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

[bobandsherry]

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Originally Posted by bobandsherry I continue to dabble in the bottom feeding with some GTC orders and snagged WFC-L today at $1015.

Interesting, the date range for WFC-L shows as $1,030 - $1,130, yet my traded executed at $1,015. I could have sworn I saw it hit $1,012.50. I must have snagged some ghost shares Or probably because it wasn't a full lot size that it doesn't register. It was enough for me on a bottom feed.

[brokrken]

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Originally Posted by bobandsherry Interesting, the date range for WFC-L shows as $1,030 - $1,130, yet my traded executed at $1,015. I could have sworn I saw it hit $1,012.50. I must have snagged some ghost shares Or probably because it wasn't a full lot size that it doesn't register. It was enough for me on a bottom feed.

Bob, I've actually seen this happen on a highly liquid blue chip common stock that I had set a limit on. My sell order got executed during the day at a higher price than a date range including my trade date shows. Not sure what the reason

[Mulligan]

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Originally Posted by BeachOrCity I don't know too much about preferreds and only have a few, but it seems to me in a time like this, any "rulebook" needs to be taken with a grain of salt. Anyone know of any Cumulative preferreds for any "too big to fail" institutions they like? Still don't know if I would pull the trigger on these, as I could see the "rules" being changed to say "all equity" gets wiped out! You just don't know. But to pull the tigger now, I would want to see some incredible reward for (my perception of) the risk. (None of this is too impugn those who trade on the volatility and can spot value to buy and exit quickly) Thoughts?

Beach it depends on what you want from them. If your goal is cap gain kills you have to wait and strike and strike quick. Hell today Im freaking out opening bid on SR-A was $17...Geez more losses...So I decided I might as well buy a bunch and the went off at $16.30 somehow...Then an hour later I am selling an assload at $24.
But all preferreds are not inherently dangerous in terms of getting paid. Could list 25 perpetuals that paid through WW2, Vietnam, the 70s and 80s drama and still paying today...Hell DMRRP hasnt missed a dividend since it was issued when Abe Lincoln was president.

[BeachOrCity]

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Originally Posted by Mulligan Beach it depends on what you want from them. If your goal is cap gain kills you have to wait and strike and strike quick. Hell today Im freaking out opening bid on SR-A was $17...Geez more losses...So I decided I might as well buy a bunch and the went off at $16.30 somehow...Then an hour later I am selling an assload at $24. But all preferreds are not inherently dangerous in terms of getting paid. Could list 25 perpetuals that paid through WW2, Vietnam, the 70s and 80s drama and still paying today...Hell DMRRP hasnt missed a dividend since it was issued when Abe Lincoln was president.

Thanks. I don’t know enough to actively trade preferreds so really focus on companies I have confidence in that provide what I view as a nice risk adjusted yield.

Years ago I bought BAC and WFC preferreds. Both above par but good yield. They probably went up Close to 20% but are now worth less than I paid.

No real interest in selling because I still like the yield.

At some point maybe I will find that cumulative perpetual with a highly rated company at a nice yield during all this market turmoil. ... but for the most part I feel very outgunned by all the really smart people who know this space far better than I ever will.

[Mulligan]

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Originally Posted by BeachOrCity Thanks. I don’t know enough to actively trade preferreds so really focus on companies I have confidence in that provide what I view as a nice risk adjusted yield. Years ago I bought BAC and WFC preferreds. Both above par but good yield. They probably went up Close to 20% but are now worth less than I paid. No real interest in selling because I still like the yield. At some point maybe I will find that cumulative perpetual with a highly rated company at a nice yield during all this market turmoil. ... but for the most part I feel very outgunned by all the really smart people who know this space far better than I ever will.

It really just comes down to analyzing what you want, the safety level you want and making sure you arent overpaying in terms of current and historical pricing.
Then you just hold for income if that is its purpose. And ultimately that is it for me too. The trading is around the edges and added spice...Some can be quit simple...KTH... Buy at 29.50 your looking at over 6.3% maturity in 2028... non callable, 27.10 redemption price split A3/BBB- rating...PEco Energy subordinated debt issued in 1998 is held inside the trust of KTH. PA biggest utility...Do you like 6.3% IG? Do you like a mandatory maturity? If you like the company and the price and buy and forget about it.

[Mulligan]

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Originally Posted by BeachOrCity Thanks. I don’t know enough to actively trade preferreds so really focus on companies I have confidence in that provide what I view as a nice risk adjusted yield. Years ago I bought BAC and WFC preferreds. Both above par but good yield. They probably went up Close to 20% but are now worth less than I paid. No real interest in selling because I still like the yield. At some point maybe I will find that cumulative perpetual with a highly rated company at a nice yield during all this market turmoil. ... but for the most part I feel very outgunned by all the really smart people who know this space far better than I ever will.

Beach, screw BAC or WFC, if you want safety....Look at CBKLP...Now google 50 safest banks in the world..Only 3 are US...And you probably dont know any because they are all quasi ag coop banks in which Co Bank is one. Trading at $91... 6.125% par $100 past call.

[capjak]

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Originally Posted by Mulligan It really just comes down to analyzing what you want, the safety level you want and making sure you arent overpaying in terms of current and historical pricing. Then you just hold for income if that is its purpose. And ultimately that is it for me too. The trading is around the edges and added spice...Some can be quit simple...KTH... Buy at 29.50 your looking at over 6.3% maturity in 2028... non callable, 27.10 redemption price split A3/BBB- rating...PEco Energy subordinated debt issued in 1998 is held inside the trust of KTH. PA biggest utility...Do you like 6.3% IG? Do you like a mandatory maturity? If you like the company and the price and buy and forget about it.

KTH is not qualified Div. Co Bank is Qualified Div. if in taxable CoBank looks good.

[brokrken]

YTM on LANDP is near 17% at this level. I think I may bite. Any thoughts from the group?

Farmland isn't a bad place to be right now

[Mulligan]

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Originally Posted by brokrken YTM on LANDP is near 17% at this level. I think I may bite. Any thoughts from the group? Farmland isn't a bad place to be right now

I bought 500 yesterday at 21.75.

[Mulligan]

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Originally Posted by capjak KTH is not qualified Div. Co Bank is Qualified Div. if in taxable CoBank looks good.

Cap its not qualified because it is interest debt. Debt is never qualified and sits above in cap stack.

[brokrken]

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Originally Posted by Mulligan I bought 500 yesterday at 21.75.

Looks like I just missed it. My $22 bid has no bites. Will keep trying

[Mulligan]

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Originally Posted by brokrken Looks like I just missed it. My $22 bid has no bites. Will keep trying

Remember Ken though they will want too I suspect, they are under no obligation to redeem this next year. Its such a tiny float relative to their other preferreds LANDB and LANDC which are 100 million plus issuances it shouldnt be a problem.

[brokrken]

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Originally Posted by Mulligan Remember Ken though they will want too I suspect, they are under no obligation to redeem this next year. Its such a tiny float relative to their other preferreds LANDB and LANDC which are 100 million plus issuances it shouldnt be a problem.

Is 9/30/21 not the maturity date?

[bobandsherry]

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Originally Posted by brokrken Is 9/30/21 not the maturity date?

That's my understanding Ken. Seems like they have to redeem unless there's something hidden within the filing.

I'm on the bubble with this issue. Part of me says 16% is nice return for 18 months. But by the time I went to look it was already near $23 and that would give "only" about 13%. If economy turns around, could see some other issues flying higher. It's on my radar now to watch for a drop, maybe I'll put a bottom feeder GTC on this one.

[bobandsherry]

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Originally Posted by Mulligan Beach, screw BAC or WFC, if you want safety....Look at CBKLP...Now google 50 safest banks in the world..Only 3 are US...And you probably dont know any because they are all quasi ag coop banks in which Co Bank is one. Trading at $91... 6.125% par $100 past call.

Thanks for the reminder on CBKLP. I snagged a few shares today at just under $90.

[Mulligan]

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Originally Posted by brokrken Is 9/30/21 not the maturity date?

No it is not a mandatory redemption but a penalty increase if they dont....

If the issuer fail to redeem or call for redemption the Preferred Stock pursuant to the mandatory redemption required on 9/30/2021, the dividend rate on the Preferred Stock will increase by 3.0% per share per annum to 9.375%, until such shares are redeemed or called for redemption. If a Change of Control Triggering Event occurs, unless the issuer has exercised their option to redeem the Preferred Stock, holders of the shares may require the issuer to redeem the Preferred Stock (see prospectus for further details).
I sold into this income comeback rally yesterday and this morning and dumped about a third of my stash this morning on my phone while golfing...Totally impossible to liquidate all and really dont want to...But I need cash in case something drops. Dont like sentiment at all.After being down 15% Im down around 6% it looks like now, through constant flipping and trading movements. It kinda pissed me off, not panic. A lot of my stuff is mental comfort term dated issues such as KTN, KTH, ASRVP, CNIGO. Then I got a few illiquids and a couple others like LANDP, Keeping the CBLKP also.

[bobandsherry]

Once again Mulli, you are plugged into the details. Not sure if the kicker makes the rate worth definitely worth redeeming or not, but sure seems like it's rich. Stay safe.

[Running_Man]

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Originally Posted by pb4uski Mully, RM said I don't disagree the first part that with the financial stress that some preferreds may not pay when due and some non-cumulative issues may even skip one of more payments... that is sensible. My response was with respect to the second sentence. Any missed payments will be because the issuer doesn't have the financial strength to make the payments... noting to do with the good for the country or any government intervention or such rubbish. Get it now?

You are not understanding the present circumstance at all. There is already talk of putting severe restrictions on companies that take any financial help (read loans backed by feds) the president has already stated he is not opposed to blocking stock buybacks or issuing options by any company that takes a loan.

https://www.washingtonpost.com/busin...512_story.html

in 2008 19 banks were prohibited from paying dividends that received TARP moneyhttps://www.ft.com/content/130d27a0-...c-00144feabdc0

Financial help this time is going to be TRILLIONS to corporations of every size. The Federal Deficit is going to be huge and cash flow generated as a result of the bailouts that are coming will result in stringent laws being passed down the line. ESPECIALLY for any bank, real estate, financing or energy preferred that takes government money.

I realize the rolling issues that are going to arrive as a result of a complete halt of the economy are not clear at this time, the financing aspects will come into play after they get through the GDP turmoil and to avoid future pain, government is going to have to show these loans were not bad and it will take 1st shot at future cash flows of the companies that are paid these loans I am presuming. The worst GDP drop in history is 12.3% in 1932, GOLDMAN is estimating a 24% drop in Q2, largest ever in American history. I am just planning for the logical impacts that are going to occur from the largest drop in GDP when corporate debt was already at it’s highest point of debt to GDP in history.

The country is facing an increase in debt and a drop in GDP, money to pay for that must come from somewhere and preferred dividends come from the most indebted companies in the United States in general.

Utility index got crushed on Friday and should be a concern to everyone, some very good utility stocks got obliterated, Spire went down 10% TO 63. IDA one of my favorites is down to 74 from a peak of 112. WEC dropped 18% Friday alone to 74. The HYG fell amounts not seen since 2008, these are all signs of an extreme debt crisis that is about to hit and the FED and loans will have to be trillions.

I do not have the ability to dance in and out of issues like Mully does and need a longer term horizon, so I plan based on what I feel are likely dominos that will fall into each other as a result of financial conditions and how one domino falling over will affect the next. I am quite happy to be wrong, but if I am wrong know I am just fine. However there are 22.4 Trillion in pension assets in the United States. The single biggest fixed income piece for these pensions is leveraged corporate debt.

As of the end of February the pension funding gap fell to 18% of assets. That will be over 25% by the end of March maybe approaching 30%. And that is just the average. There will not be financial room for companies that take relief money from the FEDS, which most conmpanies that pay preferreds will do, to allow preferred dividends, they will be subordinate to the FEDERAL debt, which will be used to backstop corporate debt, which supports the pension funds. To me it just seems a logical flow.

https://www.cnbc.com/2020/03/19/coro...lief-bill.html

Edit: Just saw this in the proposal for the payments to indiviudals one rule will be no raises for any executives making more than 425K and the Federal Government has the “right” to participate in any gains the company taking the money makes. And this is the preliminary workings…...

[pb4uski]

I suspect that you are right that companies receiving bailouts will have restrictions on payment of common stock dividends, stock buybacks, executive compensation, stock options and the like.... and it might be as bad as it gets.

I just don't think that you are right that there will be restrictions on preferred dividends.. I think preferred shareholders will be treated pari passu with bondholders.

Besides, under the TARP program the capital infusions were preferred shares... do you seriously think the preferred shares owned by the government would come ahead of preferred shares owned by the public? You can check into it but I doubt that preferred shares of banks receiving TARP money were prohibited from paying preferred dividends, but they were prohibited from paying common dividends. Muligan or some of the others who owned bank preferreds back then might know.

You do understand that preferred dividends and common dividends are different, right?

[Running_Man]

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Originally Posted by pb4uski I suspect that you are right that companies receiving bailouts will have restrictions on payment of common stock dividends, stock buybacks, executive compensation, stock options and the like.... and it might be as bad as it gets. I just don't think that you are right that there will be restrictions on preferred dividends.. I think preferred shareholders will be treated pari passu with bondholders. Besides, under the TARP program the capital infusions were preferred shares... do you seriously think the preferred shares owned by the government would come ahead of preferred shares owned by the public? You can check into it but I doubt that preferred shares of banks receiving TARP money were prohibited from paying preferred dividends, but they were prohibited from paying common dividends. Muligan or some of the others who owned bank preferreds back then might know. You do understand that preferred dividends and common dividends are different, right?

Yes I know they are different and I know that preferred dividends were not restricted, we are at 5-10 times the level of financing needed for 2008. We are at the early stages, once the preferred shares fall, the ability to restrict payments for a period of years will be far easier to enforce while the loans are repaid. At some point down the line the dividends will be restarted and that will be when preferreds will be the best possible investment. I strongly reccomend reading The Great Depression by Benjamin Roth, to get an idea of what will happen to financial securities, and now we are in an era where it is expected for governments to take extraordinary measures for the common man.