All in All a Quiet Day

Just reviewing winners and losers in the income issue market today there is nothing at all standing out.

Interest rates are barely moving while stocks have moved a bit higher (200 Dow points or so). Honestly everyone needs to focus on economic data to be able to make rational decisions. Tonight we are going to look closer at the data–in general data has been mixed, but we do note that the last consumer confidence number was off quite a bit–the consumer is the driver for this economy.

The other items we will likely do is unload some of our sock drawer utility issues. The intent was to hold these issues for a very long time, but when the Spire (SR-A) 5.90% issue is at $27.39, the Nextera 5.65% baby bond (NEE-N) is at $27.75 and the National Rural Utilities 5.50% baby bond (NRUC) is at $27.58% one has to consider a sale–EVEN if there is no place to go with the proceeds. The NRUC issue has a current yield of 4.99%–yikes–can I do a little better? Likely not with the high quality but money market is still in at 2.09% (Gabelli US Treasury Money Market–GABXX), but trending lower so a person has a month or two to try to deploy funds.

21 thoughts on “All in All a Quiet Day”

  1. Please do your own DD, but for those hunkering down for a longer term rate vacuum and focused on income, there’s still a bit of daylight in HFRO-A.

  2. I feel for freedom to do what the hell I want without to much repercussions…But I do have my limits, lol…So I devote some monies still to “reach for safe yield and risk the call”. That being said I bought more PPX at 25.49 today. In this rate environment little downside with above relative market yield, and past call anchoring. The next interest payment is in the bag for all intents. Its my biggest position, and am ready to keep playing the call risk/ flip game. Stare em down and dare em time come early Oct with it.

    1. Have been in PPX for years and PPL common. I think most Kentuckians will still need electricity even in these crazy times. My PPX and PPL divi’s pay for my monthly bill.

      1. Will, I only have played the baby bond over the years. The common has intrigued me, but PPL’s majority of earnings now come from The Motherland not in US. And they are underwriting new rates of return. This has caused the company some angst. Just providing you with info if you were not aware. Certainly not trying to cause you any concern owning it.
        This was from Morningstar this past week.
        PPL’s U.K. Worries Will Limit Dividend Growth; Worst Case Is a Cut
        While the near term for PPL has attractive regulated growth opportunities that could produce 5.5% annual rate-base growth through 2021, it is the uncertainty around its U.K. operations that leaves PPL the only utility on our list at risk for a dividend cut beyond 2021.
        We project roughly 1% dividend increases annually through 2021 as management cautiously readies itself for a U.K. regulatory outcome, with no increase in 2022 and 2023. Our dividend payout ratio rises to an uncomfortable 79% in 2022, as we forecast just 4% allowed returns for the RIIO-ED2, in line with what U.K. regulators recently proposed for gas distribution, gas transmission, and electricity transmission utilities. Best-case scenario, we think there will be no dividend growth in 2022 and 2023 as PPL manages earnings headwinds. PPL’s regulated cash flows should allow management to navigate a high payout ratio.
        However, developments in the U.K. regulatory environment have consistently been below our bearish expectations. The U.K. has historically been a constructive regulatory jurisdiction, but political and regulatory environments are proving to be a significant headwind. If the U.K. regulatory environment deteriorates beyond our expectations, we think a worst-case scenario could result in PPL cutting its dividend 10% to a more manageable 70% payout ratio.

    2. I have a low opinion of PPL ever since they screwed over their bondholders. Rated investment grade until they spun them off to a subsidiary, along with some trash. Lost half of their value.

  3. Any opinion on floating rate issues with guaranteed minimum? I have BML-L at 4.5% and there’s a good chance the price goes up. Had GS-D until I cashed out too soon. Loaded up on PYT at minimum 5.6% yield to maturity, though the complexity makes it hard to figure the risks.

    1. Martin, I am nowhere near as experienced as a lot of other III members, but I have been playing that angle for a while with pretty good success. My thought was that these are majors that will be kicking out payments long after whatever maelstrom awaits us all, and the FLR yield would likely boost the share price if we do indeed drift significantly lower toward zirp or negative rates — I don’t know, but who does, really? I have a position in one account with BML-L, yielding c 4.6 but already up a percent or two. I also bought into GS-D back in February when it was yielding c. 5.3, caught a couple of payments and unloaded the biggest block shortly after last ex-div. For me that was a major haul. Have positions in GS-A, -C and -D spread out across a number of accounts, also interested in adding MS-A which shot up lately and then dipped over past few days. Makes sense to me, but I do not have a “grid-brain” and am as curious as you to know what more experienced folks think on the subject. Sometimes I’m right and give myself a D. Sometimes I’m wrong and you can call me D minus.

  4. Tim – not sure if this is possible without spending any money on additional programming costs, but would you consider adding another “Additional Links” page on the side for investors to discuss common stocks? I think the Sandbox Page has been helpful and thought maybe a Common Stocks page could be helpful for a few people that might want to discuss dividend paying stocks. The yield on some fixed income securities is so low right now, that after inflation and paying income taxes (for investments not held in retirement accounts), there is not much left. Today I started a small position in KRG and while I’m not a fan of retail REITs, it was worth a little risk to me as their #1 tenant is Publix. Publix is probably the #1 grocery chain in Florida, is internet resistant, and has no debt at all. While I do have concerns about some of their other retail tenants, it was worth a starter position for me as they are in the process of selling off some of their lower quality assets. I certainly won’t buy dumpy mall stocks such as PEI, but some of the other REITs are worth a look at current levels. Thank you.

    1. Good idea and I second that, Lou.
      BTW, could you give an update on your thoughts re: CDR-B? CDR common has horrible performance (down almost 50% in the past year).

      1. Affinity4 – I’m fine with CDR-B and think it is a good defensive play at the current time. With a coupon rate of 7.25% it could be called, so I feel there is limited downside potential with the security. Also, I hold the C shares as well – they do have a chance for some capital appreciation. The common stock has been having a horrible year, which I can’t fully understand. While they are a “retail” open-air shopping center REIT, I’m still impressed with their list of Top 20 tenants. #1 tenant is Giant Foods (owned by Ahold with a credit rating of BBB+). Here is a link to their most recent quarterly supplement with their top 20 tenants listed on page 17.

    2. kaptain–no problem–even I know how to do that–will get it tonight.

      1. Tim, I got out a couple dimes lower on SR_A. Should have hung on a bit longer, but I took advantage of several bounces between $27 to 26. 50 to milk it good. I do want back in, I just need it to drop 75 cents or so. Who knows how long that wait will be.

    3. Kaptain Lou, thanks for your post on KRG. I bought 300 shares back on March 22, 2019 following Samuel Smith, an early West Point retired person who now works for Jussi (yes the same Jussie, departed from Rida et. al.’s Team). at $15.534. Picked up another 100 shares at $16.19 on 5/3/2019. I sold some PEGI (Pattern Energy: Wind Renewable: one of Rida’s picks which worked beyond my belief). So I bought some 592 shares of KRG @ $14.30 to average the cost down. Yes. they had a bad quarter. Samuel Smith and perhaps Brad Thomas both seem to like their balance sheet. IMHO, this is much better than SKT (Vegas Shopping Mall), perhaps the worst pick by Brad Thomas. Yes. Publix was the de facto #1 Supermarket on the way to the Florida Keys, when we went there decades ago.

  5. Yep. Everything I have that’s not fixed or noncallable is for sale at the right price. I think if you look past the fluctuations, we are on a steady downtrend in rates so that we can join the rest of the world and keep the $ from skyrocketing.

    So I want to look out over the battered landscape a couple years from now and feel safe in my bunker as I watch folks sifting thru the trash for some nice, safe 4% yields.

    I may be wrong, but I’ll live with how I’m betting…


  6. I second the motion on those holding and a few others even tho have good call coverage, got a few bloated prices on the balance sheet:
    Reinvest targets if one takes profits, esp at or around or below $25 open orders if there is a price down? Just some ideas to draw the mind’s discrimination and a walk thru some Watch Lists: ARR-B, NTRSP. UBP-G, ACGLP, DLR-G, MNR-C, AIW (due 5-23). Might be a good time to employ buy limits (hairballs)?
    Off to FlatTops and surrounds finally here in late Aug! It’s been a long slog lately, but that can not get in the way of investment activities/management.
    Thanks for all the camaraderie here at III. JA

    1. I would be hesitant to buy any income security that never traded much above par in this low interest rate environment.
      such as Arch Cap ACGLP, which has a ceiling around 25, but a floor at 19.
      I am keeping my powder dry for now and will be loading up if the market tanks and stuff starts trading in the 20 dollar range down from 26-27 now, just like it did last December.

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