Tuesday, December 2, 2014

Are Lower Tax Preferred Stock Dividends Really A Better Deal?

Preferred stock investors who acquire shares in a regular income account rather than a tax-deferred account such as an IRA, will often favor issues that are designated as qualifying for a lower tax treatment. But most risk-averse preferred stock investors would probably avoid all but six of today’s Qualified Dividend Income preferred stocks. And the lower coupon rate that QDI-designated preferred stocks offer often eliminates the tax savings when compared to similar non-QDI alternatives.

Favoring QDI-designated preferred stock for your regular income (non-IRA) account may not be delivering the after-tax benefit that you’ve been counting on...

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Monday, October 27, 2014

Preferred Stock Market Snapshot: Investment Grade Preferred Stocks Available Below $25

With the third quarter of 2014 now behind us, the number of investment grade preferred stocks selling for a market price below $25 is now at 71. While 71 candidates is much lower than the 167 we started the year with, it is still plenty for preferred stock buyers to pick from.

A strong retail sales report on September 11 pushed preferred stock prices lower for the second consecutive month. The implication was that if retail sales are picking up, inflation cannot be far behind so the Fed will surely be bumping up rates any time now. But when global oil prices fell during early October, speculators had the opposite reaction -- lower fuel costs drive prices down, which is sure to postpone any thoughts the Fed may have about raising rates.

Those reacting to such events are applying the short-term thinking of a value investor (buy low, sell high) to a long-term income investment (preferred stocks), which often creates buying opportunities for preferred stock investors who are paying attention...

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Monday, September 22, 2014

Preferred Stock Buyers - Be Sure You're Watching The Right Indicator

Savvy preferred stock buyers, looking for a glimpse of what the future of interest rates looks like, are used to watching Fed announcements regarding the federal funds rate. While doing so was fruitful during the Greenspan Fed years, the post-QE reality faced by today's Fed requires a change in focus for preferred stock investors.

Over the next year or two, preferred stock investors looking for a leading indicator of preferred stock rates and yield should pay attention to information related to the Fed's 'Overnight Fixed-Rate Reverse Repurchase facility.' How the Fed manages this facility is likely to become very important to preferred stock investors...

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Monday, August 18, 2014

Apartment Investment And Management Co. Preferred Stock, Opportunities And Risks

Like the name says, Apartment Investment and Management Company, also known as AIMCO, owns and operates apartment complexes throughout the United States. AIMCO has several initiatives underway to reduce its $4+ billion debt load including the issuance of preferred stock. Using two issues, about $123 million of debt was converted into equity during Q2. The 6.7 percent current yield being offered by AIV-A and AIV-Z is consistent with other B+ rated preferred stocks available in today's preferred stock marketplace.

For preferred stock investors, the cumulative dividends of AIV-A and AIV-Z, along with their competitive current yields, call protection and potential for a rating upgrade will have to be weighed against...

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Monday, July 14, 2014

Preferred Stock Buyers: Time To Change Tactics For Sub-$25 Purchases

Contrary to what we were all told earlier this year, preferred stock market prices have been slowly rising, not falling, since January. As the Fed has withdrawn from its QE program, the market price for the highest quality preferred stocks has gone up about $2 per share this year. A variety of theories have been proposed to explain this reality, but my sense has been, and continues to be, that preferred stock investors have already "priced in" the complete withdrawal of the Fed from their QE bond-buying program.

During a period of increasing prices, preferred stock buyers can purchase newly issued preferred stock shares for sub-$25 prices by...

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Monday, June 23, 2014

American Realty Capital Properties Preferred Stock, Opportunities And Risks

Those considering investing in American Realty Capital Properties, Inc. (ARCP), but who are concerned about its aggressive acquisition strategy and the means of funding it, might find ARCP's preferred stock a better alternative. ARCP is a property REIT and offers a traditional preferred stock that trades on the NGS under the symbol ARCPP. The unrated security's $23 share price is providing a current yield of 7.3 percent.

In June 2012, the company reported that its portfolio included 118 properties. Two years later, the company now reports 3,809 properties in its portfolio, prompting concerns from major shareholders. The company's preferred stock may offer a way of investing in this company while reducing the volatility risk and shareholder turmoil that has come with its aggressive growth strategy.

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Wednesday, May 28, 2014

American Homes 4 Rent Preferred Stocks, Opportunities And Risks

If you believe that single-family homes are likely to appreciate in value over the next several years, American Homes 4 Rent (AMH), organized as a REIT, is a company worth keeping an eye on. AMH is less than one year old, having concluded its initial public offering last August, but its common stock has risen over 10 percent since then. AMH offers investors three preferred stocks - AMH-A, AMH-B and AMH-C - all with cumulative dividends and introduced shortly after the company's August initial public offering.

For each of AMH's preferreds there is a special provision that adds a Home Price Appreciation Factor ("HPA" Factor) to the $25 par value ("initial liquidation preference" amount), hence increasing your dividend income if home values rise..

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