As I mentioned last week I am doing a little buying this week–not lots and lots, but continuing the slow add of what I hope to be rewarding income issues.
My initial thoughts were that I would stay to shorter duration issues, but after some research I went with a perpetual fixed to floating issue.
I added another mREIT preferred AGNC 6.125% (AGNCP) fixed to floating preferred. This issue just went floating a couple months ago–AGNC currently has 4 FTF issues outstanding and 1 fixed rate reset issue which doesn’t reset until 2027.
The AGNCP issue is NOT the highest yielding of the 4 issues, but my intent is to hold long term and if interest rates move lower this will not be the 1st issue called as the spread is somewhat less than some other issues.
I have multiple holdings in the mREIT arena and while the the 9-11% dividends are juicy it goes without saying that being too overweight in a given sector can be costly–and in the case of mREITs the sector will move as one. Thus far the mREIT sector is performing adequately, but in the world we live in things can change fast.
I like PMTV. similar corporate risk level to AGNCP in my opinion and roughly the same yield except its a bond instead of a prefered
rdking647-I’ve got the PMTU issue and am looking at the selection of newer bonds from the mREITs since they appear to have backed away from issuing preferreds.
PMTV/PMTU have a place in my holdings along with AGNC preferreds (M,N,O,P). The first have a fixed rate and maturity, which is a plus especially if/when rates move downward. The later float and may end up being longer term hold and have a nice spread above SOFR if/when rates drop. Just spreading the wealth and not put all my eggs in one basket.
I have AGNCO I generally take the higher yield over lower call risk if I don’t plan to hold long term. Used to have a large holding I sold some of it I think it’s been slightly overpriced lately except for the dip a couple months ago. There’s mixed opinions about whether it is a premier REIT as priced or if it’s just average risk.
If being overweight mREIT prefs is risky I’m in a lot of trouble.,My biggest sector by far because l’ve done very well trading them while also collecting high dividends. Low default rate but that could change in waves if the stars don’t align.
I’m holding some AGNCP with approximately the same logic, although maybe my logic is slightly different. While I think it’s slightly less likely to get called, I also like that I benefit more from the case where they do decide to call them all at once.
Since at the current price it’s only about 15 BPS less than the best of the group (44 vs 46 cents/quarter), I think this potential windfall makes up for the difference. I’m not sure this is good logic, though. Has anyone looked at the historical data? What tends to happen in reality?
Tim – Didn’t you leave out the important details? Since it just started floating on 4/15, then according to the prospectus, the new floating rate was determined by 3 month term SOFR on 4/14 which was approx 4.26. Then based on the formula, the next coupon payment will be approx 9.217% 4.26+.26+4.697 = 9.217%. That should be the approximate coupon payment to be paid on 7/15. That also means that assuming nothing changes by 7/14, the NEXT coupon after the 7/15 would go up slightly from there.