This is not a recommendation–as everyone knows we don’t make recommendations, as everyone of us has different needs.
I just bought a smaller position in the split investment grade preferred from Vornado Realty (VNO). The particular issue is the 5.70% cumulative, redeemable issue (VNO-K).
This issue is currently redeemable and has been since 7/17. The issue pays a dividend of about 36 cents. The issue recently went ex-dividend on 9/13/2019 and paid the dividend on 10/01/2019–so we are now into the ‘accrual stage’. The issue is trading around $25.26–a week ago it traded around $25.16.
The play here–at least for me is that the issue is split investment grade so it should trade around the call price of $25 as they might be able to redeem the issue at any moment as the 5.70% is above the 5.20-5.30% they could likely lock down with a new issue.
At this moment assuming a 30 day notice price to redemption there is about 11 cents of call risk in the issue.
We will simply hold this issue until called–unless it rockets higher in which case we would sell–but there is no logical reason for it to trade above $25.50 in the foreseeable future. Our hope is the issues remains outstanding for a few months.
NOTE–a a yield to worst basis this is obviously a negative return (with the assumption that it is called immediately). For us it is a spot to park $10,000 of excess cash for hopefully a couple safe dividends