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

[MikeTN]

I've been buying some Preferreds but as they are new to me I have only about 5% of my IRA in Preferreds: WFC/PRL, SCHW/PRD, and some PFF for comparison. I bought last fall so have had dividends and price appreciation. I would like to buy more and cut back on equities. At first I was disappointed that I can't buy at the prices y'all paid a year or two ago. However, given that the equities are up more than the preferred shares, it appears I lucked out by waiting to buy more.
I see no mention of preferred ETFs on this Forum. The expense ratios bother me but PFF has done about as well as my two purchases. For someone who does not want to spend much time on this do you think a mix of PFF and individual relatively safe issues makes sense? Any particular Preferred to suggest today?

 

[imbatman]

I have done really well with some below-valued CEFs every so often when the market undervalues them relative to their assets (discount as opposed to premium). While it is already up a lot (20% YTD), it is still below normal and trading a 5% discount (typically trades even over the last 5 years on average).

Anyhow, CEFs are a different beast and have high expenses due to leverage and interest....also pay attention to distribution sources (right now, this is all income at 6.47%). I don't own it now but have it on my watch list, FWIW

https://www.cefconnect.com/fund/FFC

 

[Sunset]

I've been buying some Preferreds but as they are new to me I have only about 5% of my IRA in Preferreds: WFC/PRL, SCHW/PRD, and some PFF for comparison. I bought last fall so have had dividends and price appreciation. I would like to buy more and cut back on equities. At first I was disappointed that I can't buy at the prices y'all paid a year or two ago. However, given that the equities are up more than the preferred shares, it appears I lucked out by waiting to buy more.
I see no mention of preferred ETFs on this Forum. The expense ratios bother me but PFF has done about as well as my two purchases. For someone who does not want to spend much time on this do you think a mix of PFF and individual relatively safe issues makes sense? Any particular Preferred to suggest today?

I have a few preferreds.
I also looked at history and how stocks have over time done much better than preferreds, unless you get the preferreds at an extremely low price that rises.

So my belief is preferreds are fine, as I view them as sort of a bond substitute, but I will always keep mostly in stocks for the foreseeable future.

 

[Texas Proud]

I've been buying some Preferreds but as they are new to me I have only about 5% of my IRA in Preferreds: WFC/PRL, SCHW/PRD, and some PFF for comparison. I bought last fall so have had dividends and price appreciation. I would like to buy more and cut back on equities. At first I was disappointed that I can't buy at the prices y'all paid a year or two ago. However, given that the equities are up more than the preferred shares, it appears I lucked out by waiting to buy more.
I see no mention of preferred ETFs on this Forum. The expense ratios bother me but PFF has done about as well as my two purchases. For someone who does not want to spend much time on this do you think a mix of PFF and individual relatively safe issues makes sense? Any particular Preferred to suggest today?

But.... in my AA I look at prefs as part of my bond allocation... so leaving it in equity would have skewed my ratio....

AND, my prefs pay better than the bonds that I was looking at... yes, they have more risk but I am OK with that...

 

[pb4uski]

....For someone who does not want to spend much time on this do you think a mix of PFF and individual relatively safe issues makes sense? Any particular Preferred to suggest today?

Not keen on the ETFs for preferreds, though if there was a good one out there it would make my life alot easier.

Check out ALL-B, C-N, JXN-PRA, CHSCL

YMMV

 

[pb4uski]

I have done really well with some below-valued CEFs every so often when the market undervalues them relative to their assets (discount as opposed to premium). While it is already up a lot (20% YTD), it is still below normal and trading a 5% discount (typically trades even over the last 5 years on average).

Anyhow, CEFs are a different beast and have high expenses due to leverage and interest....also pay attention to distribution sources (right now, this is all income at 6.47%). I don't own it now but have it on my watch list, FWIW

https://www.cefconnect.com/fund/FFC

I own some preferreds issued by CEFs, like Eagle Point, Priority Income, Caryle Credit, Highland Income, etc.

Preferred Stock of Closed End Funds (CEFs) | Innovative Income Investor

Preferred stocks of closed end funds (CEFs) tend to be some of the safest preferred stock in existence. This is because of the requirements that the CEF have at least 200% asset coverage for preferred stock and 300% for debt asset coverage of "senior securities" which means debt and preferred...

innovativeincomeinvestor.com

 

[youbet]

CNTHP

Anyone know what's going on with CNTHP (Eversource Energy preferred)? It's been trading in the low $50's for some time and suddenly it has jumped up significantly. Closed today at $73. I don't see any announcements on Schwab, QuantumOnline or even the ES investor page.

 

[pb4uski]

Over at innovativeincomeinvestor.com they are scratching their heads as well.

See 10/21 and 10/23 posts in this thread: Illiquid Preferred Securities Discussion | Innovative Income Investor

 

[youbet]

Over at innovativeincomeinvestor.com they are scratching their heads as well.

See 10/21 and 10/23 posts in this thread: Illiquid Preferred Securities Discussion | Innovative Income Investor


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Thanks pb4uski, especially for the link! And, yes, interesting that the folks at Innovative Income Investor are tossing it around too. I visited that site long ago and for some reason haven't been there for a long time. But I've bookmarked it again.

I have a pretty significant position at about $52. Think I'll toss out a sell order for a few shares and see what happens.

 

[Happyras]

For those holding WFC is anyone aware if a good reason why WFC series L has dropped suddenly? It is down nearly $70 over the past month and not in a normal trading range. Did I miss some memo? Is there a compelling reason not to buy more at this level?

 

[njhowie]

For those holding WFC is anyone aware if a good reason why WFC series L has dropped suddenly? It is down nearly $70 over the past month and not in a normal trading range. Did I miss some memo?

Longer term interest rates have moved higher over that period. Since these preferreds will never be called/redeemed, pricing will be a function of long term rates.

Is there a compelling reason not to buy more at this level?

Rates could go still higher and price heads lower. If you are in it simply for high/higher yield and the income stream, then go for it, and buy more if the price continues falling. Nothing has changed other than interest rates.

 

[Happyras]

I agree on your point of slightly higher long term rates, but the drop is disproportionate at first glance at the chart, so I thought more might be going on to incur higher risk....long term agencies 20 or 30 yr duration have actually dropped in yield over the same period, but they have short term call risk.

 

[njhowie]

I agree on your point of slightly higher long term rates, but the drop is disproportionate at first glance at the chart, so I thought more might be going on to incur higher risk....

Have to keep in mind that it is a market, and folks are irrational. Overshooting to the upside and downside is common. That's your cue to take advantage of mispricing.

 

[olyveoil]

Any input appreciated. I am trying to understand Preferred convertibles.
ALB.PRA -- Issued June 2024.
Pays 7.25% June 2024 until March 2027.
Current share Price = ~ $46 with 3.625 in annual dividends. ~7.8%

Converts to common stock on March 2027. Conversion rate = 0.3809 - 0.4570 and Conversion Price = $131 -- $109

I am not touching it....just want to understand it. Thanks for any insight.

 

[tutan]

This is a mandatory convertible, so your preferred shares will be converted to common shares. If I buy preferreds I don’t want convertibles. I suppose you can quickly sell the common shares once converted, but can you trade those shares on 03/01/2027?

 

[olyveoil]

This is a mandatory convertible, so your preferred shares will be converted to common shares. If I buy preferreds I don’t want convertibles. I suppose you can quickly sell the common shares once converted, but can you trade those shares on 03/01/2027?

Yes. I not sure how to know how many shares/at what price I get at conversion. Thanks for reply.

 

[tutan]

You’re welcome. quantumonline.com gives a good summary:

ALB-A Search Results - QuantumOnline.com

QuantumOnline.com offers complete income investment security information for individual investors seeking regular returns on investments.

quantumonline.com

You’ll be getting $50 every preferred share.