not much more than a divi over call.... so it you want to take a chance it might be worth it.... I did buy a bit more, but I am getting this divi and I will be under par from now on...

Good point....Some people dont like call hassles. I dont get too worked up over them...Though I only have had one this year.
Any thoughts of trying JCP baby bonds again?

 

[Freedom56]

Hmm, that is BB+, while Fitch has KYN-F “A” rated and another rating agency has them A+... And there is a reason why they are highly rated because of the legal mechanisms behind it...Plus Im getting QDI...
But, yes finding yield that is safe and term dated is hard...

Where do you see this rating? It is not in the prospectus.

"This security was not rated by Moody’s or S&P at the time of its IPO. In regard to the payment of dividends and upon liquidation, the preferred shares rank junior to the company's senior debt, equally with other preferreds of the company, and senior to the common shares of the company. "

If you are playing with preferred stocks past their call date close to par, your might want to consider:

COF-P

for a near 6% yield.

I own several thousand COF-F (purchased well below par) with call protection to 2020. I am waiting for someone to unload to pick up some COF-P close to par. Safe interest bearing preferred stocks are hard to come by these days.

 

[MooreBonds]

Any thoughts of trying JCP baby bonds again?

I've held KTP through the thick and thin! Cost of $19.11. Hoping it doesn't turn into another damn Toys R Us. Mulligan, start talking up JCP to the girlfriend. Get her to go spend your moolah there!

 

[aja8888]

What happened to AMEREN ILLIN 6.625% PFD today? Down almost 5%?

 

[Mulligan]

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

Where do you see this rating? It is not in the prospectus.



"This security was not rated by Moody’s or S&P at the time of its IPO. In regard to the payment of dividends and upon liquidation, the preferred shares rank junior to the company's senior debt, equally with other preferreds of the company, and senior to the common shares of the company. "



If you are playing with preferred stocks past their call date close to par, your might want to consider:



COF-P



for a near 6% yield.



I own several thousand COF-F (purchased well below par) with call protection to 2020. I am waiting for someone to unload to pick up some COF-P close to par. Safe interest bearing preferred stocks are hard to come by these days.

I can see why you like COF-P, Freedom. But I have all the perpetuals I need. Until price drops, I am mostly playing in term dated ones, and spreading the duration risk around.
KYN has their ratings on their website. By law they must maintain 200% asset coverage or must start liquidating preferreds until asset coverage is met. They currently are at 290%, almost 50% above needed requirements, and way above threshold. Plus based on all their other preferreds (private placed issues) this will not be called if logic is followed until close to 2020 maturity. Here is the ratings link... Go to “recent ratings” tab to see the ratings assigned to it.
http://kaynefunds.com/kyn/leverageasset-coverage-ratios