Monday, February 2, 2015

Preferred Stock Versus Common Stock Investing Results

The common stock market had a great year last year, gaining 11.5 percent. And by the end of 2014, the average market price of high quality preferred stocks was $25.98 per share, a value gain of 9.5 percent.

But while the preferred stock value gain of 9.5 percent was not as impressive as the 11.5 percent seen by common stock investors, preferred stock investors realized substantially better dividend income throughout the year...

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Tuesday, January 6, 2015

Preferred Stock Buyers Change Tactics For Double-Digit Returns

Dramatically falling oil prices throughout the fourth quarter of last year have reduced inflation pressure, delaying, once again, any hope of a rate increase. On December 18, 2014 Fed Chair Janet Yellen stated that the Fed "…could continue to be patient." For preferred stock investors, downward pressure on rates means upward pressure on prices.

During such periods, savvy preferred stock investors can frequently purchase shares at wholesale (sub-$25) prices when new preferred stock issues are being distributed to the market. 83 percent of the non-convertible preferred stocks issued during 2014 (54 of 65) were introduced to the market by their underwriters using a temporary trading symbol on the wholesale Over-The-Counter (OTC) stock exchange. So how did buying shares during OTC distribution work out for preferred stock buyers during 2014?...

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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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