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

[Mulligan]

I'm a few days late with this, but here are my current holdings......

CHCSM
CHSCL
CNLPL
CNTHP
AILLL
SLMNP
MNR-C
SPLP-A

Any thoughts?

Those are solid plays, Youbet. Some may be a bit too solid being the CLP and AILLL are way over par. But as you know as long as they dont get called they will trade at a solid premium in this interest rate environment. SPLP-A is the weak link in safety but its certainly reasonable risk and a nice counter balance to the ones will over par

 

[Mulligan]

It was up to $100.43 today! Now, for each lot, I'm up $45, now that's my entry point for a decent red wine, if I would ever have the urge to buy one.

Now since a few of us have this issue. Give your wives a credit card, turn the tv to the QVC channel and tell them to go to work!

 

[brokrken]

SPLP-A is the weak link in safety but its certainly reasonable risk and a nice counter balance to the ones will over par

Unless they go back to paying the divy in shares

 

[Mulligan]

Unless they go back to paying the divy in shares

Yes, but didnt they just do that one quarter last year during Covid peak?
Bottom line they are not as safe as the others, but none of his others have a YTM (or YTC) at 10.50% plus like this one has with a 5 year term duration.
I just saw yesterday a SPLP board member was buying them last week, and owns 30,000k of the preferred now plus 70k of the common. Interesting he was buying the preferred.
I decided yesterday to get in at $20.71 for my high risk bucket.

 

[Freedom56]

It looks like we are at the beginning of another sell-off of bonds and preferred stocks. Bond funds such as BND and LQD are trading below pre-pandemic levels despite the current vs past treasury yields and lower current distributions from those funds. My individual bonds are trading well above pre-pandemic levels. So much for the theory that bond funds adjust for interest rates just like individual bonds.

I'm looking to scoop up some JPM-G and JPM-H (both past their call dates) if they drop below par and JPM-C, JPM-D, COF-H when they drop well below par.

 

[Sunset]

It looks like we are at the beginning of another sell-off of bonds and preferred. Bond funds such as BND and LQD are trading below pre-pandemic levels despite the current vs past treasury yields and lower current distributions from those funds. My individual bonds are trading well above pre-pandemic levels. So much for the theory that bond funds adjust for interest rates just like individual bonds.

I'm looking to scop up some JPM-G and JPM-H (both past their call dates) if they drop below par and JPM-C, JPM-D, COF-H when they drop well below par.

Yes, VERY ANNOYING.... not such a safe choice..

 

[Mulligan]

It looks like we are at the beginning of another sell-off of bonds and preferred stocks. Bond funds such as BND and LQD are trading below pre-pandemic levels despite the current vs past treasury yields and lower current distributions from those funds. My individual bonds are trading well above pre-pandemic levels. So much for the theory that bond funds adjust for interest rates just like individual bonds.

I'm looking to scoop up some JPM-G and JPM-H (both past their call dates) if they drop below par and JPM-C, JPM-D, COF-H when they drop well below par.

If your in cash waiting may bring some deals. I keep fighting and moving around. Buying heavily into past call anchored issues from 2% 10 year era, and some term preferreds. They arent as exposed and acting better. The low yield IG liquids are the ones most exposed now.

 

[Freedom56]

If your in cash waiting may bring some deals. I keep fighting and moving around. Buying heavily into past call anchored issues from 2% 10 year era, and some term preferreds. They arent as exposed and acting better. The low yield IG liquids are the ones most exposed now.

I have a lot of cash waiting on the sidelines. I am looking at corporate notes with 1- 3 years remaining such as some of the one's I picked up last March:

Seagate Technology March 2022 4.25% notes CUSIP 81180WAV3 (bought at $96.21 last March)

Seagate Technology March 2024 4.875 Notes CUSIP 81180WAT8 (bought at $93.70 last March).

Centurylink April 2024 7.5% Notes CUSIP 156700BA3 (bought at $96.61 average cost last March and prior to)

Qwest Dec 2021 6.875 Notes CUSIP 74913GAX3 (bought at 97.30 last March)


The market has become too irrational. We have nearly bankrupt companies rallying to absurd market capitalization based on some promoters on Reddit. It was bad prior to the Dotcom bubble, but this is far worse. I will start putting limit orders below par on the corporate notes above if the market gets into a panic sell mode.

 

[brokrken]

Yes, but didnt they just do that one quarter last year during Covid peak?
Bottom line they are not as safe as the others, but none of his others have a YTM (or YTC) at 10.50% plus like this one has with a 5 year term duration.
I just saw yesterday a SPLP board member was buying them last week, and owns 30,000k of the preferred now plus 70k of the common. Interesting he was buying the preferred.
I decided yesterday to get in at $20.71 for my high risk bucket.

Yep, they only did it that once.

 

[Winemaker]

I cannot find the article I read, but recently Steel Partners was increasing their stake in a company that had great forward carryover tax losses, perhaps even a complete takeover. The last acquisition they made was with the SPLP shares instead of cash, and that created a buying opportunity when those stockholders dumped their newly acquired shares. I was a buyer then and still hold them.

 

[Mulligan]

I cannot find the article I read, but recently Steel Partners was increasing their stake in a company that had great forward carryover tax losses, perhaps even a complete takeover. The last acquisition they made was with the SPLP shares instead of cash, and that created a buying opportunity when those stockholders dumped their newly acquired shares. I was a buyer then and still hold them.

They love those tax loss carryovers! The beauty of this issue is if company can stay viable, the preferred will be forced to drift towards par as it gets closer to redemption. Say in 4 years it just wont sit at $20 as when was last time a solvent company offered a 31% term dated one year return (25% plus the 6% annual divi). I dont know of such situation.
Im still keeping it very modest, but have to think longer term here as a hold.

 

[brokrken]

OTRKP (and the common) getting hammered today. Looks like they lost their biggest customer and revised down 2021 Revenue guidance from $165M to $100M.

 

[bobandsherry]

OTRKP (and the common) getting hammered today. Looks like they lost their biggest customer and revised down 2021 Revenue guidance from $165M to $100M.

Wow - I have no horse in that race (thankfully), but huge impact. Not sure how this company keeps operating. Last 6 years their operating income has been negative, even during the good times.... and losses posted every year. Here's the Operating Income:
2015: -9,182
2016: -8,998
2017: -12,232
2018: -13,626
2019: -20,014
2020: -14,900

I saw this: RBC Capital downgraded Ontrak to sector perform from outperform and reduced its price target to $32 from $82.

 

[Mulligan]

Wow - I have no horse in that race (thankfully), but huge impact. Not sure how this company keeps operating. Last 6 years their operating income has been negative, even during the good times.... and losses posted every year. Here's the Operating Income:
2015: -9,182
2016: -8,998
2017: -12,232
2018: -13,626
2019: -20,014
2020: -14,900

I saw this: RBC Capital downgraded Ontrak to sector perform from outperform and reduced its price target to $32 from $82.

One of those dingbat women on Fast Money 3-4 months ago was pumping bigly the common stock. I checked the financials and didnt see any cattle in that hat, so I had no interest in the preferred either.

 

[brokrken]

Wow - I have no horse in that race (thankfully), but huge impact.

Bob, I thought you bought some back in December. Did you sell them already?

 

[bobandsherry]

Bob, I thought you bought some back in December. Did you sell them already?

Yeah, bought them on the dip back in December. Then bought some more as they dipped a bit further (under $24). As they approached par I unloaded my holdings of OTRKP in early Feb. I wanted to move money into equities.

As of mid-Feb, here's what I was holding:

My list is a bit shorter than it's been, made decision to get into equities to ride the lift up in the market and also considering yields and possible call on some issues. Here's what I'm still holding.

CEQP-, CHMI-B, CMRE-C, EP-C, GMLPP, NYCB-U, QRTEP, UZC

 

[bobandsherry]

I don't know how many holding MDLY and it's Sr Notes, but while it's been expected but according to Quantum it's official that distribution suspended on MDLQ and MDLX. Both have taken a beating since it was announced yesterday. Both are now down 50% from Monday's open. By comparison, the common shares down only 15%.

 

[pb4uski]

Ok, I think I previously posted that I moved my tIRA preferred portfolio from Fidelity to Schwab because Fidelity was playing nanny over what tickers that I could trade online and that was annoying.

So yesterday I received my first dividend from a Canadian preferred that I own (EBBNF) and Schwab went and withheld 15% of the dividend for taxes! I recall this being an issue so looked back at the last thread and saw the post from aja8888:

RE: EBBNF - having been charged 15% foreign tax on the dividend at Schwab in my IRA.

I spoke to Schwab's Global Trading Desk today and the agent told me that the agreed upon tax exemption in an IRA is a function of the stock prospectus published by the company. The agent seemed very clear on that ruling and even looked it up.
__________________
Everyone has a plan until they get punched in the mouth...philosopher Mike Tyson

And response from Mulligan:

So has issue been resolved yet Aja? This is an international treaty...The trouble is brokerage blames intermediary who takes it out at the source before brokerage receives money. Its a blame game...A few people stated they had to fill out a Canadian form to get it resolved...ERRAF had same issue with me and another guy. I wasnt as persistant as they said it wasnt their fault. Another guy made repeated calls until they fixed the issue. And that mixed my problem also.

I did look back and received numerous dividends when I held this issue in my Fidelity IRA and they never withheld tax on either of my two Canadian preferreds (ALTGF being the other one).

Schwab says that the bank that they use to process these did the withholding and it must be done for all dividends (but not interest)... I suggested that they should move from the dumb bank that they use to the smarter bank that Fidelity uses. Anyway, the guy is escalating it but I sense that I am pushing a rope.

aja, did you ever get this resolved? Have any of you who have Canadian preferreds in a Schwab tIRA found a way to avoid it and if so, how? Does anyone know if Vanguard does or does not withhold for Canadian dividends received in a tIRA or Roth?

I don't really want to move back to Fidelity or sell both of these issues... I guess that I could move the two Canadian issues back to Fido, but then I would have preferreds spread out among 4 different retirement accounts and I'm trying to minimize that hassle too.

 

[aja8888]

aja, did you ever get this resolved? Have any of you who have Canadian preferreds in a Schwab tIRA found a way to avoid it and if so, how?

No, I just sold the issue shortly after that. No more Canadians for me.

 

[brokrken]

Have any of you who have Canadian preferreds in a Schwab tIRA found a way to avoid it and if so, how?

I don't think this will help much, but I also had this issue at Schwab, but with a common stock, SAN. I never could get it figured out, so the only way around it was to take the dividend as stock, where they didn't withhold.

 

[pb4uski]

Yeah, the Schwab guy just called me back. I guess that some of these Canadian preferreds can be held by DTC and those that can't be held by DTC are held by Citi... if your particular ticker is held by DTC then no withholding but if held by Citi then Citi withholds 15%. I repeated it back to him and asked him if he realized how stupid that sounds... and he said that there was noting that they could do.

I'm going to call Vanguard and see if they withhold... if they don't then I'll have them transferred to my Vanguard tIRA. If Vanguard does withhold then I'll either transfer them back to Fidelity or sell them. Actually, they are my two best gainers so perhaps I should just sell them anyway but at the same time they are the two highest yielders too so I would sort of like to keep them.

 

[Mulligan]

Yeah, the Schwab guy just called me back. I guess that some of these Canadian preferreds can be held by DTC and those that can't be held by DTC are held by Citi... if your particular ticker is held by DTC then no withholding but if held by Citi then Citi withholds 15%. I repeated it back to him and asked him if he realized how stupid that sounds... and he said that there was noting that they could do.

I'm going to call Vanguard and see if they withhold... if they don't then I'll have them transferred to my Vanguard tIRA. If Vanguard does withhold then I'll either transfer them back to Fidelity or sell them. Actually, they are my two best gainers so perhaps I should just sell them anyway but at the same time they are the two highest yielders too so I would sort of like to keep them.

PB, Schwab is an OTC Canadian disaster. TD is decent on withholding or not correctly most of time and always designated QDI correctly. Vanguard for me anyways shut down all Canadian OTC purchases. I was allowed to hold what I had but since sold.
My only problems were occasional incorrect withholding held in a Roth. I threw in towel and just hold when I do in taxable account and get the money back when I file my taxes.

 

[pb4uski]

No, I just sold the issue shortly after that. No more Canadians for me.

PB, Schwab is an OTC Canadian disaster. TD is decent on withholding or not correctly most of time and always designated QDI correctly. Vanguard for me anyways shut down all Canadian OTC purchases. I was allowed to hold what I had but since sold.
My only problems were occasional incorrect withholding held in a Roth. I threw in towel and just hold when I do in taxable account and get the money back when I file my taxes.

I ended up throwing in the towel too. I did talk with Vanguard and they said that they do not do 15% withholding for those securities but they would not accept one of my two tickers. For 2 tickers out of about 40 that I currently have it just wasn't worth the effort so I sold them... for a lot more than what I paid for them... so overall the trip was good.

Now the hunt for replacements begins.

 

[Mulligan]

PB, Here is one to think about...I bought 12 shares at it is a $1000 par issue..

For those that may be interested, Edison International parent of Southern Cal Edison issue a $1000 “par” preferred that went live today. A pedestrian 5.375% fixed, for first 5 years. After that resets to 5 year treasury bond yield plus 4.698%. Resets in March 2026 and every 5 years thereafter. There is no utility preferred with that high of a reset adjustment out there which is the long term appeal. Reset preferreds are just entering US market. Ute NI-B issued one a couple years ago that resets in March 2024 with a 3.63% plus 5 year and presently trades at $27.27.
I personally bought 12 today off the bond desk using the cuspid as this will not trade on the exchanges or OTC.

https://www.sec.gov/Archives/edgar/data/827052/000119312521067286/d312913d424b5.htm

 

[pb4uski]

That sounds interesting, but I already have a slug of SCE-L (aka SCE.PRL) that has a 5% coupon and I'm in it at $23.10 for a 5.4% yield.... would the above issue be duplicative from a diversification perspective? As I read it it was issued by the parent rather than the operating subsidiary, right?

It looks like the sub is a slightly better credit all else being equal? SCE-L is BB+ and SCE's senior debt is BBB, a notch higher than the parent's senior debt so I'm guessing that the parent's preferred would be BB.... make sense?

That 4.698% reset does seem attractive... the 5-year treasury would only need to be 0.302 to get the same "coupon" as SCE-L... anything above that would be gravy. What was the pricing like?