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

PVTBP seems to have hit a wall on the way back to $26 and above. Hopefully, as the next dividend date draws nearer, we will see a little firming of the price to $26.50 or better.

It's a done deal that this will be called - question is when?

Guess I'm betting that it will be after the merger, and very shortly thereafter. If I'm correct, we have 2 dividends; if not, too bad.

I chickened out as my thesis was broken... When Capital One brought that 5.1% to market that scared me off... I captured one divi profit and bailed... I could easily make a case they hold off calling until merger which is still possible... Its just I felt so confident thinking the best they could do is issue a 6% non cum, but the market is going crazy... Mostly I had too much risked at 2000 shares, knowing I had 60 cents locked up already, so I bailed.
Did you notice KTH crazy trading today? Bouncing to $33.35 before settling back to $32.38. Almost sold at peak, but I am intent on keeping these due to their decent yield, non callable feature, and 2028 call.


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[Mulligan]

Ok, Im weak... Rain cancelled my golf today, again... Half of my KTH is in my HSA and I couldnt resist selling at 33.45 for an easy $400 tax free profit holding a week. My other half is frozen in another account as trading fees too high there... That is why I put half there so I wouldnt sell them all, ha!
Earlier in day with some of my free cash I bought 300 shares of EYMXP. A big dump seller is out and still has several left for tomorrow... Its past call and above par but still yielding 6%. A 25 million float which is small. They also have bigger baby bond floats outstanding near that yield, so I am not too worried about a near term call.. Just my opinion for myself. Also sold 100 more shares of BGLEN at $104 and bought them right back at $103.50... I am milking this BGLEN cow for every penny I can get out of this skittish call scare issue I can.


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[Mulligan]

Bought 200 shares of PJS. Been hunting this issue down for several weeks and always get screwed over and front run. Wanted 300 but I will give up and leave it at 200... Since I couldnt get that other 100, I just threw in towel and bought 38 more shares of BGLEN to clean out the account... Back over 500 shares again...Ooops!
So until I can collect a divi on BGLEN and look to flip some, I am probably hunkered down for a bit...Have one order outstanding that may sit for months as it rarely trades. So this is what I have now...
AILLL/AILNP, EGYKP, EYMXP, PJS, BGLEN, KTH,PFK,CTWSO, CTWSP,
CVB, CBB-B, GJP, UEPCO, PVTBP.


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[Golden sunsets]

Mul-why did you sell CNTHP and CNLPL? Was it to take profits? I also saw reference to you attempting to purchase a preferred that had only one share traded recently at 175. Was that CTPPO?


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[Mulligan]

Mul-why did you sell CNTHP and CNLPL? Was it to take profits? I also saw reference to you attempting to purchase a preferred that had only one share traded recently at 175. Was that CTPPO?


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Ugh, rained out again today...All 3 golf tourneys this week rained out...Cant rule out a trade today, ha!
Golden, unfortunately the reason I own no CNTHP or CNLPL is a simple one...I went to the well one too many times buying/flipping and goosing my returns. I have not been able to find a suitable reentry point. So I have had to move on to other near quality issues.
No, it wasnt CTPPO, though I would like to have it though. The one I am pursuing is so old electrical utilities were largely not even created yet, ha!
I did a break down of my preferreds... 93% of my value is investment grade, 81% regulated utilities, average age of each issue 28 years, and current yield 6.15%. The bogey man is all but KTH and PFK are past call and largely over par. Thus my desire to churn and flip and reenter to "fully milk the cow" in case I would get caught holding the "call bag". Though some I believe will never be called provided we dont get negative interest rates.


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[Mulligan]

Bought 180 more shares of PJS at $26.52. The 92 cent 6 month dividend is coming soon, so this makes a safe play... But at 380 shares this is the limit with this issue.


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[Sunset]

Bought 180 more shares of PJS at $26.52. The 92 cent 6 month dividend is coming soon, so this makes a safe play... But at 380 shares this is the limit with this issue.
...

if the call price is $25, won't this mean you still could lose a small amount if it got called Monday ?

And only 380 shares, is this because you view it as more risky ? or just don't have cash for more ?

 

[Mulligan]

if the call price is $25, won't this mean you still could lose a small amount if it got called Monday ?

Certainly! But of my 15 issues, only 2 are not past call above par. So "calls" arent really a concern for me. I largely have avoided them and try to poke into unique situations where it doesnt look probable. They had a partial call of the issue way back in 2010... This makes me think all the call warrant holders are shot and have been executed or it would have been finished off years ago with this nice 7.1% debt yield.
The underlying issue which is a 7.55% debenture ultimately now the responsibility of CoreLogic is uncallable until 2028. The company is fine in this present mortgage market and has paid 14 years... I like the 2028 backstop also.
But this is ultimately just a best guess effort on not being called. But I will risk the 60 cents to get into a 7% plus yield that is not a 30 year out call.


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[Slow But Steady]

A quandary

Here's a quandary I imagine many of you are also having.

I bought half a position of KCC a bit above 29. Now it's almost 34. If I sell now, I pocket over 2 years of dividend, but then I have to find another place to invest those funds.

Many of the my other positions have also gone up quite a bit. KCC is just the most pronounced.

So, are you folks selling, sitting tight, buying more, or

Slow

 

[Mulligan]

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

Well here is my take... Many of these I recommended like KCC, but I am out of now and sold quite a bit earlier. And selling had nothing to do with safety of issue. It is the fact there could be call warrant holders who exercise the right to take the rest of the issue. Remember this is not a growth stock but an income issue. KCC is what 14 years old and now all the sudden in August 2016 is worth almost 20% above call price? Its present yield is now 6%. You can find that in other issues as safe and avoiding a possible 20% haircut.
Just my philosophy, but I NEVER expose myself to that kind of call loss..Your purchase price is irrelevant, now. Its what its worth now that matters. And this is real money that you earned (at todays price anyways)
Its not a growth stock and I would lock in the cap gain and pocket the 2 years of bonus dividends and reinvest in something closer to par.
But I do this almost weekly... And KCC at this price if it was a bit more liquid to be candidate for what I have done with KTH...Buy the dips and sell the rips, rinse and repeat.
Lets phrase the question a different way...Lets say I said..."Hey Slow, I got this great investment for you called KCC. You can buy it at $34. Its Yield to Call if held to maturity is 5.57% if bought today, but it is possible you could buy today and lose 20% tomorrow to a call"..... Would you find that to be a "compelling investment option" and say..."Gee Mulligan, thanks for the hot tip!"?



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[Texas Proud]

I sold my KCC at a lower price... so yes, I would sell it at this higher price...

It is getting harder to find something that is not overpriced... but as Mulligan said I want to reduce my call risk as opposed to keeping 'yield'...

Also, since you have 2 years of divis, you can buy a lower yield issue with less call risk and still make more money than holding what you have... by whatever yield you purchase with the money...

Now, if the issue is below call price then the decision is harder... you do not have the call risk, but still have 2 years of divis that you can pocket... I did it on one issue, but not another.... but am having a bit of trouble finding what I want to invest into.... I have a few bids out and hope the price comes down just enough to fill.. the big thing in this that I can see is patience...

 

[Mulligan]

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

Patience is always excellent advise, Texas! And if we havent been in such a "shoot fish in a barrel" environment I may have regretted a few, ha!
We all may have a bit of different desire when buying preferreds, but one I am mentioning here is a compelling risk/reward based on safety and current yield for those looking for "conservative" issues..
EYMXP is a $25 million float, 6.25% par, past call, 80% institutionally held issue from Entergy Mississippi. It normally has daily trade volume of about a 100 due to the fact it is so tightly held by institutions. But there is a dedicated seller with Im guessing 10k or more that is unwilling to budge below $26.05. In fact friday he raised it to $26.08. It is not a noticable issue due to lack of trading volume. But at $26.05 it would represent a nice entry point for a 6% utility preferred. I bought 300 (Thursday at $26.05) and wish I would have bought 500. But I would have had to sell something because I wanted to get PJS at price point I got yesterday. So my only option is to sell some BGLEN, and that cant happen yet as the looming divi and flip option afterwards is too compelling for me. Since Entergy Miss has some outstanding baby bonds of similar yield and considerbly bigger floats, they would fall first before a small perpetual would, I consider it safe for now. Moodys also considers the company safe for those unfamiliar with the company. It is Mississippi's biggest regulated public utility and a low cost provider of electricity.

Moodys upgraded from stable to positive last week...
....Senior Secured First Mortgage Bonds, Affirmed Baa1

RATINGS RATIONALE

"Entergy Mississippi is benefiting from the successful implementation of forward-looking cost adjustments within its formula rate plan" said Vice President Ryan Wobbrock. "These adjustments should improve EMI's margins going forward and result in sustained cash flow to debt metrics around 20%."

Last month, the Mississippi Public Service Commission (MPSC) approved a rate stipulation settlement, between EMI and the Mississippi Public Utilities Staff, resulting in a $19.4 million base rate increase as well as the inclusion of several rider mechanisms to recover other costs on an annual basis. Importantly, the formula rate plan (FRP) order also incorporated, for the first time, adjustments to true-up the known and measurable costs incurred subsequent to EMI's filed, historical, test year. These adjustments improve the timeliness of cost recovery and boost cash flow beyond what EMI has already been achieving through the FRP.

Moody's views the FRP as a significant credit positive since it provides a dependable and clear framework for timely operating cost recovery. This translates into a high degree of visibility and predictability into EMI's future operating margin, cash flow and debt service. As a result, EMI has shown some of the most consistent and predictable financial margins among vertically integrated peers over the last five years. In addition to being very stable, EMI's margins should now increase due to forward-looking adjustments, which should also improve cash flow to debt ratios.




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[Coolius]

Here's a quandary I imagine many of you are also having.

I bought half a position of KCC a bit above 29. Now it's almost 34. If I sell now, I pocket over 2 years of dividend, but then I have to find another place to invest those funds.

Many of the my other positions have also gone up quite a bit. KCC is just the most pronounced.

So, are you folks selling, sitting tight, buying more, or

Slow

I am in a similar situation as you, Slow.

Bought KCC at $29.24 in February and captured 1 dividend in March. Debating if I should sell, but cash is building up in my account and I don't really want to put too much into issues yielding in low 5%.

Remember that if KCC is called, the redemption price is $25 + $2.68, for a value of $27.68 plus accrued dividend. So the premium we paid is about 1.5 dividend above redemption value.

So, next month, my premium will be totally offset by dividends received. Actually, accrued dividend up to today covers everything now.

This is where Mulligan and I tend to differ; I am leaning towards riding the gravy train until a call since premium has been recovered. It is not a big position, rather small in fact, so not overly concerned either way.

 

[Mulligan]

Coolius brings up a good philosophical point. He is more concerned with income and loss compared to initial investment... Nothing wrong there...I take a more "total return" viewpoint... If price dropped back to $27.68 and no call, I would still consider it a loss of capital by not selling at $34. And would make be mad I didnt take it considering I can find suitable 6% replacements now. And remember that is all its yielding at its current price. One must evaluate the yield on current price not purchased price.
But like Coolius also said if it isnt much and if its considered a hassle then maybe it isnt worth it anyways... Me personally I love locking the profit down and either buying later again lower or buying one that is similar and had a little dip. It seems like I never have a problem with coming up with things to buy, ha! The only limitations is usually I dont have any money to buy it.


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[Coolius]

My philosophy, FWIW, will not be relevant or applicable to many in the investing world - but it works for my peace of mind, and that's what counts.

I set a goal of a return of $XX,XXX each year. I track my progress on a monthly basis. These are mostly income stocks - Preferreds, ETDs, Bonds, plus a few Blue Chips ( LMT, JNJ, etc ). Also have 15% in cash now, waiting to be put to work in any meaningful pullback.

If I take a cap gain on an income component, I feel the loss of the income until such time as I can replace it. Again FWIW. I know TR types will not see it that way, nor should they.

Also look for opportunities to do a bit of swing trading, flips, and cash-secured puts/covered calls strategies, making use of the cash in the account.

That's what makes the market - so many different approaches - and all work, until they don't.....

 

[Texas Proud]

Just a quick question.... where do you guys look to get the ex-dividend dates

I would like to know for sure when they are happening, but the few sites that I look at have an old dividend date but not an ex-dividend date...

 

[Coolius]

Just a quick question.... where do you guys look to get the ex-dividend dates

I would like to know for sure when they are happening, but the few sites that I look at have an old dividend date but not an ex-dividend date...

My broker usually has the next ex-dividend date when I look up a stock.
If the next ex-div has not yet been declared, I usually count forward 90 days and use that as a rough date until declaration.


Try Dividend.com as well; but some of the illiquid Preferreds discussed here cannot be found on that site.

 

[Slow But Steady]

Regarding KCC, I guess I'm a total return investor as well, so I will think seriously about selling it.

By the way, I have more time since I've retired, so I'm also looking into using covered calls and cash-covered puts to produce some income. Coolius, are you using Think or Swim, or something else?

 

[Sunset]

In your situation I would sell KCC, for all you know in 2 years time you could pick it up cheap as how much longer can this bull run ?

 

[Mulligan]

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

Just a quick question.... where do you guys look to get the ex-dividend dates

I would like to know for sure when they are happening, but the few sites that I look at have an old dividend date but not an ex-dividend date...

For some of them it works to google something like this...Say a CNLPL issue for example.... Eversource declares preferred stock dividends....
And then find one that is the most recent date... The pink sheet illiquids like Coolius states are pretty wonky at times with brokerage websites showing them correctly at all times. There gets to be a predictability in them though... Preferreds can only be paid after being
Declared which can only happen after a Board of Directors meeting...They almost always due this year to year on same rolling date. For example if in 2015 it was declared on 2nd Thursday of August, it would also happen the following year on the 2nd Thursday in August. Some declare months ahead and others a mere 2 weeks ahead.
So if you find the declaration date for 2015 of the quarter you are looking for, more than likely it will happen the day of the week the following year.


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[Coolius]

Regarding KCC, I guess I'm a total return investor as well, so I will think seriously about selling it.

By the way, I have more time since I've retired, so I'm also looking into using covered calls and cash-covered puts to produce some income. Coolius, are you using Think or Swim, or something else?

Slow, I have ThinkorSwim, but do not use it.

The option strategies I use are basic ones - no exotic stuff like Iron Condors, Butterflies, diagonal, or verticals.

Just plain old vanilla stuff - covered calls, and cash-secured Puts.

My aging brain cannot process the complexity of the exotic stuff, and in retirement I don't have much desire to do so. Too much like work - heck, it IS work!

 

[Slow But Steady]

Slow, I have ThinkorSwim, but do not use it.

I have Streetsmart Edge (the Schwab product) and ThinkorSwim (from TD Ameritrade, if anyone's interested).

Like you, I'm planning on nothing more exotic than covered calls and cash covered puts. I haven't placed a single options trade yet, but it looks like using Think or Swim it will be easier to figure out when it's a good time to sell a put or a call than using the Schwab platform.

 

[Coolius]

I have Streetsmart Edge (the Schwab product) and ThinkorSwim (from TD Ameritrade, if anyone's interested).

Like you, I'm planning on nothing more exotic than covered calls and cash covered puts. I haven't placed a single options trade yet, but it looks like using Think or Swim it will be easier to figure out when it's a good time to sell a put or a call than using the Schwab platform.

You're probably correct; the ThinkorSwim platform allows you to see the break points where profit becomes a loss, which is useful.

However, for the many years doing this, I look at charts and try to sell puts at around what I think is a support floor price - if the premiums make it worthwhile.

When I sell Covered Calls, I usually choose a strike 1 or 2 notches above the current quote. Looking for only small gains, no home runs for sure.

My Preferred/ETD portfolio provides for my living expenses; so gains from options are icing on the cake, I don't want to risk too much in doing this.

 

[Sunset]

I recently bought CBB-B 200 shares Aug 3 for $50.17 for my DFIL, and today another 200 shares for $50.15 for DW.

These were both orders I had put in and they had sat there for a week or so before being triggered.

 

[Coolius]

I recently bought CBB-B 200 shares Aug 3 for $50.17 for my DFIL, and today another 200 shares for $50.15 for DW.

These were both orders I had put in and they had sat there for a week or so before being triggered.

Nice. I had a GTC bid triggered today as well, for 200 CBB-B, at $50.16.

Now let's hope that this one remains uncalled for a long, long, time......