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outandabout
Contributor ○

Ideas for individual preferred shares?

I haven't own any in several years, so I'm open for a few ideas.

Out

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55 Replies
RJD1300
Explorer ○○

Re: Ideas for individual preferred shares?

It seems like many are trading above par now.  I have a few that I bought below par or just a bit above.  All are in the green currently.

What are you looking for?

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outandabout
Contributor ○

Re: Ideas for individual preferred shares?

The last one's I owned were VZ and a couple banks. Can't remember the site that covered them, but I'll look around a bit.

Take care

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JRinNY
Participant ○

Re: Ideas for individual preferred shares?

check quantumonline.  great website. everything rallied though. so BBB's might be a bit safer than lower ratings ( but pay less, of course)

outandabout
Contributor ○

Re: Ideas for individual preferred shares?


@JRinNY wrote:

check quantumonline.  great website. everything rallied though. so BBB's might be a bit safer than lower ratings ( but pay less, of course)


That was it, JR. You are on top of it. BBB's could be the window to sneak into a position.

Thanks

Take care

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NomasDOZ
Follower ○○○

Re: Ideas for individual preferred shares?

For the last 8 months or so it has been difficult to find VALUE in preferreds of credit worthy / protected issuers.  I am now getting my ALL preferreds called and even a couple `20 bond issues have been called 6 to 3 months early.  The TBTF safest and tax advantaged issuers continue calling about 2 issuances for every new one they issue.  With premiums up to +$28 so many that were showing +5.75%YTM, are now down to  3.75% YTM.  It is these days hard to beat cash and that may continue on until the Bond vigilantes finally show the that Emperor (FED) has no clothes vs being able to effectively set medium term rates as the .TNX.   Of late in the ROTH I did add to VNO-M. near $25.46.  NO fee comm allowed me to get a wish limit order for 2 more shares at $25.36  around 12/4.  But those were acquired in the IRAs both in the Roth and in the RO/IRA,  But I only did so because I had the original shares from last Jan below $22 when they yielded closer to 6%.  So these new shares not already in the ROTH, will be on top of the list for conversion to Roth for 2020, where they will become tax exempt period. But the most recent shares only pay about 5.15% YTM.  REIT prefers do not get tax advantaged dividend treatment.  I am watch listing MER-K as having a strong situation as to it's call protection. Most newer issuances that have come to market, have come nearer to 5% coupons as BAC, ALL, FITB, and PSA.   Public storage is a nice weakening economy play vs an extension of George Carlin's observation about a house being a place to keep your stuff while you are getting more stuff.  When thousands start losing their homes to this current building debt crisis exploding, those people need places to keep their stuff when they move to apartments.  So Apt Reit preferreds  are also not paying tax advantaged dividends either.  I am also watch listing the Mortgage REIT preferred AGNCN as it may turn out to be of a bit higher quality than many others in the same asset class.  AGNC is supposed to be holding plus 90% US Gov't agency mortgage obligations.  But then in the bail outs of '08 /'09 the GSE preferreds were not backed up by the Fed and Treasury and they mostly all defaulted.   For taxable accounts there are very few decent opps in Preferreds right now.  The ones that are tax advantaged will against their coupons almost certainly continue to be called and then you will be stuck with a lousy YTM vs what the wide eyed see in the coupons against par.  3% to 3.4% on SUBORDINATED debt may not be the ideal place to go vs awaiting a 3 to 6 months to see where the .TNX rates may come out to be and how far over 2.15% they might go this time.  For now 1.94% remains very strong resistance.   I also hold the NYMTM which  I did just recently buy just below par for a dividend capture strategy.  So I have to dump those shares next week before Friday to avoid making the Ex date for the first distribution.   After it goes Ex? maybe it might get another look nearer to $24.  One other possible Dennis Gartman strategy that might be employed is to buy a lot of 150 or 200 preferreds on any knock downs with the intention of taking a small 25 to 45 cents capital gain on 50 to 100 shares in the near term.  So you can "effectively" put that gain against the cost basis of your residual shares and lower the EFFECTIVE cost basis increasing your effective YTM. DG has often opined to buy that which is going higher with the intention of selling even higher. But that generally works better in common share and ETFs.  ie IHI of late?

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retiredinSC
Follower ○○○

Re: Ideas for individual preferred shares?

I use quantum online and there are currently no bargains there - per my criteria - some mortgage reits have been  'reasonable', and I own a couple - don't know how much they are above par now.

Enbridge is investment grade and the common is a top position in the MDI div/growth portfolio(and my portfolio).

It has a preferred - EBGEF, and is listed on the Toronto exchange - so it's under my radar.

It is fixed to float - was reset in 3/19, and will be reset again in 3/24.

The thing is - it's significantly below par (19.53 vs 25) now.  I think not being on quantum online and having the fixed/float feature could explain that.

There is an article on seeking alpha from April of this year which explains this issue pretty well.

I took a position on it in late Sept and I'm up 1.96 per cent, and currently yielding 6.88.

This is confusing and requires work but I think it's a reasonable bet -

Good Luck,  Joe

BruceM
Participant ○○○

Re: Ideas for individual preferred shares?

Try the Dividend Investor web site. They give you a long list of available preferred stock with the current price, current yield and earliest possible redemption date. You can copy/paste this into Excel and if you're handy with Excel, can do a lot of sorting to get this long list of hundreds of preferreds down to a manageable few.

BruceM

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hku
Explorer ○○

Re: Ideas for individual preferred shares?

If you dabble at all here, you will undoubtedly get walloped with an early call and watch any premium you paid completely disappear in seconds.  Another fools errand.

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outandabout
Contributor ○

Re: Ideas for individual preferred shares?

Thanks for the additional thoughts/suggestions.

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DryFly
Explorer ○

Re: Ideas for individual preferred shares?

If you scroll back to page 4 you will see a thread by Astrokng called Preferred Shares for Steady Dividend Income.   It is worth reading.  I have copied my first post below.  The numbers have changed for HPI and CLNY called the B and E issues, so I bought the I and J, both well under par.   They both have yields in the high 7%+ range which reflects the risk factors.  I have a bid out for more ARR-B for under $25.  There are few bargains in preferred stocks today.   

‎10-05-2019 06:11 PM

Re: Preferred Shares for Steady Dividend Income
 

 

I have over 30 preferred issues and they are between 25% and 30% of my portfolio.  In more normal markets I would recommend you consider a CEF first.  HPI is my favorite.  You get diversification and protection against call risk.  You could have bought it at $18.21 back in December.  Now it is $23.25, which is a 7.89% premium, way too expensive as the yield is down to 6.37%.

The best way to buy a preferred is as a new issue before it hits the NYSE or NASDAQ.    You have a good chance to buy the shares below par, meaning less than $25.  This opportunity does not always happen.  You can sometimes see new issues planned here:  

https://innovativeincomeinvestor.com

Another source of good information is https://www.siliconinvestor.com/subject.aspx?subjectid=58607  Make sure you look at Lord Xot's spread sheets at the top.  There is a ton of great information in those sheets.  Click on the ticker symbol and you will get more useful information.

CLNY-J is a reasonable choice.  I have owned it in the past and currently hold the sisters B & E.   You might want to look at ARR-B which is a Mortgage or MReit and past it's call date of Feb 2018.  ARR is not a great company and I would not own their common.  However they have to pay the preferred dividends before they pay the common ones, so I continue to hold it.  They pay monthly too, and their yield is 7.86%,  and it closed Friday at $25.05.  That should tell you that there is some risk here.  I would not put it in an IRA.  They recently called their other issue, ARR-A.  

The biggest problem today is that the new issues are coming out at much lower yields.  I bought UBP-K at $24.95 with a coupon of 5.875% to replace my UBP-G which has been called.  The G coupon was at 6.75%, so my income will decline .22 per share per quarter.  Oh well, I will just keep on investing!

Cheers,

DryFly

outandabout
Contributor ○

Re: Ideas for individual preferred shares?

Thanks, Dry.

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IBTrvlr-Sojrnr
Explorer ○

Re: Ideas for individual preferred shares?


@DryFly wrote:

If you scroll back to page 4 you will see a thread by Astrokng called Preferred Shares for Steady Dividend Income.   It is worth reading.  I have copied my first post below.  The numbers have changed for HPI and CLNY called the B and E issues, so I bought the I and J, both well under par.   They both have yields in the high 7%+ range which reflects the risk factors.  I have a bid out for more ARR-B for under $25.  There are few bargains in preferred stocks today.   

‎10-05-2019 06:11 PM

Re: Preferred Shares for Steady Dividend Income
 

 

I have over 30 preferred issues and they are between 25% and 30% of my portfolio.  In more normal markets I would recommend you consider a CEF first.  HPI is my favorite.  You get diversification and protection against call risk.  You could have bought it at $18.21 back in December.  Now it is $23.25, which is a 7.89% premium, way too expensive as the yield is down to 6.37%.

The best way to buy a preferred is as a new issue before it hits the NYSE or NASDAQ.    You have a good chance to buy the shares below par, meaning less than $25.  This opportunity does not always happen.  You can sometimes see new issues planned here:  

https://innovativeincomeinvestor.com

Another source of good information is https://www.siliconinvestor.com/subject.aspx?subjectid=58607  Make sure you look at Lord Xot's spread sheets at the top.  There is a ton of great information in those sheets.  Click on the ticker symbol and you will get more useful information.

CLNY-J is a reasonable choice.  I have owned it in the past and currently hold the sisters B & E.   You might want to look at ARR-B which is a Mortgage or MReit and past it's call date of Feb 2018.  ARR is not a great company and I would not own their common.  However they have to pay the preferred dividends before they pay the common ones, so I continue to hold it.  They pay monthly too, and their yield is 7.86%,  and it closed Friday at $25.05.  That should tell you that there is some risk here.  I would not put it in an IRA.  They recently called their other issue, ARR-A.  

The biggest problem today is that the new issues are coming out at much lower yields.  I bought UBP-K at $24.95 with a coupon of 5.875% to replace my UBP-G which has been called.  The G coupon was at 6.75%, so my income will decline .22 per share per quarter.  Oh well, I will just keep on investing!

Cheers,

DryFly

Lord Xot predicted the drop in income of preferred's quite some time ago. His preferred positions and yours probably reflects an astonishing amount of study in order to build a portfolio. Thanks for your input. I wish Lord Xot would check in once in awhile too.


 

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sugarhill6
Explorer ○○○

Re: Ideas for individual preferred shares?

I typically use Charles Schwab to come up with a list of preferred shares to research.   They have a pretty decent preferred stock screener.  Once I have my list, I then go to QuantomOnline to research details.    I then plug all of the details into a spreadsheet to see the yield to worst (YTW).  If the YTW fits my investment objective, and I like the details, then I try to buy. 

I'm still finding value in retail REITs.   Shopping is not going away, people will still have to buy food to eat, and retail in the middle of Washington DC can be turned into something else (like apartments) or can be sold for considerable value.   I am still finding value in industrial REITs.   Online shopping will continue to increase the need for warehouse space, especially space near urban populations.   I'm not a big fan of energy common stocks right now, but like energy preferreds.  I am still finding value in energy preferred shares.   Many issue K1's, but double digit returns for 3-4 years is hard for me to pass up...especially when I don't have the downside risk like the common.       

Yep, prices have "Melted Up" (thanks JR).   :)    People are looking for income, and low interest rates will typically move people to preferreds.    

If you buy preferreds with favorable call terms, then buying above par will not be an issue.   

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DryFly
Explorer ○

Re: Ideas for individual preferred shares?

 

There is not much to study to invest in preferreds.  You could read the covenants and listen to investor conference calls.  The math is easy.  I am more focused on "can they pay, will they pay" rather than the quality of issuing company.  I am not buying the common stock.  

Besides the decline in yields there is also the disappearance of issuers.  For example Realty Income (O) has called all of their preferred issues, painful for me as I owned them all.  To replace them O sold debt for a very low yield. I decided to buy their common stock as a replacement.  Royal Bank of Scotland had at least six issues.  All are now gone and not likely to be replaced even at unattractive low yields.

Preferred dividends are not tax deductible as debt would be.  They come directly from profits.  For many types of companies they are not an attractive financing option.

Lord Xot did check in at another forum.   I believe he is more interested in travel and playing golf these days.  I know he used to listen to investor conference calls.  Here is a link to his "check in":

https://www.siliconinvestor.com/readmsg.aspx?msgid=32469997

Cheers,

DryFly

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sugarhill6
Explorer ○○○

Re: Ideas for individual preferred shares?

If investors are losing money because they didn't account for call risk, then the math is either not easy or they didn't quite understand the convenants.    When I hear investors say that one should NEVER buy a bond/preferred share because it is selling above par (at a premium) I cringe....because they don't quite understand these investments.   

The company paying the dividend or interest matters.   Everything matters; its our money on the line.   "Can they pay" goes back to the "quality of the company."   If one is not willing to do the "investment legwork" then there are great ETFs, mutual funds, CEFs, etc. to invest in.   

Many assets are inflated and expenses, preferreds being one of them.   No free lunch will rates are low.   Education and hardwork is the key, but that is life.  

 

 


@DryFly wrote:

 

There is not much to study to invest in preferreds.  You could read the covenants and listen to investor conference calls.  The math is easy.  I am more focused on "can they pay, will they pay" rather than the quality of issuing company.  I am not buying the common stock.  

Besides the decline in yields there is also the disappearance of issuers.  For example Realty Income (O) has called all of their preferred issues, painful for me as I owned them all.  To replace them O sold debt for a very low yield. I decided to buy their common stock as a replacement.  Royal Bank of Scotland had at least six issues.  All are now gone and not likely to be replaced even at unattractive low yields.

Preferred dividends are not tax deductible as debt would be.  They come directly from profits.  For many types of companies they are not an attractive financing option.

Lord Xot did check in at another forum.   I believe he is more interested in travel and playing golf these days.  I know he used to listen to investor conference calls.  Here is a link to his "check in":

https://www.siliconinvestor.com/readmsg.aspx?msgid=32469997

Cheers,

DryFly


 

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Jakes1
Follower ○○○

Re: Ideas for individual preferred shares?

You might want to check out the Innovative Income investor website.  It's been extremely helpful for me.

https://innovativeincomeinvestor.com/

 

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cliff
Explorer ○○

Re: Ideas for individual preferred shares?


@retiredinSC wrote:

I use quantum online and there are currently no bargains there - per my criteria - some mortgage reits have been  'reasonable', and I own a couple - don't know how much they are above par now.

Enbridge is investment grade and the common is a top position in the MDI div/growth portfolio(and my portfolio).

It has a preferred - EBGEF, and is listed on the Toronto exchange - so it's under my radar.

It is fixed to float - was reset in 3/19, and will be reset again in 3/24.

The thing is - it's significantly below par (19.53 vs 25) now.  I think not being on quantum online and having the fixed/float feature could explain that.

There is an article on seeking alpha from April of this year which explains this issue pretty well.

I took a position on it in late Sept and I'm up 1.96 per cent, and currently yielding 6.88.

This is confusing and requires work but I think it's a reasonable bet -

Good Luck,  Joe


 

Joe, on another thread today I mentioned that I hadn't yet given anyone a kudos and that I wouldn't unless someone posted something that was guaranteed to make me money.  So a bit ago I laid one on you.

It took me 4 trading days to accumulate what I wanted of the Enbridge Series 5 Preferred (OTC:EBGEF) that you brought to our attention.  I already have a boatload of Enbridge (ENB) so I did a little work and then dove in.

What's not to like?  U.S. dollar denominated $1.344 dividend on a cumulative redeemable investment grade preferred.  I nibbled around and got filled from $19.20 to $19.50.  My last fill was about 15 minutes before today's close.  So a guaranteed 7% yield for 4+ years at least.  (I use guaranteed in the practical sense, not the theoretical.)

So, Joe, thanks!!

Bentley
Contributor ○○○

Re: Ideas for individual preferred shares?


@cliff wrote:

It took me 4 trading days to accumulate what I wanted of the Enbridge Series 5 Preferred (OTC:EBGEF) that you brought to our attention.  I already have a boatload of Enbridge (ENB) so I did a little work and then dove in.

What's not to like?  U.S. dollar denominated $1.344 dividend on a cumulative redeemable investment grade preferred.  I nibbled around and got filled from $19.20 to $19.50.  My last fill was about 15 minutes before today's close.  So a guaranteed 7% yield for 4+ years at least.  (I use guaranteed in the practical sense, not the theoretical.)

So, Joe, thanks!!


 

 This April SA article adds some color to this super-secret gem......:)


Enbridge Series 5: The Highest Yielding Investment Grade Preferred Stock Is A Strong Buy
Apr. 24, 2019 5:38 PM ET

About: ENBRIDGE INC RE PRF SER 5 (EBGEF), ENB


EBGEF is a U.S. dollar denominated investment grade preferred stock from Canadian energy infrastructure giant Enbridge that yields 6.7%. Dividends are qualified and received on a 1099.

retiredinSC
Follower ○○○

Re: Ideas for individual preferred shares?

Cliff,

Since so much of what we do is highly subjective - it's rare that ideas are literally adopted by other posters.  I'm glad you took advantage - and it's still on the rise - so you must not be the only one buying this money maker.

I'm surprised the etf's and cef's haven't discovered this and driven it closer to par.

Good Luck in the new decade,  Joe

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