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Buy More, Hold or Sell

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?

Altera Infrastructure LP Suspends Preferred Distributions

Early today PTrader posted on the Reader Initiated Alerts page that Altura Infrastructure Partners suspended their preferred unit distributions. Thanks for the early post.

The announcement is here.

Altera is controlled by giant Brookfield Business Partners (BBU) which has assets of over $55 billion and one might have assumed that BBU would not let this happen–well think again.

Right now the 3 issues from Altera are trading in the $9.50/shares area–all down around $15/share.

All of these issues are ‘cumulative’, but there is no guarantee that these will be paid anytime soon as the company has struck a deal with their parent (BBU) for debt restructuring that will not allow dividends until certain milestones are met.

Wesco International to Make 1st Juicy Dividend Payment

Wesco International (WCC) which merged with Anixter International earlier his year is about to make their 1st dividend payment on the juicy 10.625% fixed rate reset cumulative preferred on the 30th of the month.

The WCC-A issue went ex-dividend today for around 73 cents–the first payment is for slightly over 3 months.

The company is a giant in the business to business distribution and supply chain business with revenue now in the $17 billion area.

You can be certain there is plenty of risk in Wesco as they are rate B1 by Moodys and BB- by Standard and Poors. You can read S&P’s take on the combined companies.

I only mention this issue because depending on your risk tolerance this may be a reasonable holding. The reset period isn’t until 6/22/2025 so at 10.625% there is plenty of ‘meat on the bone’ yet even though shares closed at $28.30 today.

Disclosure–I hold a position in this issue which I bought in the $26.90 area.