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

[Mulligan]

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

Losses are mostly in hospitality and MREITS.

I also hold quite a few common shares of Weingarten Realty, a shopping center REIT. They have reduced but not eliminated the div. I expect them to come back eventually. They have a lot of good properties.

I had been thinking about doing this for a while, so I had several other preferred holdings that I was able to sell at or near all-time highs. And by the grace of God, the losses aren't enough to affect our financial situation very badly.

Still, it's a bit of a jolt to find out I'm not as smart as I thought I was.

Yes, Slow, The leverage unwinding really smacked Mreits and Covid quickly grabbed the hospitality reits by the throat in a flash. Things can move quickly south, way quicker than I can react. Really what has always saved my bacon was I researched in 2012 ish for 6 months and studied everything bad. And back then all preferreds were inside the 5 year charting window of the 08-09 crisis. Those charts were horrendous for all preferreds that survived, but the utility preferreds I noticed stayed a lot stronger. Then I noticed highly illiquid ute preferreds were even stronger than that. So that has always been my base thesis and kept me from stretching much. And trust me I am tempted, but I try to keep it in a designated small “high risk bucket”. Utes are bastards...They have a monopoly, get to file to raise rates to get reimbursed for the “deadbeats”, and will stick money in regulators and state govt officials pockets in some creative method to get the rest of what they need.
I need to watch myself as I am at my lowest ute threshold in quite a while. About 40%, but I still try to buy ute type stuff..For example DMRRP...A railroad preferred, (issued in 1863) but a very unique one...The company no longer exists, its just a piece of property stretching 141 miles of rail track. CSX Transportation has a perpetual life lease of the property and in return must pay the few remaining preferreds and common (CSX owns most of the shares and doesnt have to pay itself) shares. This costs about $50,000 a year.
Anyways the preferred is backed by the land which has no debt on it. And if not paid CSX must sell the property to redeem the shares plus dividends. Well that isnt happening especially since they have owned it through mergers for 160 years. So what you have is a preferred that is actually a senior secured bond backed by the land and rail line worth infinitely more than the outstanding shares. So this one is actually safer than a ute in my mind. The trouble is it is 50% over par and yielding 4% now. And with only 8000 shares outstanding it isnt going to trade often.
I have drifted into Industrial Reits (think Amazon distribution type warehouses) these bad boys are running on all cylinders basically even during this crisis which has hit many reit segments hard.

 

[Mulligan]

I felt the company will last many years, and the div is ~10% so I bought 200.
Do you still have yours, or did you flip them when some sucker paid $26.81?

Sunset, I feel in the long run, I got to hang onto these. Acquistions are always a bit dicey (think OXY and their disaster buying Anadarko last year). But where do you have a chance for 10% with a real company with a real background the size of it and its resources...Plus their bonds despite a lower rating are trading very strong well above par. Im probably holding and forgetting about them and letting it play out. And at 300 shares its not going to make me panic on them. But...I aint buying anymore, I promise!

 

[aja8888]

I have an order in for both, adding to my ever growing collection of preferreds.

My orders closed @ 200 shares of each. Now the wait.

 

[Sunset]

I went to quantumonline to look and of course my login didn't work.
So I put in my email, and they literally sent me my username and password.
Turns out they chop off a password if it's too long which is why my record of the password failed.

The point is: they don't encrypt your password on the site. So don't use that password anywhere else.

Now I have to think of something other than 1234567 to use at the bank

 

[bobandsherry]

For anyone looking for a parking spot, look at NGHCO and NGHCP from insurer Nat Gen. AllState is buying them out and expected to clear regulatory hurdles early 2021. SEC filings state the preferreds will be redeemed prior to acquisition closing. That could give one up to three more divi payments. Prices of these two are sitting in 25.25 range, so a lot of meat on the bone for a short duration play.
I have a decent slug of these.

Any reason you didn't include NGHCZ and NGHCN? "Z" has slightly higher rate with same call as "O" and "P" and has a slightly better yield/return as well.

And "N" has same rate but call date is 7/15/21, so has 4 div's before it can be called (unless change of control allows them to call earlier). So has a little more meat on the bone for a longer time, gives another 20 basis points or so to the overall return.

Unless there's something I didn't see, this just gives a few more options when trying to snag a few shares at a lower cost.

Update: Looks like prices pulled in with original calcs had the "N" wrong. Refreshed with current prices and indeed "N" not so meaty. Have to watch for when each of these dip. So "O" and "P" have the best returns currently.

 

[Happyras]

NGHCN is trading much higher at 25.90 with the same call price, but July 2021 call date. So I wonder how it is treated if the acquisition is prior to that call date. Are they at risk for conversion at the future call price earlier? I can't see the detail yet on quantumonline. The Z share symbol is callable in Sept this year at $25 and seems to have less meat so to speak. However it is trading at 25.45, a bit hit I would guess? Anyone help on this as to which shares if any have a better risk/reward?

 

[Winemaker]

I went to quantumonline to look and of course my login didn't work.
So I put in my email, and they literally sent me my username and password.
Turns out they chop off a password if it's too long which is why my record of the password failed.

The point is: they don't encrypt your password on the site. So don't use that password anywhere else.

Now I have to think of something other than 1234567 to use at the bank

I keep getting phishing or spoof emails using my quantumonline email saying they've got pictures of me in various embarrassing position demanding ransom.
I haven't been on the site for a long while.

 

[Mulligan]

NGHCN is trading much higher at 25.90 with the same call price, but July 2021 call date. So I wonder how it is treated if the acquisition is prior to that call date. Are they at risk for conversion at the future call price earlier? I can't see the detail yet on quantumonline. The Z share symbol is callable in Sept this year at $25 and seems to have less meat so to speak. However it is trading at 25.45, a bit hit I would guess? Anyone help on this as to which shares if any have a better risk/reward?

AllState filings indicate it will be called at first call date next summer. The higher price negates the menial call length protection. The debt issue isnt directly addressed so I avoided it.

 

[pb4uski]

Just received a notice that PNC-Q is being called on Sept 1.

The PNC Financial Services Group, Inc. (NYSE: PNC) today announced the redemption on Sept. 1, 2020, of $480,000,000 of Depositary Shares (CUSIP: 693475832) (the "Depositary Shares") representing interests in PNC's 5.375% Non-Cumulative Perpetual Preferred Stock, Series Q (the "Series Q Preferred Stock"). Each Depositary Share represents a 1/4,000th interest in a share of the Series Q Preferred Stock. All 19,200,000 Depositary Shares currently outstanding will be redeemed.

The Depositary Shares will be redeemed at a redemption price of $25.00 per Depositary Share plus declared and unpaid dividends of $0.3359375 per Depositary Share, representing the dividend for the period from June 1, 2020 to, but excluding, Sept. 1, 2020.

Wierd thing though... on Fidelity in indicates that the last trade was $25.33.... why would someone buy it for $25.33 today to receive $25.34 on Sept 1?

I noticed that it opened at $25.69, had a low of $25.29 and closed at $25.33. Pity the person who bought at $25.69 at the open only to see the company announce the call later in the day and ive the price down to $25.33... instant 1.4% loss.... you takes your chances I guess.

https://thepncfinancialservicesgroupinc.gcs-web.com/node/38806/pdf

 

[Hamster]

Would greatly appreciate some advice if anyone has any to offer. Just bought a new house and my old, paid off, one will be sold soon. But instead of a short term loan to cover the time between the purchase and sale, I got a 15 year mortgage at 2.5%. I will pay this off fairly fast but not within a year.

So when my old house closes in a few weeks, I will have about $600K in cash which I just need to earn more than 2.5% on without too much risk for twelve to eighteen months.

I have a few candidates from browsing quantumonline: EAB, ELU, APRCD, APRDN and a couple of others. I have also been considering some of the issues frequently discussed here, like the SCE preferreds and CBKLP but I already own quite a bit of those.

Your comments or suggestions would be appreciated.

 

[Coolius]

Hamster, you might want to look at non-callable preferred stocks.


I own WFC-L & BAC-L. Both are non-callable, and yield about 5%. They are convertible stock, but the level at which the conversion can be exercised is so high there is almost zero chance of that.


Dividends are Qualified.



Because there is no call risk, your primary concerns would be centered around the possibility of dividend suspension ( they are non-cumulative ), and the possibility of insolvency ( low risk, in my opinion ).


Of course, if there should be a market meltdown these stocks will drop along with the rest of the market. That is a risk with ANY stock. If that is too great a risk, bonds could be a consideration as long as you hold to maturity.



Do your own DD, and then you can make an informed decision. Good luck!!

 

[Hamster]

I own WFC-L & BAC-L. Both are non-callable, and yield about 5%. They are convertible stock, but the level at which the conversion can be exercised is so high there is almost zero chance of that.

Thanks for the suggestions. Since I don't expect to hold these beyond a year or so I am not too worried about call risk.

I already own some WFC-L from back when it was cheaper. I will take a closer look at BAC-L.

 

[pb4uski]

Just received a notice that PNC-Q is being called on Sept 1.

The PNC Financial Services Group, Inc. (NYSE: PNC) today announced the redemption on Sept. 1, 2020, of $480,000,000 of Depositary Shares (CUSIP: 693475832) (the "Depositary Shares") representing interests in PNC's 5.375% Non-Cumulative Perpetual Preferred Stock, Series Q (the "Series Q Preferred Stock"). Each Depositary Share represents a 1/4,000th interest in a share of the Series Q Preferred Stock. All 19,200,000 Depositary Shares currently outstanding will be redeemed.

The Depositary Shares will be redeemed at a redemption price of $25.00 per Depositary Share plus declared and unpaid dividends of $0.3359375 per Depositary Share, representing the dividend for the period from June 1, 2020 to, but excluding, Sept. 1, 2020.

Wierd thing though... on Fidelity in indicates that the last trade was $25.33.... why would someone buy it for $25.33 today to receive $25.34 on Sept 1?

I noticed that it opened at $25.69, had a low of $25.29 and closed at $25.33. Pity the person who bought at $25.69 at the open only to see the company announce the call later in the day and ive the price down to $25.33... instant 1.4% loss.... you takes your chances I guess.

https://thepncfinancialservicesgroupinc.gcs-web.com/node/38806/pdf

So help me understand this. According to the call notice if I hold out until they call it on Sept 1 I would receive $25.3359375. I put in an order for $25.33 (Friday's closing price) over the weekend and it was filled today. So on 100 shares the buyer will make 59c over the ~28 day holding period.... 0.3% annualized return.

Strange world. What am I missing?

 

[tutan]

Appears many shares traded at $25.31 today, also the minimum of the day. That is only $2 more per 100 shares but that becomes 1.2 - 1.3% annualized.

 

[Texas Proud]

OK.... have not been using the various sites given awhile back.... just getting back into trading...


So, go to dividends.com and it is way different than before... I cannot find any place to put in a specific ticker and get the historical info... this was a go to site for me back when...


Freerealtime seems to be the same but does not give ex-divi date or yield...


So, what is a good free site that replaces dividends.com?

 

[pb4uski]

Appears many shares traded at $25.31 today, also the minimum of the day. That is only $2 more per 100 shares but that becomes 1.2 - 1.3% annualized.

I woud have thought that $25.31 or thereabouts would be what they would be trading for... I threw the $25.33 limit order out there for shits and giggles and was surprised that it filled.

Now I have to figure out what to do with the proceeds.

 

[Mulligan]

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

Would greatly appreciate some advice if anyone has any to offer. Just bought a new house and my old, paid off, one will be sold soon. But instead of a short term loan to cover the time between the purchase and sale, I got a 15 year mortgage at 2.5%. I will pay this off fairly fast but not within a year.

So when my old house closes in a few weeks, I will have about $600K in cash which I just need to earn more than 2.5% on without too much risk for twelve to eighteen months.

I have a few candidates from browsing quantumonline: EAB, ELU, APRCD, APRDN and a couple of others. I have also been considering some of the issues frequently discussed here, like the SCE preferreds and CBKLP but I already own quite a bit of those.

Your comments or suggestions would be appreciated.

Hamster, I would be careful misapplying a short term duration need with a long term perpetual. You may catch a rough patch when not needed. These can be volatile.
NGHCO and NGHCP are slated for redemption early next year per AllState filings. SPE-B is term dated..There is another one that is term dated a Gabelli one in 9/2021 next year. Have to remember the name and ticker though.

 

[Hamster]

Hamster, I would be careful misapplying a short term duration need with a long term perpetual. You may catch a rough patch when not needed. These can be volatile.
NGHCO and NGHCP are slated for redemption early next year per AllState filings. SPE-B is term dated..There is another one that is term dated a Gabelli one in 9/2021 next year. Have to remember the name and ticker though.

Thanks for the advice. I will definitely take a closer look at the kinds of things you suggest, but I should clarify that, while I expect to hold these only for a year or so, I can hold them longer if that ends up making more sense. My biggest concern is that they keep paying.

 

[pb4uski]

If you have a "make me sell it" price, put a GTC limit sell out there. Costs you nothing and maybe you find another person who forgets to put a limit price on their order, or just need to the shares for one reason or another.

Yes, that is what I have done... put a GTC limit at the "last" price and we'll see if anyone bites.... I could even lower it a bit and be quite happy.

Well, it took about 6 weeks but with the GTC order I was able to sell all of my HAWLN at $24/share... bought at $19.78... so at a gain equal to over 4 years worth of dividends.

 

[bobandsherry]

Well, it took about 6 weeks but with the GTC order I was able to sell all of my HAWLN at $24/share... bought at $19.78... so at a gain equal to over 4 years worth of dividends.

If your experience is like mine, that stock will now hit $25/sh Those thinly traded preferreds are a curse and a blessing, trying to cash out can be a bit tricky, but in the end you banked it.

 

[pb4uski]

Perhaps.... but to be honest I can't understand why anyone would pay $24 for it... 4.17% yield for a Ba1 credit.

 

[bobandsherry]

Perhaps.... but to be honest I can't understand why anyone would pay $24 for it... 4.17% yield.

Dunno, but just looked and it closed yesterday at $24.90, 4.02% yield. Bid only $22.76, so no one looking to pay up today.

 

[Mulligan]

Perhaps.... but to be honest I can't understand why anyone would pay $24 for it... 4.17% yield for a Ba1 credit.

Guys, Its a freakin $20 par , $21 redemption price preferred. All Hawaii ones are...Do they think they are $25 issues?
Here is one to study and watch if so inclined...I bought a little more LXP-C today at $54.11.. A 6.01% yield. Busted convertible and a conversion will still net a profit way down the road...Indirectly rated Baa3... Industrial reit and common stock LXP just hit 7 year high yesterday. It has converted past few years from office reit to Industrial reit. My biggest holding, though granted most of mine were bought cheaper.

 

[Mulligan]

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

Well, it took about 6 weeks but with the GTC order I was able to sell all of my HAWLN at $24/share... bought at $19.78... so at a gain equal to over 4 years worth of dividends.

Good job PB! Yesterday I sold 200 shares of AILNP at $140 and $145 that I bought earlier this year at $119. I have had a lot of these lately.As you have noticed, PB, the illiquid market has gone nuts!!!! And I have sold an arse load for easy money... Unbelievable month I had!

 

[Mulligan]

PB, I will be honest, I been buying a sub 4% perpetual but Im trying to buy up the float, ha.