Innovative Income Investor | Innovative Income Investor

Headlines of Interest

Below are press releases from companies with preferred stock and/or baby bonds outstanding-or just news of general interest. Now that we are very near to the end of earnings for the quarter ending 6/30/24 news will be somewhat slow once again.

DTE Energy’s smart grid technology prevented nearly 5,000 customer power interruptions and 1.8 million outage minutes for customers so far in 2024

The 30-Year Fixed-Rate Mortgage Lingers Just Under 6.5 Percent

Hovnanian Enterprises Reports Fiscal 2024 Third Quarter Results

Raymond James Financial Declares Quarterly Dividends on Common and Preferred Stock

Stifel Reports July 2024 Operating Data

XAI Octagon Floating Rate & Alternative Income Trust Will Host Q2 2024 Quarterly Webinar on August 29, 2024

Lincoln National Corporation’s Board of Directors Declares Quarterly Cash Dividend

Edison International, Southern California Edison Declare Q3 Dividends

ICE First Look at Mortgage Performance: Delinquencies improved in July despite Hurricane Beryl’s impact on Houston homeowners

Pebblebrook Hotel Trust Provides Operating Update

Still the Reigning ‘Safety’ Closed End Fund Preferred–By a Long Ways

I try to watch the coverage ratio that each of the closed end funds (CEFs) have on their ‘senior securities’. As most of you know CEFs have to have a coverage ratio of at least 200% on their preferreds. If the value of their portfolio takes a steep stumble they might crack this rule and when they do they need to redeem shares until they are back in compliance (or alternatively sell a bunch of common shares).

The champion of all coverage ratios today – and for as long as I can remember is closed end fund Tri-Continental Corp (TY). TY has a 5% perpetual preferred outstanding (a $50/share issue with a ticker of TY- or TY-P or TY/P or TY.PR depending on the broker etc) which has been outstanding since 1963. The coverage ratio is OVER 4000%–does that spell safety? It is redeemable at any time at $55/share. Currently it is trading at $47.45 for a current yield of 5.27%. Obviously the low yield means one will forgo a couple percent of yield–BUT you never have to worry about the safety. SAFETY doesn’t mean the share price will always give you a positive total return. The preferred has traded as low are $18/share (or there abouts) back in 1972-1973—wish I would have been around then to ‘back up the truck’.

Why doesn’t TY redeem the shares? The redemption would only cost them $37 or $38 million. That has always been a question–maybe the board of directors own most of the shares? Who knows.

These shares trade rather thinly—around 990 shares per day according to Yahoo Finance. You have to use limit orders as it can move plus and minus $1/share

So if you want pure safety this one is for you. Disclosure–I have owned this one for years (and years)—I don’t sell it I just collect my dividends.

From time to time I update coverage ratios of all CEF preferred and baby bonds which one can see here.

An Old Morgan Stanley Pricing Page

We have a reader requesting this page so I am posting it for them.

Every Piece of Economic Data of Critical Importance

If you read the FOMC minutes from the July meeting you know that they are backing themselves further into a corner relative to a interest rate cut. A rate cut will happen in September UNLESS we get hot inflation news and/or huge employment gains in the data to be released in the next 3 weeks or so. It is getting harder and harder for the Fed to renege on this action. Can you imagine equity market reactions if they do not cut?

This morning we have the 10 year treasury at 3.83% which is up from the close yesterday at 3.78%–really just noise, but obviously we are trending lower. Tomorrow with Jay Powell speaking this could get pushed down further, although with the ‘promise’ of a rate cut already known and memorialized in FOMC minutes there isn’t much that can be added to that conversation.

Equity futures are up mildly this morning–awaiting jobless claims numbers in a few minutes–each piece of data is critical importance. We get the purchasing managers index at 8:45 a.m. (central time) and existing home sales at 9 a.m.–typically not important numbers, but EVERY piece is now important.

Last night the Carlyle Credit Income Fund (CCIF) announced earnings and generally as expected. This holder of CLOs has a asset coverage ratio of almost 300% which generally matches that of other CLO owner (i.e. Eagle Point Credit, Oxford Lane Credit Company)–all of them are up near 300%. Excellent performance out of these company’s for holders of senior securities (preferreds and/or baby bonds). CCIF is just a $152 million CLO company and is much smaller than ECC or OXLC, but you can be certain they will grow assets over time with sales of common shares–and then eventually more term preferreds. The company has a term preferred outstanding with a 8.75% coupon (CCIA)–disclosure that we hold a full position in this issue.

Well let us get the day underway and see if the economic numbers confirm rate cuts or if it gives one pause. As I do everyday I am looking for something to buy. I see potential targets out there–but am having trouble pulling the trigger–must be my age OR maybe it is simply complacency with were I am currently positioned. We’ll see.