I had a chunk of money in a Gabelli money market fund for a good share of this year and with buying cash in short supply I have put in a sell order for the end of day today.
I am looking back to the mid sized regional/community bankers to buy in the next few days. I am going to add to a current position in Customers Bancorp FTF (CUBI-F) which is now floating–I already owned it and added a little today at $25/share (utiltized the last of my cash in that account). The issue went ex dividend today and is next redeemable on the next dividend payment date (3/15/2023). Current dividend is at a yield of around 8.2%.
I am also looking at others including the Valley National 5.50% fixed to floating (VLYPO) which has just converted to a floating rate effective 10/01/2022. This will be inferior to the CUBI floaters in yield terms–but I need some diversification. The December dividend is around the rate of 7.3% and all things being equal more in March. Of course this issue is now redeemable, but only on a dividend payment date.
Equity markets have been quiet today–the 10 year treasury moved up by 5 basis points. While I would prefer ‘flat’ in interest rates, plus or minus 3,4 or 5 basis points is not harmful to our investments—remember speed kills (i.e. 10 or 15 basis point moves).
“I am also looking at others including the Valley National 5.50% fixed to floating (VLYPO) which has just converted to a floating rate effective 10/01/2022. This will be inferior to the CUBI floaters in yield terms–but I need some diversification. The December dividend is around the rate of 7.3% and all things being equal more in March. Of course this issue is now redeemable, but only on a dividend payment date.”
So with the typical 30-day notice, the last day VLY could announce a 2022 redemption of VLYPO at $25 is tomorrow, December 1st? VLYPO pays its $.4583 quarterly dividend on 12/30/22.
Tim – I think you might be a little late to the VLYPO party. But as an owner with a cost basis well below $25, I’m hoping it stays outstanding. The December dividend will cost VLY $458K more than what they paid during 3Q 2022.
As of 11/29/22 3MO Libor hit a new high for this cycle of 4.76%. If it is still there on 12/28/22 (dividend determination date), the 1Q 2023 dividend will cost VLY $710K more than what they paid during 3Q 22. Will be then paying an 8.33% yield on it, with their publicly trade bonds at yields of 5 – 6.5%.
It remains to be seen how long they are going to take this pain.
TIM,
Today I also sold money market funds in two accounts to buy more CUBI-F.
I hope there is not a bidding war tomorrow.
35spline–I suspect there will have adequate shares available for the both of us.
Is the floating rate adjusted at every dividend date?
Thanks.
Hi Stephen–it is changed quarterly on the ‘dividend determination date’ which is specified in the original prospectus.
CUBI-F prospectus is at https://www.sec.gov/Archives/edgar/data/1488813/000095015916000721/customers424b5.htm
VLYPO prospectus is at https://www.sec.gov/Archives/edgar/data/714310/000119312517242560/d429083d424b2.htm
Just to add a little color, if the 3 month LIBOR on Dec. 13 is where it is today, the coupon on CUBI-F for the next quarter will be about 9.50%.
Just to add more color, the CUBI-E has a 3-month LIBOR plus a spread of 5.14%.