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

[brokrken]

I could always just buy more NSS, SSW or SPLP, but already did some of that a few weeks back and looking for something new.

 

[pb4uski]

Took one more bite of the MTB- apple today at $1003. The $15.93 divi goes exD in 2 weeks. No redemption notice came with it so this 6.375% par high quality QDI cumulative bank preferred will live on.
I have over 50 shares of MTB- and MTB-C so this is an outside position and probably my favorite preferred now in terms of quality and yield.

Mulligan... where do you get the 6.375%...everything that I am seeing on both Quantum and Fidelity say 5%.

 

[Winemaker]

I'd be interested in getting the group's thoughts on any of the AFSI preferreds. AmTrust Financial recently went private and since the announcement the prefs have gotten crushed and the yields are ~ 12%. I can't find an S&P or Moody's rating, but Insurance industry specific rater, A.M best, has them at A-. The non-cumulative part scares me and they have issued more preferred shares in the recent years which also worries me. However, they are in a good cash flow business and going private puts me at a ease a bit that the people running the show now are fully vested in the success. Anyway, just a thought. Would love to hear your thoughts.

I bought the proverbial 200 shares in the $22 range before they went private. I still own them and bought some 200 more in my "play" or "speculation" account. The general thinking is that the new private owner/family will screw the preferred investor and default on the divvy. My thought was if they screw their preferred shareholders, who would do business with this insurance company? I mean if you screw over your preferred stock owners how would policy owners feel safe? The company would fold like a deck of cards. So I took a nibble more, thinking that. Hell it's only money!

 

[Mulligan]

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

Mulligan... where do you get the 6.375%...everything that I am seeing on both Quantum and Fidelity say 5%.

PB, this was one of those odd duck preferreds and presumably wasnt even issued in the beginning for public trading. It was a TARP issue during 2008 crisis that started out as a 5% issue. Then it got moved to a preferred that was to become a 9% issue in 2014 unless preferred owners agreed to it becoming 6.375%. Not wanting to lose it and knowing it would be redeemed if not voted for approval the preferred holders approved the adjustment.
This is why its a bank cumulative. This do not exist anymore. Only 3 in existence that trade...MTB-, MTB-C, and FIISO (I own all three). Since it was originally a TARP issue it has grandfathered status and is allowed to still be trading....

The dividend rate is scheduled to increase to 9.00% on and after 2/15/2014 if the amendment detailed in the prospectus is not approved by shareholders. On approval of the amendment the dividend rate will increase to 6.375% on and after 11/15/2013.

 

[Coolius]

MTB Bank just released a good earnings report, one can interpret that as good or bad news from the viewpoint of a MTB- shareholder.



Good, the bank is doing well, so dividends will continue.


Bad, because they may now have money to redeem the preferred series, thus destroying our income pipeline.


Like Mulligan, I have an overweight position in MTB-, and a small position in FIISO.


These are great sock drawer candidates if you can buy them at a reasonable price.

 

[Mulligan]

They dont think of it that way bankwise, Coolius. This is Tier 1 cap. The profits allow them to expand the balance and use for other things. It wont be called for that reason. Many of these small trust preferreds have their banks earning more profits annually than the value of the preferreds are and they dont redeem. They are looking at cost on capital. Actually the new JPM issue at 6% is a good benchmark for MTB. They wont redeem these preferreds for a reissuance on that differential. Not worth the cost. They need probably 5.75% to interest them unless they redeem for other unrelated reasons.

 

[Mulligan]

They dont think of it that way bankwise, Coolius. This is Tier 1 cap. The profits allow them to expand the balance and use for other things. It wont be called for that reason. Many of these small trust preferreds have their banks earning more profits annually than the value of the preferreds are and they dont redeem. They are looking at cost on capital. Actually the new JPM issue at 6% is a good benchmark for MTB. They wont redeem these preferreds for a reissuance on that differential. Not worth the cost. They need probably 5.75% to interest them unless they redeem for other unrelated reasons.

Think of it this way as the CEO of FISI said when asked about trying to buy out FIISO owners with an offer...He said..Our return on equity is over 10% so we still are making money off the 8.48% preferreds....Why would we waste money overpaying to buyout preferreds at 8.48% when our return on equity is higher?

 

[Coolius]

This is Tier 1 cap.

Good catch, I forgot about that, the Tier 1 capital. Problem with trying to keep facts about 30+ issues all at once, gets tough for a old hat like me.


Well the MTB preferreds seem to have shaken off their recent lethargy, now showing 427 shares traded today - HUGE volume for them, eh!

 

[Mulligan]

Good catch, I forgot about that, the Tier 1 capital. Problem with trying to keep facts about 30+ issues all at once, gets tough for a old hat like me.


Well the MTB preferreds seem to have shaken off their recent lethargy, now showing 427 shares traded today - HUGE volume for them, eh!

These MTB preferreds actually have two prices...The official one on a 100 block trade and the unofficial trades that occur 5-25 shares at a time...The MTB- bounced on a 100 block moving it to 1017. That was going to happen with exD approaching. MTB-C official pricing hasnt reflected where it has been trading. It has coming dribs and drabs around 1016... But is showing 1001 that cant be bought at. I have had a very nice run here loading up on these. But with present yield, and safety they just cant be considered as issues to sell.

 

[Mulligan]

Mulligan... where do you get the 6.375%...everything that I am seeing on both Quantum and Fidelity say 5%.

PB, I saw this and thought of your post. Here is the definitive proof of the payout. M&T just declared the quarterly preferred dividend this week for both series at $15.9375. You times that by 4 and divide by $1000 par and one gets the 6.375% par yield.
https://ir.mtb.com/news-releases/ne...-announces-dividend-declaration-series-and-22

 

[pb4uski]

PB, I saw this and thought of your post. Here is the definitive proof of the payout. M&T just declared the quarterly preferred dividend this week for both series at $15.9375. You times that by 4 and divide by $1000 par and one gets the 6.375% par yield.
https://ir.mtb.com/news-releases/ne...-announces-dividend-declaration-series-and-22

I believed you.. and later saw it in the description of the offering.

Does the substantial premium and a possible future call make you nervous?

 

[Mulligan]

I believed you.. and later saw it in the description of the offering.

Does the substantial premium and a possible future call make you nervous?

The call risk will be there... Preferreds are part of annual capital plan they send to Feds each year. They may not submit them which could put them at call risk in another another couple quarters. I have over 50 shares between the too, including buying 13 more this past Wednesday at $1003. So with $15.93 in the bag in 2 weeks, there is no premium or any exposure to call loss. In fact one could buy up to $1015 before end of month and not be exposed to a loss. I strongly suspect these will stay fairly anchored to par from the call risk.

 

[pb4uski]

Yeah, I saw that 1003... that was a great scoop!

 

[Mulligan]

Coolius alerted me the day after Christmas about a sell off in MTB-. I got 15 or so at $955 when it went crazy on a very short minutes downdraft. I then bought more at even par and then last go around at $1003.

 

[Mulligan]

Yeah, I saw that 1003... that was a great scoop!

BTW, I loved your kitchen update, very nice. The first picture doesnt give it justice that picture 3 did showing the actual interior. Pretty sweet!

 

[pb4uski]

Thanks! We are very pleased with the results.

 

[Winemaker]

Ouch! Amtrust just announced on the 18th that it is delisting the AFSI-D preferred from the NYSE exchange, but will continue to make all divvy payments. It sank 25% today.

 

[Mulligan]

Ouch! Amtrust just announced on the 18th that it is delisting the AFSI-D preferred from the NYSE exchange, but will continue to make all divvy payments. It sank 25% today.

Winemaker, I detest this company, but I bought shares at 14.50 and 14.37..600 shares total...Modest high risk play. At over 12% interest I had to stick my hand ot to catch a falling knife.

 

[Winemaker]

Winemaker, I detest this company, but I bought shares at 14.50 and 14.37..600 shares total...Modest high risk play. At over 12% interest I had to stick my hand ot to catch a falling knife.

I have blood on my hands, too. Nothing that glass of wine can't cure.

 

[Running_Man]

Winemaker, I detest this company, but I bought shares at 14.50 and 14.37..600 shares total...Modest high risk play. At over 12% interest I had to stick my hand ot to catch a falling knife.

What makes this company appealing?

 

[brokrken]

I have blood on my hands, too. Nothing that glass of wine can't cure.

Jeez, Mully, your insight on these guys basically talked me outta buying them and yet you dipped your toe. Dang

 

[bobandsherry]

Winemaker, I detest this company, but I bought shares at 14.50 and 14.37..600 shares total...Modest high risk play. At over 12% interest I had to stick my hand ot to catch a falling knife.

Like that is so unlike you, but MTB- and then this? Like opposite ends of the spectrum

 

[Texas Proud]

WOW.... I might have to stick my hand out and grab some of this...


Just wondering which is the better one to try and grab... I have looked at a few sites and the yields listed are different... Marketwatch has them at over 19%...


Anybody run the numbers?

 

[Running_Man]

I am looking at this and wondering what do people see in this? Amtrust is going private to avoid continued prying into very shaky financial reporting - they have been under SEC investigation for 5 years and that is probably why they want the preferreds off the NYSE. What exactly other than high payout is a positive for these securities

 

[Coolius]

With the Amtrust issues, I will be absolutely going out on a limb - and a weak one - if I were to buy any.


The risk level is too high for my tolerance, and so I have to differ from Mulligan and continue to stay away from the Karfunkel companies, just like I stay away from the Portnoy ( RMR ) companies.


I finally got 200 shares of JPEEL at $25.14 - paid higher than I would have liked, but it is a solid and SWAN type holding for me.