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

[Mulligan]

I'm confused (again). Can anyone help me understand the following scenario?

CHSCP is an 8% perpetual preferred of CHS. It closed at $30.20 yesterday. It's next call date is 28 July 2023 at $25. That looks like a negative YTC to me. Why would it be selling at a price that results in a negative YTC?

I called CHS investor relations and they said they had no information that the call date was being extended (as happened in 2013).

What am I missing?

I think they are just betting on history repeating itself. A lot of the original farmers and patrons own this and through a fit last time and got it renewed. That was 10 years ago and 20 since issuance. I wouldnt make that bet myself. Of course it rates are high enough they will leave it outstanding for their own self interests though. But I sure am not interested there.

 

[youbet]

Yes, I know about CHSCM. Now this is only my take so there is no science behind it. But its floating date is too far out for me to look at, especially being above par. In 2 years it (or SOFR its replacement) could be significantly lower than today. My personal inclination is owning the “live floaters” such as NSS, NS-B, RZA, CUBI-E and F, and SLMBP. A few could get redeemed like CBKPP, but if they do, there is no money lost in a call. CUBI’s for example are locked in for another payment minimum after this one because they can only redeem on payment date.

Does that apply to AGRIP, that floats 1 Jan 2024, as well?

 

[youbet]

I think they are just betting on history repeating itself. A lot of the original farmers and patrons own this and through a fit last time and got it renewed. That was 10 years ago and 20 since issuance. I wouldnt make that bet myself. Of course it rates are high enough they will leave it outstanding for their own self interests though. But I sure am not interested there.

That's kinda what I thought was happening as well.

If I could get it around $26, that would be another story. But at $30+, no interest here either.

 

[Mulligan]

Does that apply to AGRIP, that floats 1 Jan 2024, as well?

For me anyways, yes. The adjustment is decent for the quality, but its still several dollars above par and its call date (float date is less than a year and a half away. The price would determine my interest level here.

 

[capjak]

WFC/PL @ $1190 6.3% div

seems decent

 

[Mulligan]

WFC/PL @ $1190 6.3% div

seems decent

Im watching, but I am still largely in the live floaters and resets. Take one of my biggest holds and have been in it most of the year. CUBI-F (I owned E earlier in year and rolled over betting it may last a bit longer).
Not counting dividends…
Past 5 days +0.03%
1 month -0.88%
3 months +1.90%
YTD -0.43%
1 year -0.05%
Going over 8% next payment

 

[Running_Man]

WFC/PL @ $1190 6.3% div

seems decent

My target is 7 percent before nibbling. Hopefully it gets there some of these are starting to get into rational buy and hold range with upside on interest rate recoveries.

 

[Free To Canoe]

Im watching, but I am still largely in the live floaters and resets. Take one of my biggest holds and have been in it most of the year. CUBI-F (I owned E earlier in year and rolled over betting it may last a bit longer).
Not counting dividends…
Past 5 days +0.03%
1 month -0.88%
3 months +1.90%
YTD -0.43%
1 year -0.05%
Going over 8% next payment

"LIBOR is being replaced by the Secured Overnight Financing Rate (SOFR) on June 30, 2023, with phase-out of its use beginning after 2021."

I wonder how this will affect things that are tied to LIBOR (like CUBI-F)?

Perhaps they will call before the phase out date.

Bought some CUBI-F at par yesterday.

https://www.investopedia.com/terms/l/libor.asp

 

[Mulligan]

"LIBOR is being replaced by the Secured Overnight Financing Rate (SOFR) on June 30, 2023, with phase-out of its use beginning after 2021."



I wonder how this will affect things that are tied to LIBOR (like CUBI-F)?



Perhaps they will call before the phase out date.



Bought some CUBI-F at par yesterday.



https://www.investopedia.com/terms/l/libor.asp

Indications are its 3 month SOFR plus a .26 spread. Its not totally signed sealed and delivered though. Im betting this gets redeemed by July anyways as it could be pushing 9% by then.

 

[perrytime]

I'm somewhat familiar with preferred's.

Can someone outline to me the risk with AGNCP, $17.18. Seems to me it has upside to 25, yes that may take many years. In mean time i collect 8.8%.

Price could go lower, anything else?

 

[underwrite]

I'm somewhat familiar with preferred's.

Can someone outline to me the risk with AGNCP, $17.18. Seems to me it has upside to 25, yes that may take many years. In mean time i collect 8.8%.

Price could go lower, anything else?

AGNCP is a mortgage reit. Make sure you understand what a mortgage reit is before investing in their preferred shares. There are a number of risks, particularly in this environment. Mortgage reits invest in long-term mortgages with short term funding sources. When the short term rates are similar or higher than long-term rates, the viability of mortgage reits business model goes awry. That is happening now to an extent and if the rate curve stays where it is or worsens, the viability of mortgage reits is in jeopardy. Just make sure you understand the business model and risks before investing In preferred shares of a mortgage reit.

 

[Mulligan]

AGNCP is a mortgage reit. Make sure you understand what a mortgage reit is before investing in their preferred shares. There are a number of risks, particularly in this environment. Mortgage reits invest in long-term mortgages with short term funding sources. When the short term rates are similar or higher than long-term rates, the viability of mortgage reits business model goes awry. That is happening now to an extent and if the rate curve stays where it is or worsens, the viability of mortgage reits is in jeopardy. Just make sure you understand the business model and risks before investing In preferred shares of a mortgage reit.

Im not a Mreit guy at all. Dont maybe that is just an indictment of my style. I dont trust them but that is emotional not analytical. Its been a tough year plugging away plus 4% or so on the year. But I guess it could be worse. A couple examples of what I presently own.
PLDGP. At $54.75 stripped out you get a 6.2% YTC in 2026. If Prologis doesnt redeem it which it most certainly will since they dont use preferreds in their capital plan you would have an 8.54% BBB+ going forward. Since they have A rated debt and very little of it, this preferred is stronger than most bonds.
Adjustables are really cooking yield wise now.
SLMBP will go exD in a week paying a 9.05% annualized. The following divi goes to almost 11% being its 1.7% plus 4.65% (Libor) off $57.85 price.
NSS is $2.65 annualized for a 10.73% next month and is heading for 11.50% the following payment.
Even a BBB- adjustable is heading over 9% I own. TNCAF which is a OTC issue from TC Energy. A Canadian preferred. Will crank out a 8.44% annualized in a week. But after it resets end of month off Canadian 3 month treasury bill plus 1.92% it will pay 9.5% QDI. Its present price is $15.65 CAD but you have to convert into USD to make your purchase bid. Im getting yield like I have never had before be it IG bonds, IBonds, or preferreds.
Oh and CUBI-F will live on also and it heads well over 9% after it goes exD for this 8% plus payment.

 

[bobandsherry]

Im not a Mreit guy at all. Dont maybe that is just an indictment of my style. I dont trust them but that is emotional not analytical. Its been a tough year plugging away plus 4% or so on the year. But I guess it could be worse. A couple examples of what I presently own.
PLDGP. At $54.75 stripped out you get a 6.2% YTC in 2026. If Prologis doesnt redeem it which it most certainly will since they dont use preferreds in their capital plan you would have an 8.54% BBB+ going forward. Since they have A rated debt and very little of it, this preferred is stronger than most bonds.
Adjustables are really cooking yield wise now.
SLMBP will go exD in a week paying a 9.05% annualized. The following divi goes to almost 11% being its 1.7% plus 4.65% (Libor) off $57.85 price.
NSS is $2.65 annualized for a 10.73% next month and is heading for 11.50% the following payment.
Even a BBB- adjustable is heading over 9% I own. TNCAF which is a OTC issue from TC Energy. A Canadian preferred. Will crank out a 8.44% annualized in a week. But after it resets end of month off Canadian 3 month treasury bill plus 1.92% it will pay 9.5% QDI. Its present price is $15.65 CAD but you have to convert into USD to make your purchase bid. Im getting yield like I have never had before be it IG bonds, IBonds, or preferreds.
Oh and CUBI-F will live on also and it heads well over 9% after it goes exD for this 8% plus payment.

For whatever reason, ETrade won't let me buy SLMBP "online". TNCAF must only trade on the Canadian exchange.

I'm holding CUBI-E, and since I couldn't buy SLMBP I picked up some more CUBI-E today at $25.20. Goes ExDiv in a week with ~51 cent dividend, so 30 cents for the week long hold and then with 4.65% LIBOR, this should then reprice to about 9.4% coupon rate and QDI! If my math is right, XIRR of almost 14% if called next quarter for these bought today. I hope it keeps rolling for a bit, but good place for short term hold if called.

These tied to LIBOR still a bit of a unknown as to how they'll convert with SOFR replacing LIBOR.

 

[Mulligan]

For whatever reason, ETrade won't let me buy SLMBP "online". TNCAF must only trade on the Canadian exchange.

I'm holding CUBI-E, and since I couldn't buy SLMBP I picked up some more CUBI-E today at $25.20. Goes ExDiv in a week with ~51 cent dividend, so 30 cents for the week long hold and then with 4.65% LIBOR, this should then reprice to about 9.4% coupon rate and QDI! If my math is right, XIRR of almost 14% if called next quarter for these bought today. I hope it keeps rolling for a bit, but good place for short term hold if called.

These tied to LIBOR still a bit of a unknown as to how they'll convert with SOFR replacing LIBOR.

Weird you cant buy SLMBP. CUBI-F can only be redeemed on payment date so it is automatically good for this divi and the following one next year no matter what.
TNCAF is a Canadian issue that can be bought on OTC. TNCAF is the OTC ticker. Its Canadian ticker symbol is TRP.PR.F. Some brokerages do not allow buying them. TD does.
They are zeroing in on 3 month TERM SOFR (not SOFR or 3 month SOFR) plus 26 bps add on to replace Libor. That keeps it pretty close to Libor so I am not worried.
My biggest holds for now are NSS, CUBI-F, TNCAF, PLDGP, SLMBP and KTN.

 

[Graust]

Where to Look for Floating Rate Security Distribution Amounts

Mulligan (and others),

Where do you find out the amounts for now-floating securities, such as SLMBP, NSS, KTN, CUBI-E, etc.? I think CUBI announced it when they announced dividends, but these other securities are harder to find.

I do divi capture with some of these (or a portion of them) when I’m able, so I like to know the specific amount of the distribution/dividend I’m going to receive, if possible.

Another I am trying to figure out is AQNU.

And yes, I consulted QuantumOnline, and looked at company investor relations links, but didn’t find much, or found info that was different than what TD Ameritrade said.

Thanks in advance! Happy Holidays

 

[Mulligan]

Mulligan (and others),

Where do you find out the amounts for now-floating securities, such as SLMBP, NSS, KTN, CUBI-E, etc.? I think CUBI announced it when they announced dividends, but these other securities are harder to find.

I do divi capture with some of these (or a portion of them) when I’m able, so I like to know the specific amount of the distribution/dividend I’m going to receive, if possible.

Another I am trying to figure out is AQNU.

And yes, I consulted QuantumOnline, and looked at company investor relations links, but didn’t find much, or found info that was different than what TD Ameritrade said.

Thanks in advance! Happy Holidays

Its written the prospectus. For many its the posted Libor
rate 1 or 2 business days prior to dividend payment. So the yield is known way before the company declares it. As that is a rubber stamp board function when they meet. KTN, btw, is a fixed maturity debt payment so it doesnt adjust. Some of these are rising nicely. NSS is will gliding over 11% most likely, my TNCAF will be locking in around 9.5% by tomorrow or so for March payment. CUBI-F will be around 9.5% off par also come following payment. That is assuming Libor is at todays yields so it could be higher too.

 

[copyright1997reloaded]

Hey all
I have some new "funds available for investing" from my 401k->Rollover IRA. I'm looking for suggestions on preferreds, preferably (ha ha) ones where the issuer won't' go under and who have some protections (e.g. cumulative).

Any suggestions for my watch list? Thanks.

 

[bobandsherry]

Saw it mentioned elsewhere -> IPWLP and IPWLK are called. Interesting to see these redeemed given their low coupon rate. These were placed on the "expert" list by SEC, so the "experts" got to take advantage of the pricing play on these for redemption.

 

[Mulligan]

Hey all
I have some new "funds available for investing" from my 401k->Rollover IRA. I'm looking for suggestions on preferreds, preferably (ha ha) ones where the issuer won't' go under [emoji4] and who have some protections (e.g. cumulative).

Any suggestions for my watch list? Thanks.

Are you wanting duration length protection? Yield expectations? Credit quality? Qualified dividends a need? A lot of different angles to play depending on your goals or expectations.

 

[copyright1997reloaded]

Are you wanting duration length protection? Yield expectations? Credit quality? Qualified dividends a need? A lot of different angles to play depending on your goals or expectations.

Great questions.
if
Yield expectations - better than treasuries/CD's, better than callable corporate bonds.

Qualified dividends - for the most part, not needed as these will be in a qualified account. If one comes along w/qualified divs that I like, I would put it in my regular account.

Credit Quality - I don't like losing money, but understand where preferreds are in pecking order vs. bonds and willing to take a bit more risk. Hopefully plays with decent financials and in an industry apt to be around for awhile.

Duration Length protection - if I am understanding this one correctly: If called, I would want to buy under par to make the loss of future payments a bit less painful. If you mean perpetual, I would be OK with some of those.

Thanks!

 

[Mulligan]

Great questions.

if

Yield expectations - better than treasuries/CD's, better than callable corporate bonds.



Qualified dividends - for the most part, not needed as these will be in a qualified account. If one comes along w/qualified divs that I like, I would put it in my regular account.



Credit Quality - I don't like losing money, but understand where preferreds are in pecking order vs. bonds and willing to take a bit more risk. Hopefully plays with decent financials and in an industry apt to be around for awhile.



Duration Length protection - if I am understanding this one correctly: If called, I would want to buy under par to make the loss of future payments a bit less painful. If you mean perpetual, I would be OK with some of those.



Thanks!

If you like bank preferreds there are a slew of them over 6% QDI and many $5 or so under par because they were issued at 4.5%-5% ish a few years ago when yields were lower. But remember since they were issued during record low yield times, Fed would have to drop Funds rate back near zero for them to ever return to par.
You also have live floaters that will continue to have very high yields with Libor up from Fed hikes. If Fed drops rates ( shouldnt be for a while) they will drop.
I have a lot of my money in bonds now, so some of my preferreds are more aggressive.
NSS, its 6.73% plus Libor which is around 4.75%. It trades around par and has little chance of being called. So its yield is heading to a juicy 11% or so. Same principle with SLMBP I own. Also TNCAF and CUBI-F. Those are in the floating 9%-10% camp. TNCAF is Canadian currency but is BBB- rated.
I also own a lot of KTN and KTH which is basically a non callable IG debt. For example I added a few hundred more of KTN to my stash in 27.30s. So strip out accrued that is like 6.6% ish YTM. KTH around 28.50 range will get you about same yield because it matures in 2028 at $27.10 not $25.
For some safer perpetuals I past week bought 500 shares of noncallable SOCGM between $25.68 and .75%. That is about a 5.8% perpetual yield. Also bought 200 shares of CTA-A under $62 today. Its high quality QDI about 5.7% but its trading for good relative value being its back down to circa 2000 pricing. Its an 80 year old preferred. SOCGM is probably over 100 years old and is harder to buy. But it has a sister SOCGP that is basically identical.
CEQP- is a noncallable MLP pipeline preferred. It yields about 9.4% and I own a decent amount of it. Noncallable means it cant be redeemed by company. Crestwood is a pretty decent MLP.
So I have a mix of floaters, shorter duration term dated ones, higher yield, and lower yield HQ perpetuals. They all will trade a bit differently. Ask any questions about any of these or others that may interest you and I will try to assist or clarify.

 

[copyright1997reloaded]

If you like bank preferreds there are a slew of them over 6% QDI and many $5 or so under par because they were issued at 4.5%-5% ish a few years ago when yields were lower. But remember since they were issued during record low yield times, Fed would have to drop Funds rate back near zero for them to ever return to par.
You also have live floaters that will continue to have very high yields with Libor up from Fed hikes. If Fed drops rates ( shouldnt be for a while) they will drop.
I have a lot of my money in bonds now, so some of my preferreds are more aggressive.
NSS, its 6.73% plus Libor which is around 4.75%. It trades around par and has little chance of being called. So its yield is heading to a juicy 11% or so. Same principle with SLMBP I own. Also TNCAF and CUBI-F. Those are in the floating 9%-10% camp. TNCAF is Canadian currency but is BBB- rated.
I also own a lot of KTN and KTH which is basically a non callable IG debt. For example I added a few hundred more of KTN to my stash in 27.30s. So strip out accrued that is like 6.6% ish YTM. KTH around 28.50 range will get you about same yield because it matures in 2028 at $27.10 not $25.
For some safer perpetuals I past week bought 500 shares of noncallable SOCGM between $25.68 and .75%. That is about a 5.8% perpetual yield. Also bought 200 shares of CTA-A under $62 today. Its high quality QDI about 5.7% but its trading for good relative value being its back down to circa 2000 pricing. Its an 80 year old preferred. SOCGM is probably over 100 years old and is harder to buy. But it has a sister SOCGP that is basically identical.
CEQP- is a noncallable MLP pipeline preferred. It yields about 9.4% and I own a decent amount of it. Noncallable means it cant be redeemed by company. Crestwood is a pretty decent MLP.
So I have a mix of floaters, shorter duration term dated ones, higher yield, and lower yield HQ perpetuals. They all will trade a bit differently. Ask any questions about any of these or others that may interest you and I will try to assist or clarify.

Thanks! Some of these look very interesting, I need some time to research them (I took fairly quick looks in quantum and seeking alpha pro). Funny that a couple are related to securities I hold (CTVA) and way back I owned a Sallie Mae inflation adjusted preferred.

 

[Mulligan]

Thanks! Some of these look very interesting, I need some time to research them (I took fairly quick looks in quantum and seeking alpha pro). Funny that a couple are related to securities I hold (CTVA) and way back I owned a Sallie Mae inflation adjusted preferred.

Here is a link of many preferreds where you can skim to see name and pricing to evaluate deeper if one appeals.

https://innovativeincomeinvestor.com/25-preferred-stock-sorted-by-share-price-loss-gain/

 

[Mulligan]

Thanks! Some of these look very interesting, I need some time to research them (I took fairly quick looks in quantum and seeking alpha pro). Funny that a couple are related to securities I hold (CTVA) and way back I owned a Sallie Mae inflation adjusted preferred.

The Sallie Mae is a very interesting preferred in a rising rate environment being its very low adjustment and pricing well below par because of it. A year ago the preferred was yielding in 4% range. But do to exploding Libor the next dividend will be above 11% at a $58 purchase price. I bought aggressively in $56 range a divi before last recognizing its yield would explode.

 

[mz44]

Here is a link of many preferreds where you can skim to see name and pricing to evaluate deeper if one appeals.

https://innovativeincomeinvestor.com/25-preferred-stock-sorted-by-share-price-loss-gain/

Thanks