As most everyone knows REIT Hudson Pacific (HPP) suspended their common share dividend today. The preferred share dividend remains intact.
If you own the 4.75% perpetual preferred (HPP-C) you may be wondering what your next move is–and everyone has their own way of handling bad news from company’s that they hold a position in. The preferreds reacted today with heavy volume of 161,000 shares changing hands and closed down 43 cents at $12.52. Being a low coupon issue shares have been relatively weak all year– the credit ratings of the company have been downgraded this year–the preferred is way down at a B rating from S&P–darned junky.
I don’t have any shares of this preferred issue–and try to avoid ever owning junk like this, but sometimes folks buy a ‘bargain’ that turns out to be a junkier than anticipated and they are ‘stuck’. Some folks may determine shares are a great buy/speculation right now and initiate a new position. Others might average down and buy more shares—but if you are like me you would be out right now—any sign of trouble and I am out and booking a loss if necessary. I personally find no real reason to sit and worry about any given security and in this case I think it might be a year or two before HPP gets the ship righted.
I exit and simply move on from either troubled company’s or from those that might experience a delisting—most recently this happened with insurance company Enstar (ESGR) which is being acquired. I owned shares in the 7% preferred (ESGRO) and exited them immediately on the announcement @$23.83 taking a small 12 cent capital loss. Shares are now at $20.28. While dividends will likely continue to be paid I simply do not want to own delisted shares.
So that is how I handle these situations–how do you handle them?
I owned TELZ for a bit. I could not stand the never ending drama of it and sold for a loss. TELL was basically a penny stock before they got bought out. Now TELZ has recovered but now you have tied your future to WDS whose common stock 1 year chart is not appealing either. I am just happy I do not have to worry about it and moved on. As time goes on I am leaning more boring and less drama. The extra pennies is just not worth it.
There’s a lot to be said for not worrying…heck for not even thinking about it.
That’s why I’d take a 5$ CEF prfd with good coverage over a BBB+ 6% preferred…or maybe even 7.5%
I’ve owned the Delphi Financial preferred probably since 2009. The company was bought by Tokio Marine and they promptly delisted the preferred around 2012 or 2013. It has been very illiquid, but since it’s floating rate the share price has slowly gone up to around $24. I think my purchase price is in the $14’s.
A surprise increase in inflation would really upset this market. While listening to Powel’s recent Jackson Hole speech, I noticed the hubris in his voice all but declaring victory on inflation. Him and the entire market all on the same side of the ship… what can go wrong?
ecri thinks inflation may be underestimated
March – May 2023 this dropped down to 11 through 8 per share where I picked some up, just minor amounts. I figure they’ll never call it at that rate but I’m happy holding forever at those yields (unless inflation goes to 15% then I may be crying). That was the same time the world was ending and many of the bank pfd’s could be had at close to 50 cents on the dollar, some much less. I took a spray and pray approach figuring 50% of the bank pfd I was buying wouldn’t go belly up.
I have some DELISTED and PINK market BB:
SJIJ, CHRB, AFFT
Safer than what you think.
Can a believe a baby bond be delisted, I thought BB’s only suffer the consequences of bankruptcy? Which is not good?
Say what???? “Can a believe a baby bond be delisted?”
I rarely Buy in such cases there are less risky ways to make money. I might Sell if I wanted the tax break, or Hold if I already had my $3000 in losses that year. In an IRA where I do my short term trades I’m more likely to bail out so I can recycle the money elsewhere. I’m not familiar with HPP quality I suppose that’s a factor too, huh.
Hey Tim. It all depends on the situation. Sometimes I sell asap, other times I double down, and then triple down, lol.
I think the last pref I panicked was NYCB-A when it went close to $10. I took an L on that one.. oh well!
Well Tim, you and I have had different experiences on these issues.
Exited RILYP with a 30% return in a few weeks and in the green on ESGRO preferred post selloff with the likelihood of dividend continuing even if delisted.
Dangerous times now for the ‘quality stuff’ because its pretty fully priced. The time to buy quality has been over the past couple years.
Agree with Maine that it depends on the situation. I hold a few BB that were originally delisted but ended up on the pink sheets. Another one paid me dividends the whole time and was called and paid in full. I held NYCB U and made money.
I know many people have gambled on RILY and made money. But I think more money has been lost betting on high risk bets like HPP C
legend.vs–yes we no doubt play these things differently–you wait for fallen angels and I get out before the fall. Being very conservative I just want my fair return and don’t mess around with fallen angels. As always everyone is different.
Tim, Made my first buy of an MREIT bought RITM PD today at 23.65 I went for the 7.3% yield on purchase and the reset in 2yrs based off 5 year Treasury plus 6.2% I have no idea where we will be at in 2yrs but I have a decent return locked in and possible Capitol gains if it’s called.
Charles M,
I love the preferreds with high reset rates like RITM-D. Likely to be called on call date, but if not, great rate. Long ANG-B as well.
Not finding ANG-B
But Doc, everyone is looking at the here and now and the upcoming rate cut is already priced in. I think the rush to buy income stocks is overdone and caused the pendulum to swing too far in one direction compressing yields. The herd instinct of FOMO is adding to it. I have seen how FtoF stocks have reacted as rates have went up. Now that the market is telling us rates will decline the stocks that have already floated and went to 3 month resets will drop in price to match the 3 month Treasury and SOFR rates. Rates are going to go up or down over time. I’d rather take the risk of FtoR ( fixed to 5yr reset)
People who bought Floaters are at risk of seeing both Yield and Capitol disappear. I do hold FTF but the SOFR or 3M T has an adder which is high enough to compensate and I bought at a low enough cost I can collect the income and ride it out. The same with the 5yr resets, If I get locked into a lower rate I’ll wait for the next change. Just like the weather, if you don’t like it’s cold, just wait and it will change. I just happen to be buying stocks with 5yr resets farther out so I have more time to watch for changes.
ANG-B, formerly AEL-B
Resets 9/1/25 at 5YR-T + 6.297%
Does ANG-B issue K-1 tax forms?
No K-1 to my knowledge Jimmy.
Thanks Doc
Gunfighter, I had researched this and was interested until I found out this is owned by Brookfield. Sorry, but P.E companies bother me.
Here is an example of them loading up a company with debt
https://archive.ph/nQv85
If the ANG-B had been a term preferred I might take a small risk.