Preferred Stock Investing-The Good , The Bad and The In Between 2021

[BrianB]

WFC Preferred "L" voluntary call

This message popped up in our Fido account today:

Dear Account Owner(s),
Why are you receiving this letter?

We're letting you know that a security you hold in your account is affected by a voluntary corporate action event. If you choose to participate, you must contact us to provide instructions. If you choose not to participate your account may still be affected.

Account: XXX-XXXXXX
Corporate Action: NON-EXP CONVERT
CUSIP: 949746804
Security Description: WELLS FARGO CO NEW PERP PFD CNV A
Quantity: 2.00000
Fidelity Cutoff Date: NONE

Because some offers may have multiple cutoff dates, the "Fidelity Cutoff Date" represents the next deadline during an active offer to ensure your participation. This date may also be different from the offer's security or market expiration dates.

01/10/22 11:20:38
Each Wells Fargo preferred share is convertible into 6.3814 common shares of Wells Fargo & Company (Cusip 949746101).

Holders who convert are required to surrender their dividend payment when
converting between the bond dividend record and payment dates.
Fractional shares will be paid cash in lieu.

What does this mean for you?
Because a corporate action may materially change a company's structure, it potentially affects their financial situation,
stock price, and stock performance -- and possibly your investment mix, so it's important to carefully review all the
outlined terms.

Do I understand this correctly: They want to exchange my (2) shares of WFCPRL now worth $2962 total for (12) shares of WFC now worth $666 + $42 cash = $708 total?

Since this is a voluntary action, it makes no sense. Are they looking for [-]idiots[/-] less-knowledgeable investors with this offer? Is there something going on that I am not aware of?

BrianB

 

[Mulligan]

This message popped up in our Fido account today:







Do I understand this correctly: They want to exchange my (2) shares of WFCPRL now worth $2962 total for (12) shares of WFC now worth $666 + $42 cash = $708 total?



Since this is a voluntary action, it makes no sense. Are they looking for [-]idiots[/-] less-knowledgeable investors with this offer? Is there something going on that I am not aware of?



BrianB

Brian, this gets thrown out there every now and then. Wells is just looking for suckers. It is part of prospectus that you can do this is if you want. Tell em to pound sand till the stock price gets closer to $300.

 

[Freedom56]

Preferred CEFs are have begun their sell-off in anticipation of rising rates due to their leverage. Most are still trading above their asset values but historically as selling intensifies while rates rise, they drop to 10-14% on average below asset value. Those have proven in the past to be good entry points. There is no reason to believe this time won't be any different. They are much more volatile than owning individual preferred stocks but their yields are much more attractive. PDT is one CEF that I have bought and sold over the past 15 years. It has outperformed not only preferred ETF PFF but also the S&P 500 over the past 20 years. FPF, FFC, and FLC have also been good performers.

 

[aja8888]

Anybody see any news on the stated call date of March 12, 2022 for EP/PRC? It's currently under the call price of $50.

 

[Mulligan]

Anybody see any news on the stated call date of March 12, 2022 for EP/PRC? It's currently under the call price of $50.

Its 3/31/2028 Aja.. I just bought a small amount today at $49.15 and .20. Thats about 5.2% YTM allowing for partial accrual of next interest payment.

 

[aja8888]

Its 3/31/2028 Aja.. I just bought a small amount today at $49.15 and .20. Thats about 5.2% YTM allowing for partial accrual of next interest payment.

Are you sure? I just looked the date up on Schwab:

Stated Call Yes
Regular Call Price $50.00
Call Type Callable exclusively into cash
Next Call Date Mar 12, 2022
Call Timing At any time (continuous)

 

[Mulligan]

Are you sure? I just looked the date up on Schwab:



Stated CallYes

Regular Call Price$50.00

Call TypeCallable exclusively into cash

Next Call DateMar 12, 2022

Call TimingAt any time (continuous)

Sorry Aja,I thought you knew that part….Its been callable since 2002. It was issued way back in 1990s. Its 30 year maturity is 2028. They have shown no interest in calling it…KMI assumed this when they bought El Paso. Its actually a convertible but KMI has to get to like $35 a share and pay the difference in cash to redeem it by conversion. That aint happening.. Now they could cash redeem, but it doesnt seem like they will mess with it until close to redemption time.

 

[aja8888]

Sorry Aja,I thought you knew that part….Its been callable since 2002. It was issued way back in 1990s. Its 30 year maturity is 2028. They have shown no interest in calling it…KMI assumed this when they bought El Paso. Its actually a convertible but KMI has to get to like $35 a share and pay the difference in cash to redeem it by conversion. That aint happening.. Now they could cash redeem, but it doesnt seem like they will mess with it until close to redemption time.

Well, then maybe it makes sense to buy some here as interest rates are going up?

If they are not going to call it, then I'll keep it until 2028 or if I die before that, my daughter can deal with it.

Note: It seems like this Preferred Stock thread has gone silent.

 

[Mulligan]

Well, then maybe it makes sense to buy some here as interest rates are going up?



If they are not going to call it, then I'll keep it until 2028 or if I die before that, my daughter can deal with it.



Note: It seems like this Preferred Stock thread has gone silent.

Its sad that you have to buy something safe below inflation rate! But it is what it is… Its gone silent because its a horrible time now. I have been trading my arse off just to largely break even since beginning of year. Thankfully I was nowhere near the newly issued low yielding perpetuals as they have been pummeled!

 

[aja8888]

Its sad that you have to buy something safe below inflation rate! But it is what it is… Its gone silent because its a horrible time now. I have been trading my arse off just to largely break even since beginning of year. Thankfully I was nowhere near the newly issued low yielding perpetuals as they have been pummeled!

You know, I have been doing the same thing. I dumped a few preferreds before they crashed and I also loaded up on oil stocks and XLE last fall. I'm actually within 1% of staying even since 12/31.

One good thing about being old and no debt is one can stay in a high percentage of cash and not feel too bad about it.

 

[Mulligan]

You know, I have been doing the same thing. I dumped a few preferreds before they crashed and I also loaded up on oil stocks and XLE last fall. I'm actually within 1% of staying even since 12/31.



One good thing about being old and no debt is one can stay in a high percentage of cash and not feel too bad about it.

I wish there was a half million limit in buying IBONDs, ha!

 

[aja8888]

I wish there was a half million limit in buying IBONDs, ha!

Me too! I would load up and go play golf every day!

 

[Sunset]

What's gong on with QRTEP? It's been in a steady downtrend from $108 to $103.

I was not paying attention and today see it's down even more to $94.5

 

[Born2Fish]

I wish there was a half million limit in buying IBONDs, ha!

Me too! I would load up and go [-]play golf[/-] Fishingevery day!

FIFY!!

 

[aja8888]

FIFY!!

That would work too!

 

[Sunset]

I was not paying attention and today see it's down even more to $94.5

I looked it up.
They are having headwinds of supply issues. Then there was a fire in a distribution center that destroyed it.
Meaning they had to lay off ~10% of all staff (10% or 2,000 worked at that center).

So the stock has fallen from $14 to $6 , so I guess folks are a little nervous.

Good news is the yield now is ~8%

 

[Happyras]

So...in talking with a very impressively informed guy at Schwab helping me with covered call strategies, I was given an idea on getting back into Wells Fargo with their L series convertible shares. Effective yield is 5.5%, but it is only convertible at parity plus 30% and is a carryover from Wachovia. it is currently trading down at 1348. It looks to be a good idea, any one have a position in this or any thoughts? WFC/PL

 

[LarryMelman]

it is only convertible at parity plus 30%

What does that mean?

 

[njhowie]

What does that mean?

Read through the document discussing the preferreds and conversion/redemption from 12/30/2008:

https://www.sec.gov/Archives/edgar/data/72971/000089882208001315/serieslex4_7.htm

[FONT=TimesNewRomanPSMT,Times New Roman,Times,serif] (b) [/FONT][FONT=TimesNewRomanPSMT,Times New Roman,Times,serif]Mandatory Conversion at the Corporation’s Option[/FONT][FONT=TimesNewRomanPSMT,Times New Roman,Times,serif].[/FONT]​

[FONT=TimesNewRomanPSMT,Times New Roman,Times,serif] (i) On or after March 15, 2013, the Corporation may, at its option, at any time or from time to time, cause some or all of the Series L Preferred Stock to be converted into shares of Common Stock at the Applicable Conversion Rate if, for 20 Trading Days during any period of 30 consecutive Trading Days, including the last Trading Day of such period, the Closing Price of the Common Stock exceeds 130% of the Applicable Conversion Price of the Series L Preferred Stock. The Corporation will provide Notice of Mandatory Conversion as set forth in Section 13(b)(iii) within three Trading Days after the end of the 30 consecutive Trading Day period.[/FONT]
​

[FONT=TimesNewRomanPSMT,Times New Roman,Times,serif]
[/FONT]
At some time in the past I did calculate the "Applicable Conversion Price" and it was well over $100/WFC common share, so there was very little concern it would happen.
​

 

[Golden sunsets]

I own this stock. My cost when I got in years ago was $1164 per share, so my yield is well north of 6%. I believe this is what some call a "busted convertible". Mulligan will be along hopefully to discuss the plusses and minuses of this issue. One downside might be that further rate increases may suppress the price of this preferred further. I think there may be a floor though as to how much this stock would decline.

Sent from my SM-T510 using Early Retirement Forum mobile app

 

[LarryMelman]

At some time in the past I did calculate the "Applicable Conversion Price" and it was well over $100/WFC common share

Yes it is. I own it. I know how it works. My question was for Happyras or really for his "very impressively informed guy at Schwab", to see if he knew.

I am surprised to see that it is now trading near where I had bought some back in 2020. I need to watch it and consider buying more. I don't flip or trade or sell my preferred's, or even watch the prices after I buy them. I knew it had been up over $1500 but I didn't care. I lock in the income and put them in the sock drawer. (A term that others use, but don't really mean.)

 

[Happyras]

I tried to be brief on what the guy at Schwab stated, I figured someone could go on Quantum on line and read the detail if they did not understand. It was recommended for the very reason of how it is a broken convertible, with good yield even though over par, and not going to be called and highly likely not to be converted.

https://www.quantumonline.com/search.cfm?tickersymbol=WFC-L&sopt=symbol

 

[bobandsherry]

FYI - MNR-C called.

Monmouth Shareholders Approve Acquisition by ILPT

HOLMDEL, N.J., Feb. 17, 2022 (GLOBE NEWSWIRE) -- Monmouth Real Estate Investment Corporation (NYSE: MNR), or Monmouth, today announced that its shareholders voted to approve the acquisition of Monmouth by Industrial Logistics Properties Trust, a Maryland real estate investment trust ("ILPT").

Under the terms of the previously announced transaction, upon completion of the merger, which is expected to occur before the end of the month subject to customary closing conditions, holders of Monmouth's common stock will receive $21.00 per share in cash, without interest and subject to applicable withholding tax, and holders of Monmouth's 6.125% Series C Cumulative Redeemable Preferred Stock will receive $25.00 per share in cash plus accumulated and unpaid dividends to, but not including, the date the transaction is completed. At such time, Monmouth's common stock and 6.125% Series C Cumulative Redeemable Preferred Stock will no longer be listed on the New York Stock Exchange.

 

[youbet]

FYI - MNR-C called.

Monmouth Shareholders Approve Acquisition by ILPT

HOLMDEL, N.J., Feb. 17, 2022 (GLOBE NEWSWIRE) -- Monmouth Real Estate Investment Corporation (NYSE: MNR), or Monmouth, today announced that its shareholders voted to approve the acquisition of Monmouth by Industrial Logistics Properties Trust, a Maryland real estate investment trust ("ILPT").

Under the terms of the previously announced transaction, upon completion of the merger, which is expected to occur before the end of the month subject to customary closing conditions, holders of Monmouth's common stock will receive $21.00 per share in cash, without interest and subject to applicable withholding tax, and holders of Monmouth's 6.125% Series C Cumulative Redeemable Preferred Stock will receive $25.00 per share in cash plus accumulated and unpaid dividends to, but not including, the date the transaction is completed. At such time, Monmouth's common stock and 6.125% Series C Cumulative Redeemable Preferred Stock will no longer be listed on the New York Stock Exchange.

Mixed feelings on this one! My cost was below PAR, so a nice LTCG. But I’ll miss that div showing up every quarter. Looking for a replacement. Hard to find.

The acquisition was finalized today and the cash (for both my common and preferred) showed up in my accounts after close today.

 

[pb4uski]

I sold for $25.145 earlier this month so I guess I left a couple nickles on the table. Oh well. Still made 6.41% for the time that I held it so that's fine.