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

[Mulligan]

The HNH selling pressure is very much out there now on SPLP-a. Might stay this way awhile so it could go lower.

 

[Texas Proud]

Sold off my ATGFF for a nice quick 5% plus quick gain, and 2 monthly divis also... Wasnt entirely comfortable owning this...Did a high low pair trade today...Bought 300 more SPLP-A at 21.55 and bought 300 IPL-D at $24.96. I see great value in SPLP-A with the selling pressure from using it to close out the remaining 30% of HNH it didnt already own...SPLP using the A to buy out the remaining shares of companies it has controlling interest in. It may sag more as SPLP-A is generally sold not bought as it was never an IPO... But in 16 months you get a $25 cash put on 20% of your shares...A 13% return! And other 80% matures in 2026 for an almost 9% return holding until maturity. This is a nice little American conglomerate, not some island based shipper with similar yield. Web Bank is a nice little gem they own that isnt fully valued on their balance sheet. Something to consider...I bought the IPL-D to keep some money safe issues as I have drifted away a bit from some ute preferreds. Why pay $26 for that new Alabama Power issue when this one is really about as solid and yields more (though not eye popping at 5.11% lol) and under par now again.

Just started to look into this one...

Why do they have to cash out some in 16 months? I have not see any info on that... heck, not much info anywhere on this one...


However, I did see in the IPO of the company where they were talking about the preferred.... they do not have to pay cash... they can pay in units of the company.... so you have to take into consideration that you might have to sell that and if a lot are selling the price will go down...


Still, this one does interest me and I would like to get more info on it...

 

[Mulligan]

Its February 2020...I made it 16 months from fantasy...I am out and on my phone. When I get home later I will link u some info...The 2/2020 is definitely a $25 cash payment on you putting your 20% of shares. Gabelli insisted on that to be in there...Yes they can offer stock which you would have to then sell. Many preferreds have that in prospectus. So that isnt totally unusual. They have paid all 3 divis so far in cash. Common stock has been under book value so I doubt they would do that unless they had a cash crunch.

 

[bobandsherry]

Hey Texas Proud:

From the offer info on SEC's site:

In addition, SPLP will offer to repurchase or redeem, for cash on a pro rata basis, 20% of the SPLP preferred units to be issued in the transaction within the first three years after completion of the offer.

Then further down:

We may pay the redemption price for the SPLP preferred units in SPLP common units. As a result, holders of the SPLP preferred units may become subject to the risks associated with the SPLP common units.

Except for the requirement that we must offer to repurchase or redeem, for cash on a pro rata basis, 20% of the SPLP preferred units to be issued in the transaction within the first three years after completion of the offer, the terms of the SPLP preferred units enable us to pay the redemption price for the SPLP preferred units in cash, SPLP common units or a combination of both, at the sole discretion of the SPLP GP Board. To the extent we elect to pay the redemption price in SPLP common units, holders of the SPLP preferred units will become subject to the risks associated with the SPLP common units. See “— Risks Related to SPLP’s Business.”

 

[Mulligan]

Just started to look into this one...

Why do they have to cash out some in 16 months? I have not see any info on that... heck, not much info anywhere on this one...


However, I did see in the IPO of the company where they were talking about the preferred.... they do not have to pay cash... they can pay in units of the company.... so you have to take into consideration that you might have to sell that and if a lot are selling the price will go down...


Still, this one does interest me and I would like to get more info on it...

Here is the official release of the HNH buyout with preferreds.

https://seekingalpha.com/pr/1687210...ve-agreement-steel-partners-acquire-remaining

There are some decent articles under analysis tab on SPLP site in Seeking Alpha. This will familiarize you with the company...Steel Partners website is pretty good source too.

 

[Mulligan]

Just started to look into this one...

Why do they have to cash out some in 16 months? I have not see any info on that... heck, not much info anywhere on this one...


However, I did see in the IPO of the company where they were talking about the preferred.... they do not have to pay cash... they can pay in units of the company.... so you have to take into consideration that you might have to sell that and if a lot are selling the price will go down...


Still, this one does interest me and I would like to get more info on it...

Texas, I forgot to answer one of your questions...Specifically about the $25 cash put on 20% of the shares....The genesis of SPLP-A was not an IPO. There has never been an IPO of this issue. It was used to buy out remaining shares of Steel Exel it did not own. Gabelli was a big minority owner of Steel Exel. The original issuance did not include the 20% put. Gabelli insisted on it for the full acquisition to take place. Once Steel Partners put that it the preferred, Gabelli voted its blessing to approve the transaction.
The issue will ultimately be redeemed at $25, but it has never traded at $25. It was given in the buyout to shareholders of Steel Exel and now Handy and Harmon. Steel Partners then created a ticker symbol later to allow liquidity for people who did not want to keep their preferreds after they were exchanged to them.

 

[MooreBonds]

Texas, I forgot to answer one of your questions...Specifically about the $25 cash put on 20% of the shares....The genesis of SPLP-A was not an IPO. There has never been an IPO of this issue. It was used to buy out remaining shares of Steel Exel it did not own. Gabelli was a big minority owner of Steel Exel. The original issuance did not include the 20% put. Gabelli insisted on it for the full acquisition to take place. Once Steel Partners put that it the preferred, Gabelli voted its blessing to approve the transaction.
The issue will ultimately be redeemed at $25, but it has never traded at $25. It was given in the buyout to shareholders of Steel Exel and now Handy and Harmon. Steel Partners then created a ticker symbol later to allow liquidity for people who did not want to keep their preferreds after they were exchanged to them.

So what is your plan when this thing reaches final maturity if they announce they will issue common equity either partially or fully in lieu of cash? It doesn't trade options, and I don't know if you can short a publicly traded LP. Given where the preferreds are trading, I would expect a cliff of common shares in the hands of people looking to dump it to drop at least the same amount as the preferreds have below par. And I don't think this thing has any legs or public interest to support it if a crowd stampedes for the exits, and would take quite a while to get back to where it was before the issuance. It declared a one-time special dividend of $.15/share last December. Might be an annual tradition, but it's not like it's some 8% distribution each year. Given that it issues K-1s, AND doesn't pay a regular/sizable dividend, there's even more reason for someone to dump it and run. Could require holding for 1-2 years to get back to where it was pre-dump. I have 250 shares of the SPLP-A...didn't think through all of that before I bought.

If this dropped to 20, I might pick up a few more SPLP-A, but not much higher than that...

 

[Texas Proud]

Thanks Mulligan... this looks like a winner to me... and one to hold to maturity.... looks like they have plenty of cash flow for this...


Where do you find securities like these?

 

[Mulligan]

Texas I dont remember...I think it was Seeking Alpha last year.

 

[Mulligan]

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

So what is your plan when this thing reaches final maturity if they announce they will issue common equity either partially or fully in lieu of cash? It doesn't trade options, and I don't know if you can short a publicly traded LP. Given where the preferreds are trading, I would expect a cliff of common shares in the hands of people looking to dump it to drop at least the same amount as the preferreds have below par. And I don't think this thing has any legs or public interest to support it if a crowd stampedes for the exits, and would take quite a while to get back to where it was before the issuance. It declared a one-time special dividend of $.15/share last December. Might be an annual tradition, but it's not like it's some 8% distribution each year. Given that it issues K-1s, AND doesn't pay a regular/sizable dividend, there's even more reason for someone to dump it and run. Could require holding for 1-2 years to get back to where it was pre-dump. I have 250 shares of the SPLP-A...didn't think through all of that before I bought.



If this dropped to 20, I might pick up a few more SPLP-A, but not much higher than that...

Good question Moorebonds....I guess I have read enough preferreds that have this written in their prospectus it doesnt bother me. BGEPF is one that comes off the top of my head...Bunge has never issued shares in lieu of cash. Lichtenstein owns a buttload of common..He doesnt want it cratered.
Their balance sheet is fine...9 years from now, who knows...They like buying small companies on the cheap using their NOL’s to offset their profits to reduce taxable payments. Showing profits isnt what they want to do, or based on what people have written.
Web Bank is essentially a “hidden asset” on the books based on what I have read...
Overall though yes, these types of structures (MLP with a controlling owner Lichtenstein) common stock will trade at a market discount. Though past 12 months SPLP is up 28%. It boils down to ones comfort zone. I am not betting the farm but feel comfortable holding under sell pressure from acquisition issuance.

 

[Sunset]

.......Bought 300 more SPLP-A at 21.55 ..... I see great value in SPLP-A with the selling pressure from using it to close out the remaining 30% of HNH it didnt already own...SPLP using the A to buy out the remaining shares of companies it has controlling interest in......

I just bought 300 at $21.38 the selling pressure continues...
I did buy within an IRA as I hate the MLP tax stuff , (I'm thinking it applies here), if not well that is where I had the cash sitting so that is where I'd buy quickly for now.

So Mulligan, when you say you bought 300 more, how many do you have ?

 

[Mulligan]

I just bought 300 at $21.38 the selling pressure continues...
I did buy within an IRA as I hate the MLP tax stuff , (I'm thinking it applies here), if not well that is where I had the cash sitting so that is where I'd buy quickly for now.

So Mulligan, when you say you bought 300 more, how many do you have ?

Sunset I have had 3 people familiar with this from another forum offer same conclusions below...So its tax wise a nothing burger..

Note that unlike the K-1s issued to Limited Partners, the K-1s issued to holders of Preferred securities issued by MLPs are simple reflections of the interest income paid to the preferred holder and do not get you off in the weeds of partnership income accounting and, specific to your concern, UBTI.
I just got home from golf and bought 300 more at $21.05. This brings me to 1000 shares...That is my limit. I usually dont buy falling knives, but I knew this was coming. You just dont know the bottom. Its not company specific issue which is my worries but buy sell imbalance. It may hit $20 for Moorebonds goal. I know the put in cash is in force and I know it terminates in less than 10 years. PIK or cash Im fine with. I may just hold until the put...Will reevaluate then, but plan on holding these..
I also have a 1000 share recent purchase of KYN-F so a little hi/low on yield buys...But term dated....My recent focus has been term dated and adjustables.

 

[Mulligan]

As I assumed the sell pressure continues...36,000 shares...Over 7 times daily volume average. Once again no company issue as the common stock was actually up a nickel today... Keep in mind I am just posting what I do not convincing anyone to buy. I dont like falling knives but since I knew this was coming I can handle it and view it for me as a buy opportunity. Usually I have the sky is falling mentality, lol. All purchases have plus and minuses. I have moved some purchases around this week locking in some gains and buying other issues...I have some taxable money I am patiently sitting on trying to flag an illiquid with much luck but will keep trying... I will write later what I got and why later for amusement purposes only!

 

[CoolChange]

Building Out My Positions As Well; so; Another Question

With many thanks to the pointers here, I am building out my positions as well.

It looks like I am basically just following Mulligan's lead. Apparently, I should be following more closely though: I picked up 500 SPLP-A this morning at $21.37 before its afternoon swoon.

...
I just got home from golf and bought 300 more at $21.05. This brings me to 1000 shares...That is my limit.

And, to offset this and let me sleep better at night, I picked up 400 IPL-D at $24.97. (The reasoning below made perfect sense to me.)

....Something to consider...I bought the IPL-D to keep some money safe issues as I have drifted away a bit from some ute preferreds. Why pay $26 for that new Alabama Power issue when this one is really about as solid and yields more (though not eye popping at 5.11% lol) and under par now again.

Now, I am close to out of cash in my IRA where I have been building these positions. This situation brings me to my next question: Is there a good one-stop shop to find out if dividends from a specific issue are qualified or not?

Currently, anything that throws off any kind of dividends is going into tax deferred. But, as my overall allocation gets more conservative, I may need to start holding some issues in after tax accounts.

 

[Texas Proud]

Mulligan.... I got 400 at 21.35... it is half of what I want... I saw it was dropping and did not want to jump in all at once...

I will pick up some more in a few days... and heck, might go to 1000 if some other things happen.....



Like any stock, everybody has to determine what is good for them and what is not... there are many you have that do not fit with what I want... but some, like this, does... so I appreciate the heads up...

 

[Coolius]

Coolchange, QuantumOnline is a good source for determining if a dividend is Qualified or not.

QuantumOnline.com Home Page

I find it very useful, and have been a contributor to the site for several years.

 

[Mulligan]

Mulligan.... I got 400 at 21.35... it is half of what I want... I saw it was dropping and did not want to jump in all at once...

I will pick up some more in a few days... and heck, might go to 1000 if some other things happen.....



Like any stock, everybody has to determine what is good for them and what is not... there are many you have that do not fit with what I want... but some, like this, does... so I appreciate the heads up...

I have been fortunate will most trades....But my JBR has been a real stinker!!! I bought about a week too soon. Of course on these crapper issues, I only have 300 shares or a bit over $4k. But I am down $300 already! Pennys debt has been taken to the woodshed the last few weeks and I got a belt strap welt across my rear end with this! I hope their holiday season makes them some money so these junk bonds get some life in them.
SPLP-A dropped that is fine and expected so I went lower buying. I wouldnt consider this with JBR.

 

[Mulligan]

Coolchange, QuantumOnline is a good source for determining if a dividend is Qualified or not.

QuantumOnline.com Home Page

I find it very useful, and have been a contributor to the site for several years.

This is my go to source also, Cool, like Coolius stated...QDI and Non QDI is an eternal problem for me...I dont have much money in tax free accounts. And I have a pension that helps butt me close to edge of 28% bracket plus state tax on top. So I need more QDI than non QDI. Its harder to find safe QDI income that is reasonably high yield. Non QDI you can buy Reit preferreds, baby bonds, BDC’s, MLP,and MReits amongst others...QDI is dividends paid from after tax company income generally (unless it is return of capital). This leads one generally to banks, financials a few utes, shippers. Though some companys issue QDI as leverage for their funds such as TY-, KYN-F, and Gabelli preferreds. Of course the yields in these are even lower.
Just an anecdotal observation but it appears easier to find “safer” 6% plus non QDI, than QDI. Of course ones tax bracket will determine what you buy and where you need to stuff it to minimize taxes.
I own some, but I consider low 5% perpetual QDI preferreds (such as IPL-D to be vulnerable now. It could drop to $22 without much of a yield spike. But I can live with that. I just try to balance perpetuals, with term dated issues, adjustable rate issues, and a few yield spicers thrown in. Outside of individual company performance, the different types of preferreds over the long haul will react differently. KYN-F will not fall off much..It is too close to maturity. Of course one pays for this safety and term with lower yield...The best advise is to what tradeoffs are important to you...safety? QDI? Duration risk? Income stream? Capital protection?
Coolius and I have similar issues. But we also have different goals though. Coolius is a bit more focused purely on constant income stream, but still keeps a modest wayward eye on his portfolio value. A different person from a separate forum is just trying to set up a constant income stream and has told me he doesnt give a rats arse what the price does as long as the divi is secure. He doesnt want to mess with term dated issues. If wants it set up to where if he died tomorrow his disinterested investing wife would have to do nothing but cash the divi checks.

 

[Mulligan]

I checked to see what I have now....
1) Till death or call do us part (or until I change my mind) perpetuals...CNTHP, CNLPL, MSEXP, AILLL, CTWSO, BURCP, DMRRP, FIISO, IPL-D... No compelling values here to buy now....But am not ever selling for various reasons.
2) Adjustables....NSS, HGH...NSS is a decent risk reward here, though it may be called in January.
3) Term dated... ABRN, SPLP-A, KYN-F, RILYL, SPLP-A... These are the ones I feel most comfortable owning now, but entry point matters.
4) Own them for now...JBR, LXP-C...
Have some more cash to put in on QDI. If I cant get what I want I may punt and buy more KYN-F or some GDL-B and just hold until maturity. I dont buy proportionally so different issues have different amounts. Total yield ave. is about 6.25%. Will go lower some if I buy more KYN-F or GDL-B, lol.

 

[Texas Proud]

I have been fortunate will most trades....But my JBR has been a real stinker!!! I bought about a week too soon. Of course on these crapper issues, I only have 300 shares or a bit over $4k. But I am down $300 already! Pennys debt has been taken to the woodshed the last few weeks and I got a belt strap welt across my rear end with this! I hope their holiday season makes them some money so these junk bonds get some life in them.
SPLP-A dropped that is fine and expected so I went lower buying. I wouldnt consider this with JBR.

I have traded them a few times... but settled on PFH which is similar... based on the same debt... and I bought a long time ago... down almost 17% in principal.... I have not calculated with divis though... I will probably do it with all the different shares of JBR, JBN and PFH....


This I am going to hold... I do not see JCP filing for BK anytime soon... and if they have a good season it should come back... I will hold and collect the high divis....

 

[MooreBonds]

Sigh..just now noticed that my MHO-a is getting taken from me next Monday. Mulligan timed it right again!

 

[Coolius]

Don't feel too bad, Moorebonds. I had some AHT-D taken last week, and another 3 more issues to be taken this month; TCF-B, NEE-H and UBP-F.

I have PSA-U on the endangered list as well, expecting it to go this year in all likelihood.

No fun for sure......

 

[bobandsherry]

Sigh..just now noticed that my MHO-a is getting taken from me next Monday. Mulligan timed it right again!

FYI - M/I announced the redemption back on 9/14. Time to find another money maker.

 

[bobandsherry]

I got in on ALLY.PR.A (GMAC Capital Trust) a year ago, past call date but thought it wouldn't be called. Up over 4% on the price and and 6.9% dividend, rate is adjustable. Continue to look that it isn't called any time soon.

 

[Texas Proud]

WOW.... I have had a standing order to sell CNTHP for $57.10 for awhile...


Just sold!!! So a good cap gain and just got the divi... so cap gain of 5 divis and 1 to be paid... a good flip IMO...


Will have to put in an order to buy it back soon...