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

[Winemaker]

Monmouth Real Estate PR-C will be getting called sooner than 9/15/21 due to merger with Equity Commonwealth.

 

[Mulligan]

For anyone looking to invest monies may consider these.

For anyone looking for a more call anchored issue with relative value watch DTJ. Someone is controlled dumping as past few days it sags to around 25.34. It goes exD of 34 cents a week from Friday. So it basically is being bought at par at that entry point. The relative value is comparing it to sister 4.38% called protected DTB which is trading at $25.19. Throw in the fact utes are notorious slow “callers” and fact they may want to redeem the 6% DTY first which is redeemable this December, this one could have a little bit of staying power.
Also, there has been a decent volume controlled seller of SLMNP at $1050. I have a full position there. Its usually hard to get but the seller usually pops out each day at that price. 400 shares traded today which is a huge volume day.

 

[brokrken]

Thanks for the tip, Mully. Picked up 400 at $25.35 this AM

 

[RicDee]

Thanks for the heads-up. Got some DTJ today.

 

[Texas Proud]

OK, got an email about UBTI from Vanguard because I have preferred in a partnership...


Is all the income from a partnership subject to this tax? I thought it was just a part of the income...


Might have to sell my GLP-A....


On a side note... with GLP-B out now and fixed... is it a better holding? That is if I can hold it in my IRA.

 

[Sunset]

OK, got an email about UBTI from Vanguard because I have preferred in a partnership...


Is all the income from a partnership subject to this tax? I thought it was just a part of the income...


Might have to sell my GLP-A....


On a side note... with GLP-B out now and fixed... is it a better holding? That is if I can hold it in my IRA.

I wondering about how this could affect me, so I hope you don't mind answering.

Is the UBTI email from Vanguard regarding a taxable or non-taxable account ?

I have some in non-taxable and not Vanguard, but it does not trigger an broker email, probably due to the small amount.
I'm worried about a taxable account where I have bought some recently.

 

[Sunset]

Monmouth Real Estate PR-C will be getting called sooner than 9/15/21 due to merger with Equity Commonwealth.

Seems to me it will be after June, so really only a month or two early from the planned potential Sept date.

 

[Texas Proud]

I wondering about how this could affect me, so I hope you don't mind answering.

Is the UBTI email from Vanguard regarding a taxable or non-taxable account ?

I have some in non-taxable and not Vanguard, but it does not trigger an broker email, probably due to the small amount.
I'm worried about a taxable account where I have bought some recently.

An IRA account... and I got $2800 total


I doubled down on the security when it dropped a bunch and now have an $8000 gain plus the dividend

 

[youbet]

Monmouth Real Estate PR-C will be getting called sooner than 9/15/21 due to merger with Equity Commonwealth.

Thanks Winemaker for bringing this up.

I continue to find myself out of the loop on some of this information. (It was only from reading posts here that I got tuned into UBTI or the AILLL call for example.)

I have a substantial position in MNR/PRC and other than from you, haven't stumbled across this information. Where are you getting it?

And, again, thanks!

 

[Coolius]

Youbet,


Equity Commonwealth ( EQC ) is merging with MNR, transaction to be completed in 2H of 2021. Link is provided below:



The next dividend is assured, but after that it will depend on when they can get the transaction completed.


I also hold several hundred MNR-C, but am holding on.







https://finance.yahoo.com/news/equity-commonwealth-acquire-monmouth-real-031900940.html

 

[Winemaker]

Thanks Winemaker for bringing this up.

I continue to find myself out of the loop on some of this information. (It was only from reading posts here that I got tuned into UBTI or the AILLL call for example.)

I have a substantial position in MNR/PRC and other than from you, haven't stumbled across this information. Where are you getting it?

And, again, thanks!

I have an app on my my phone, Seeking Alpha, and it comes in handy. You put a portfolio in it, and it gives you live quotes and updates, if you choose. I check it fairly often and get a lot of good info. They have a website, also. Our favorite elder, Mulligan, is a regular commenter, under a different username, which I'll let him disclose if he chooses. Numerous articles on different subjects; it is free and some authors do hawk a subscription. Just beware about some of the articles, some is worth what you pay for, which is nothing. I've used it about 10 years.

 

[Mulligan]

I have an app on my my phone, Seeking Alpha, and it comes in handy. You put a portfolio in it, and it gives you live quotes and updates, if you choose. I check it fairly often and get a lot of good info. They have a website, also. Our favorite elder, Mulligan, is a regular commenter, under a different username, which I'll let him disclose if he chooses. Numerous articles on different subjects; it is free and some authors do hawk a subscription. Just beware about some of the articles, some is worth what you pay for, which is nothing. I've used it about 10 years.

Ha, Yep its Gridbird. It homage to my old Big Red NFL St. Louis Football Cardinals. Thats was their local nickname back in the day.... I doubled down on DTJ at $25.30. Its basically same price as DTB 4.37% issue now. Call volume was 6-1 DTJ over DTB. Somebody is selling out thinking the party is over. Im willing to take opposite bet since its basically below par now and nothing to lose.

 

[youbet]

Youbet,


Equity Commonwealth ( EQC ) is merging with MNR, transaction to be completed in 2H of 2021. Link is provided below:

Thanks! Great read. I own both the common (not much) and the preferred (7k shares). Both have been good to me.

My basis in MNR/PRC is about $24.66 so the call I was expecting in Sept at $25 PAR wasn't going to be too painful, beyond finding something else to do with the money. But I'm not quite sure what to do about the common. They're projecting the EQC shares I'll get in return for my MNR will reflect the MNR being worth about $19. But MNR closed at $19.49 yesterday. My basis is $13.73.

The next dividend is assured, but after that it will depend on when they can get the transaction completed.

Monmouth plans to continue to pay its regular quarterly common stock dividend and its Series C Cumulative Redeemable Preferred Stock dividend between signing and closing of the transaction.

Yeah, I see what ya mean per this paragraph from the article.

I also hold several hundred MNR-C, but am holding on.

It doesn't seem like it will make much difference. I own everything inside IRA's so no tax consequences and I suppose I can just sit back (while working on doing a better job of researching this stuff!) and watch.

Thanks eveyone for helping me along on this stuff!

 

[youbet]

Ha, Yep its Gridbird. It homage to my old Big Red NFL St. Louis Football Cardinals. Thats was their local nickname back in the day.... I doubled down on DTJ at $25.30. Its basically same price as DTB 4.37% issue now. Call volume was 6-1 DTJ over DTB. Somebody is selling out thinking the party is over. Im willing to take opposite bet since its basically below par now and nothing to lose.

I was a Chicago Cardinal fan back in the day! That was quite a while ago....... ! The Stadium they played in and Shared with the White Sox was torn down long ago........

 

[youbet]

I have an app on my my phone, Seeking Alpha, and it comes in handy. You put a portfolio in it, and it gives you live quotes and updates, if you choose. I check it fairly often and get a lot of good info. They have a website, also. Our favorite elder, Mulligan, is a regular commenter, under a different username, which I'll let him disclose if he chooses. Numerous articles on different subjects; it is free and some authors do hawk a subscription. Just beware about some of the articles, some is worth what you pay for, which is nothing. I've used it about 10 years.

Just downloaded the app. Will play with it later. Thanks!

 

[Mulligan]

I was a Chicago Cardinal fan back in the day! That was quite a while ago....... ! The Stadium they played in and Shared with the White Sox was torn down long ago........

Ha, youbet, Now that really is “old school”!

 

[Closet_Gamer]

Duration of PFFD?

Hi. Hope this is an OK sub-topic for this thread...

Is there a way to calculate the effective duration of PFFD?

I believe preferreds tend to perform like fixed income so rate volatility should impact preferred prices, yes?

Setting aside the tax treatment of some choices I'm considering, I see the following durations:

MLN: 8.94
VTEB: 5.26
SWAGX: 6.26

PFFD:

This is relatively short term money I'm working with (1-3 years), so interest near-term interest rate moves are a real consideration.

Thanks!

 

[aja8888]

Thanks for the tip, Mully. Picked up 400 at $25.35 this AM

I picked up 400 at the same price this morning.

 

[brokrken]

How did I not know TDE was getting called? I have to start paying more attention!

 

[bobandsherry]

I don't know who else holds a piece of CEQP-, but there's a "CONSENT SOLICITATION STATEMENT" filing on 5/17 relating to changes as one of the sponsors (First Reserve Fund) wants to exit. This would then trigger a change of control, so Crestwood is looking to change the terms of the preferred agreement to strike out the language relating to the exit of the sponsor / change of control.

From the letter:

As announced on March 25, 2021, we have entered into agreements with our former sponsor, First Reserve, providing for its complete exit from its investment in our partnership and transitioning us to a governance structure that includes a publicly elected board of directors. We believe these changes will further align the interests of management and our board of directors with those of our public investors, consistent with our long-term ESG strategy. These governance changes not only enhance the voting rights of holders of common units but also those of holders of preferred units, since holders of preferred units will be entitled to vote with holders of common units in elections of board members, as well as on other matters.

https://www.sec.gov/Archives/edgar/data/1136352/000119312521153359/d13751dpre14a.htm

This was also in the letter and caught my eye.....

We realize your time is valuable, and consequently, subject to receipt of requisite consents, we are offering a consent fee of $ per preferred unit to be paid to holders of preferred units who validly provide (and do not revoke) their consents to this proposed amendment at or prior to 5:00 p.m., Eastern Time, on , 2021 (subject to termination or extension).

it's fill in the blank as the amount of the consent fee, someone on another forum mention it was $0.125/preferred unit, or $1.25 per 100 block.

Might be better to force them to exercise the change of control. It currently has a floor of $10, shares closed today at $9.11

 

[pb4uski]

Hi. Hope this is an OK sub-topic for this thread...

Is there a way to calculate the effective duration of PFFD?

I believe preferreds tend to perform like fixed income so rate volatility should impact preferred prices, yes?

Setting aside the tax treatment of some choices I'm considering, I see the following durations:

MLN: 8.94
VTEB: 5.26
SWAGX: 6.26

PFFD:

This is relatively short term money I'm working with (1-3 years), so interest near-term interest rate moves are a real consideration.

Thanks!

Actually, this also came up in the current Income Portfolio thread where I posted about preferreds. Below is the question and my response. I wonder if some of the other seasoned preferred investors who participate in this thread (Mulligan, Coolius, bobandsherry and others) have any insights as to why they don't seem in real life to me near as interest sensitive as one would think.

I have seen your posts on this in the past. I have never looked at these but my understanding is that they are sort of like a bond with no maturity date. Won't your extra income get wiped out by the stocks' loss of value as rates rise? Just curious about your thinking.

One would think so but they don't seem to be nearly as interest sensitive as you would think in real life.... and I'll admit that it is a bit of a mystery to me.

I'll use JPM.PRD as an example. It was issued Sept 18, 2018 for $25 with a 5.75% rate and a $1.44 annual dividend... at the time the 10Y Treasury was ~3.0% and the 30Y Treasury was ~3.2%.

From Sept 2018 until July 27, 2020, the 10Y Treasury yield fell ~2.5% to 0.55% and the 30Y Treasury fell ~1.8% to 1.2%. But JPM.PRD only increased to $27.92... dropping the yield from 5.75% to 5.16%.... a mere fraction of the drop in the treasury rates.

From July 2020 to today, the 10Y Treasury yield increased to 1.64% and the 30Y Treasury increased to 2.37%. But JPM.PRD only dropped to $27.11... increasing the yield from 5.16% to 5.31%.

Another example is IPLDP (Interstate Power & Light) a BBB rated issue with a 5.1% ($1.28) dividend issued in 2013. On 6/14/2014 it was trading at $25 and the 30Y Treasury was at 3.47% and the 10Y Treasury was at 2.65%. Today, it traded at $25.60 yielding 5.0% but the 30Y Treasury is at 2.37% and the 10Y Treasury is at 1.64%. With a 100bps reduction in interest rates between 2014 and now you would think that the price would have increased a lot more than 60c, but it hasn't.

 

[Mulligan]

Actually, this also came up in the current Income Portfolio thread where I posted about preferreds. Below is the question and my response. I wonder if some of the other seasoned preferred investors who participate in this thread (Mulligan, Coolius, bobandsherry and others) have any insights as to why they don't seem in real life to me near as interest sensitive as one would think.

PB, It just depends. And also they are equities and are prone to equity behavior and not “bond like”. Such as last March when preferreds in general got pummeled do to various sell programs.
Ignoring volatility issues, rising rates will have an impact on issues. Sometimes the “expectation” of rising rates can cause sell offs more than the rates themselves.
But an issues, yield, credit quality, call status, etc all can factor in too.
Take DTB and DTJ... DTJ is around $25.07 and 5.375% par yield. DTB is a 4.375% par yield and trades at $25.24. On surface this makes no sense. But J just went past first call, while B is still call protected. This distorts pricing.
If long end jumped say 50 bps, B would drop a buck or two, while J would probably stay about where it is.
Other scenarios... Rising rates and a growing economy generally the low yield high quality issues drop harder than high yield. When economy sags, the high yielders face more pressure as their balance sheets are stressed more in economic downturns.
As a broad general rule IG preferreds tend to yield 200-400 basis points more than the 10 yr bond.

 

[Mulligan]

Actually, this also came up in the current Income Portfolio thread where I posted about preferreds. Below is the question and my response. I wonder if some of the other seasoned preferred investors who participate in this thread (Mulligan, Coolius, bobandsherry and others) have any insights as to why they don't seem in real life to me near as interest sensitive as one would think.

I dont know anything about PFFD such as what it owns and how it runs the portfolio.

 

[youbet]

How about SPLP/PRA? I accumulated a significant number of shares between early January and mid-April. Now the price is heading up and I see I'm up about 12% as a STCG. Sell? (It's in an IRA.) That would give me almost two years of divs immediately and I could stop fretting about UBTI and whether it will impact me. OTOH, I notice that SPLP had a favorable earnings announcement and the common is soaring as well. Perhaps SPLP/PRA is headed higher, maybe up to PAR?

Comments?

 

[Coolius]

As Mulligan says, " pinned to par " preferreds past first call tend to have lower volatility than those call protected ones when rate worries hit.


I have been accumulating DTJ and RNR-E as these are all pinned to par and should not deviate much from their current price - but tradeoff is that they could be called at any time with 30 days notice.


MNR-C is likely going to be called in September, its first call date ( also the div payment date ) because of the proposed EQC buyout. So as long as I can buy MNR-C below par+1 div, I don't lose - however, definitely not a long term investment, so I have to remain on my toes to identify replacements when the call happens.