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

[Born2Fish]

Steel Partners SPLP-A is my only Preferred position at this time, in tIRA. Is anyone holding SPLP-A?

At 6.35% yield is there any reason to sell this position?

I am heavy cash in my pretax accts right now.

What is everyone who sold preferreds doing for yield now? Waiting?

 

[Sunset]

Steel Partners SPLP-A is my only Preferred position at this time, in tIRA. Is anyone holding SPLP-A?

At 6.35% yield is there any reason to sell this position?

I am heavy cash in my pretax accts right now.

What is everyone who sold preferreds doing for yield now? Waiting?

I have some SPLP-A but I'm not a great role model as I have some other preferreds I didn't sell.

Spare cash I have is going into Treasury I-bonds including buying gift bonds to lock in the great rates now.

 

[aja8888]

Steel Partners SPLP-A is my only Preferred position at this time, in tIRA. Is anyone holding SPLP-A?

At 6.35% yield is there any reason to sell this position?

I am heavy cash in my pretax accts right now.

What is everyone who sold preferreds doing for yield now? Waiting?

I sold all my preferreds last Fall except for CHSCM which I will keep until it's called. What I have been buying to replace the income is I Bonds and one year Treasury Bills (starting a ladder as rates go up).

 

[youbet]

I have a position in SPLP-A split between my TIRA and my Roth. So far so good. I'm in at 20.57 and not sure I'd buy more at today's price or not. Of course, I already have it so am less motivated to buy more regardless.

Taxes turned out to be a non-issue despite it being a MLP. Because I hold the shares split between two accounts, I stay below the UBTI limit which I would have been over if the shares were consolidated in a single account. I also leaned that Schwab would have done all the legwork on paying any tax due if I had triggered UBTI.

SPLP common isn't well covered by analysts but those that do rate it "Hold." It's trading near highs.

The upcoming call date of 5-14-2022 has me thinking a bit. But, why would they call at $25 when the stock is trading well below that? And for whatever reason, I've convinced myself that collecting 6%+ interest and then redeeming at $25 when the shares mature in 4 years will work out OK.

Sooooo..... I'm hanging on to what I have but won't buy more at this time.

I'm a retired factory worker tying to learn about this stuff, so do your own diligence. I welcome corrections or additions from you experienced/knowledgeable folks.

Edit: Some of this is wrong. See the corrections from Mulligan below. I have notified Schwab about the errors on their research page regarding SPLP/PRA.

 

[Mulligan]

I have a position in SPLP-A split between my TIRA and my Roth. So far so good. I'm in at 20.57 and not sure I'd buy more at today's price or not. Of course, I already have it so am less motivated to buy more regardless.

Taxes turned out to be a non-issue despite it being a MLP. Because I hold the shares split between two accounts, I stay below the UBTI limit which I would have been over if the shares were consolidated in a single account. I also leaned that Schwab would have done all the legwork on paying any tax due if I had triggered UBTI.

SPLP common isn't well covered by analysts but those that do rate it "Hold." It's trading near highs.

The upcoming call date of 5-14-2022 has me thinking a bit. But, why would they call at $25 when the stock is trading well below that? And for whatever reason, I've convinced myself that collecting 6%+ interest and then redeeming at $25 when the shares mature in 4 years will work out OK.

Sooooo..... I'm hanging on to what I have but won't buy more at this time.

I'm a retired factory worker tying to learn about this stuff, so do your own diligence. I welcome corrections or additions from you experienced/knowledgeable folks.

I have owned SPLP-A off and on through the years. I bought I think about 800 shares at $23.30 a few weeks back. Its maturity in 4 years will help anchor it with a good YTM. The fact it can be redeemed in shares makes me a bit cautious. But management owns both common and preferred so hopefully they wouldnt screw themselves somehow.
Youbet, its already past call, but it matures in 2026. I suspect that it will stay outstanding until then.

 

[Mulligan]

Steel Partners SPLP-A is my only Preferred position at this time, in tIRA. Is anyone holding SPLP-A?

At 6.35% yield is there any reason to sell this position?

I am heavy cash in my pretax accts right now.

What is everyone who sold preferreds doing for yield now? Waiting?

Born, I keep trading, but it seems like I keep raising more and more cash. I think yield pressure will continue.

 

[Freedom56]

Be patient. The deals will come. Many of you have seen this movie before in 2013, 2015, 2017, 2018, 2020, and now in 2022. Those big preferred ETFs like PFF and the smaller PGX sell off as investors bail out due to the threat of rising rates. But how much can the FED really raise rates? We have a national debt of $30 trillion and climbing that has to be refinanced. Corporate and consumer debt are at all time highs. The only problem this time however is that most of the IG 6% plus coupon preferred stocks have been called and replaced with 4.25-5.25% coupons which implies that we could see those preferred stocks sink down to the low teens as the sell-off accelerates. That would be the time to back up the truck and buy.

 

[youbet]

I have owned SPLP-A off and on through the years. I bought I think about 800 shares at $23.30 a few weeks back. Its maturity in 4 years will help anchor it with a good YTM. The fact it can be redeemed in shares makes me a bit cautious. But management owns both common and preferred so hopefully they wouldnt screw themselves somehow.
Youbet, its already past call, but it matures in 2026. I suspect that it will stay outstanding until then.

Stated Call Yes
Regular Call Price $25.00
Call Type Callable exclusively into cash
Next Call Date May 14, 2022
Call Timing At any time (continuous)

I've wondered about this data from the Schwab site before and your current comments are moving the discrepancy to my front burner. Schwab says it is callable exclusively into cash and that there is a call date coming up 5-14-22.

Am I misunderstanding or does Schwab have it screwed up?

 

[Mulligan]

I've wondered about this data from the Schwab site before and your current comments are moving the discrepancy to my front burner. Schwab says it is callable exclusively into cash and that there is a call date coming up 5-14-22.

Am I misunderstanding or does Schwab have it screwed up?

These brokerages dont know their heads from their asses on anything. They use 3rd party info and just cut and paste. You cant trust!
Here is from SPLP-a prospectus…

Its past first call date…Here they clearly state they can redeem anytime and pay with common units if they desire instead of cash.

At any time or from time to time we may, at our option, out of funds legally available redeem the SPLP preferred units, in whole or in part, in cash or in common units or a combination thereof, at the sole discretion of the SPLP GP Board, upon not less than 30 nor more than 60 days’ notice, at a price of $25.00 per SPLP preferred unit plus accumulated and unpaid distributions, if any, on such SPLP preferred unit to, but excluding, the redemption date. If we choose to redeem less than all of the SPLP preferred units, we will either determine the SPLP preferred units to be redeemed pro rata. Once proper notice has been given and so long as funds legally available and sufficient to pay the redemption price for all of the SPLP preferred units called for redemption have been set aside for payment, from and after the redemption date, distributions on the SPLP preferred units called for redemption will cease to accrue and such SPLP preferred units called for redemption will no longer be deemed outstanding, and all rights of the holders thereof will cease other than the right to receive the redemption price, without interest. If we elect to pay the redemption price for any SPLP preferred units in common units, such common units will be valued at their volume-weighted average price for the 60 consecutive trading days immediately preceding the applicable redemption date.

 

[youbet]

These brokerages dont know their heads from their asses on anything.

Don't hold back Mulligan! We count on knowing what you really think!

Here is from SPLP-a prospectus…

Its past first call date…Here they clearly state they can redeem anytime and pay with common units if they desire instead of cash.

Thanks so much Mulligan! I had just gotten to the IPO prospectus via a link on Quantum but hadn't found that specific information yet.

I'm going to call Schwab and 'splain this to them. I'll report back.

Edit: Reporting back. (FYI, it's good to be in a group at Schwab where someone answers the phone promptly and without a phone tree, etc.) The agent listened, took notes and forwarded the information to be verified and changed. They were nice, apologetic but still had it wrong. Sigh.........

Thanks Mulligan!

 

[Mulligan]

Don't hold back Mulligan! We count on knowing what you really think! Thanks so much Mulligan! I had just gotten to the IPO prospectus via a link on Quantum but hadn't found that specific information yet.

I'm going to call Schwab and 'splain this to them. I'll report back.

Its like whack a mole with their clerical crap, Youbet. I fought a losing battle a couple years ago trying to buy AILLI…Vanguard said it was a private company. Its a subsidiary of a public company AEE. The funny part was AILLO, AILIO. aILIP, etc. etc., al, the exact same company sister preferreds were tradeable.
Rep after studying said I was correct, but he couldnt override it because the computer had it entered as such. Its still that way now….

 

[Slow But Steady]

Hey Slow….No possible guess without knowing the unknowable….Interest rate movements, crisis, market general turmoil… Who knows.. FWIW…The company has IG credit credentials but without IG rating. Why? Because a lot of IG ratings have nothing to do with actual company credit metrics.. Size of company, length history of credit, etc., etc. drag it down. But its metrics are good. Its tied for my second biggest hold now, and I am not selling (I got in low $7s average myself. Quite often I double block in 9.50s or so and dumped over $10 rinse and repeat. More careful now though.
It has been a rock star as many have cratered but this one is still up 10% past year. I see little opp for more cap appreciation, but I dont mind clipping the now 8.8% coupon thats essentially uncallable.
In the spirit of PB’s thinking here is an idea. Start thinking forward and looking to track some that may hit a personal buy zone…Here is an example for me…The $1000 par EIX 5.375% fixed to reset issue.. Since it doesnt reset until 2026 it may trade off present poor yield. It resets to 4.69% plus 5 yr Tbill… I own modest 25 or so shares with about a $1000 blend ave past year.
This is one I want to drop…It wants to hang around $960-$970 now. But Im begging for a drop to $900 to add more. This is a who has the ink pen last scenario given…But at that price even if 5yr was at 0%, you would be looking at a 6% yield in a 0 rate environment. And what if rates shoot higher? Well if 5 yr is 4% at reset, that would reset this around 9.5% QDI. …Thank you sir, may I have another? (An old Fraternity initiation ass beating reference)

Thanks, Mulligan. I guess I'll hold on to those CEQP/PR shares for a while. Or at least until I can offset the capital gains with some losses. In this market, you wouldn't think that would be so difficult. LOL.

Looking for fixed to float shares that float in the near future is an interesting idea. On Quantum Online, though, I couldn't find the particular one you mentioned.

 

[Mulligan]

Thanks, Mulligan. I guess I'll hold on to those CEQP/PR shares for a while. Or at least until I can offset the capital gains with some losses. In this market, you wouldn't think that would be so difficult. LOL.



Looking for fixed to float shares that float in the near future is an interesting idea. On Quantum Online, though, I couldn't find the particular one you mentioned.

Here is the prospectus… Note it resets off 5 yr Tbill in 2026.

https://www.sec.gov/Archives/edgar/data/0000827052/000119312521067286/d312913d424b5.htm

Also, its a $1000 preferred so it trades off the bond desk so you have to call bond desk and give them cusip number which is on this link.

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C1005783&symbol=EIX5142420


If you want to go down the credit chain a bit NSS is also about to shoot up. Its a live floater with a 6.73% adjustment and is a smidge under par. It was issued in 2013. Its a debt issue so no K-1 from this MLP.

I own both of these…I also own WTREP which is a juicy live floater but its a private untradeable issue now.
I also have CBKPP which floats end of year plus 4.5% ish. Its a strong BBB+ type quality thus the lower adjustment.
I own quite a bite of TECTP. It floats in a couple years. It has traded like a rock star due to its high yield.

 

[Montecfo]

Perhaps. At this point they are a hedge for me in the event 5-30 year rates do not rise as expected. I fear that as short term rates rise with the Fed, the longer term rates will not rise due to a slowing economy. Anyway if longer term rates rise I have plenty of CD's and Treasuries maturing in the next 5 years. The increase in income would dwarf any setback in PFFD.

There are better hedges in my view. All your equity holdings for example.

 

[ownyourfuture]

I've held preferreds in the past but in a rising rate environment, that's kryptonite.

Kryptonite is right, & I found out because of spite.
I started accumulating Innovator S&P Investment Grade Preferred ETF (EPRF)
in mid February. The plan was to invest around 1/4 of the 100 K in cash at Fidelity to try & improve on their money market rate of 0.01%

I've failed miserably so far. Today, I capitulated & bought another 500 shares.
Total shares 1,114.403 = -$467.88 -1.99%

 

[Sunset]

Kryptonite is right, & I found out because of spite.
I started accumulating Innovator S&P Investment Grade Preferred ETF (EPRF)
in mid February. The plan was to invest around 1/4 of the 100 K in cash at Fidelity to try & improve on their money market rate of 0.01%

I've failed miserably so far. Today, I capitulated & bought another 500 shares.
Total shares 1,114.403 = -$467.88 -1.99%

The S&P is down about 8% and QQQ is down about 12%, so being down ~2% is not bad.

 

[ownyourfuture]

The S&P is down about 8% and QQQ is down about 12%, so being down ~2% is not bad.

I hadn't thought of it that way

 

[Mulligan]

I hadn't thought of it that way

Own, my only advise FWIW, is not to mismatch durations with investment objectives. Cash is a short duration short end yield curve investments. Preferreds unless specifically mentioned, are long duration instruments and trade off the long end of the curve. I dont see most preferreds being suitable replacement for cash. The risk exposure to capital is very high compared to cash.

 

[Phroig]

Investment-grade preferreds are now yielding 6%+. (I know most of you experts like higher yielding issues.) Have any of you started buying these? If not, what yield would tempt you?

 

[aja8888]

Investment-grade preferreds are now yielding 6%+. (I know most of you experts like higher yielding issues.) Have any of you started buying these? If not, what yield would tempt you?

Waiting for the FED to raise interest rates and see how much damage it does to the NAVs of preferreds and bonds. Once the smoke clears, see what's left.

 

[brokrken]

QRTEP off 14% today!

 

[aja8888]

QRTEP off 14% today!

Yikes! I'm glad I sold mine at $105 or so.

 

[Coolius]

What was the reason for the huge drop of QRTEP yesterday?
Unfortunately, I got caught.

 

[Phroig]

What was the reason for the huge drop of QRTEP yesterday?
Unfortunately, I got caught.

Earnings release and business update. The common also fell sharply, but a bit less than the preferred, which seems odd.

 

[Coolius]

It is difficult to consider buying any kind of equity at this point in time.


Growth stocks have been clobbered, and the future sure does not look great if the economy stagnates and/or contracts.


Preferred Stock and Bonds don't look so hot either. The prospect of another 2 ( or more ) 0.5% hikes are strong headwinds against any stock price appreciation, Yes, one gets the income stream, but at what cost of capital erosion?


If the DOW and SP500 decline further, large cap and even strong stocks will go down ( look at AAPL ).


Even though I hear the pundits saying that Cash is Trash, I'm leaning to holding cash for the time being, perhaps once the June & July hikes are implemented, we can look at some rate relief. until then, the outlook is simply too foreboding to buy.