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Added Preferred Shares of This Investment Grade Utility

This morning I added shares to my portfolio of utility company Spire. The issue is the Spire 5.90% perpetual preferred (SR-A).

The issue rated BBB by S&P (investment grade) and is now trading around $23.90 for a current yield around 6.17%. This issue just went ex-dividend and is trading down from $24.97 just 3 weeks ago.

The issue has the optional redemption period starting 8/15/2024. If we see interest rates drop over the next 6 months we could have a chance at a redemption—or minimally a move back into the $25 area. We are looking at a potential of a 7 (+/-) yield to call (or sale) in 6 months.

I have added this buy into the laundry list of holdings.

NOTE—I already had a position in this issue.

13 thoughts on “Added Preferred Shares of This Investment Grade Utility”

  1. I love the issue, but just recently flipped out of it a few days ago for another quick flip of about 50 cents a share. Picked a small 100 share block of PNMXO today for basically same yield. When I get the cash I like buying as many of them and as far below par as I can.

    1. Grid, got into PNMXO recently also at $74. As always, wish for it to be long term issue, but…..you know……

      1. Figures it was you, Pig! I tried a few days ago, gave up, and very next morning a small dump occurred at $74. Since I was golfing today I just put out a small trotline bid at $74.50 as I had to jump a $74.25 standing bid. It hit sometime during the day.

        1. Does pnmxo have a change of control clause that is beneficial to shareholders if they get bought out? I tried to find the prospectus but failed.

          1. FC, I think we already know the answer being its already been “bought out” by a holding company PNM Resources (PNM) and Public Service New Mexico is now a subsidiary and of course the preferred issue is already a delisted security. So there really is no “change of control” redemption clause. Which isnt unusual since all the Ameren subsidiary and Connecticut Light and Power preferreds wouldnt be around either, ha.
            I doubt we see PNM being bought out any time soon as Avangrid (AGR) finally threw up their hands in desperation and canceled the merger deal last month after being jerked around by the New Mexico Public Service Commission for years. I doubt any other company wants to waste millions and be put through the wringer to nowhere anytime soon either.
            Below is the link to SEC filing of the preferred. Note that if divis are ever in arrears for a year preferreds elect 1/3 of Public Service NM board members (not PMR hold co board) and after 2 years they take majority control. I sincerely doubt PMR (or any future acquirer) would want to lose control of their “baby” because they werent doling out the annual ~$500k in dividends. This is why subsidiary preferreds are so near and dear to my heart!

    1. I wouldn’t say anything there doesn’t indicate that, but nothing I read specifically indicates it either.

  2. Nice buy. I have a full position in Spire with base of 24.42. Maybe I’ll average down a bit with an extra bite. Someone here said Spire was their local utility and that it seemed well run. Ute commons in general are trading lower with the seemingly perpetual risk-on appetite but that’ll eventually change. I still don’t fully understand why Ute preferreds pay so much, but as Jeff Spicoli says, I don’t hassle it.

    1. Josh—I think under $24 is a gift right now if the assumed interest fall actually comes to pass.

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