Closed end fund Gabelli Global Utilities and Income Fund (GLU) has added a bunch of ‘put’ dates to their 5.2% perpetual puttable preferred (GLU-B).
What this means is that during a 60 day period every 6 months during the next 2.5 years shares can be ‘put’ back to the CEF @ $50 plus the accrued dividend.
This fund has had many changes in coupon over the last 6 years or so, but it is now fixed at 5.20% and shares are trading at $50.25.
I posted this in the ‘headlines’ last night so if you read those you are already aware of this item.
I bought 100 shares just a minute ago at $50.30. Shares will be held for at least 18 months–maybe longer depending on interest rates. After the final ‘put’ date the issue turns into a perpetual with a 5.2% coupon. If interest rates are higher then the share price will likely drop as we no longer have the ‘put’ to hold the share price up. Right now it is a fairly meager coupon, but combined with the safety it is better than CDs and money markets.
2wr and others have mentioned this is the comments today.
NOTE–mother Fidelity is limiting buy orders to tiny quantities–I had to execute on eTrade.
Anyone know offhand when the put option expires? Saw 2.5 yrs, anyone have a specific date?
I think I mentioned this before, but if you place limit orders after hours on Nanny Fidelity they have a good chance of going through. I just placed an order for 150 shares of GLU-B
Tim,
Good fine. Love it! We need to keep expanding the list of ‘safer’ securities so we have some breadth. Especially ‘safer’ and cumulative.
legend vs – I added it to the ‘hiding spot’ list.
A big Thank You to Gary, 2 White Roses, & Bill S. I may be just a little different than most investors on Tims site as when I buy something I just keep it till it gets called. The older I get the more fussy I get seeking out very financially STRONG Companies. I live off the income stream. As an example I own a large amount of the AGM+E & am not happy that they have sunk to $22 but I have NO PLANS to sell as they are a very strong company.
Feel free to tell me if you disagree but right now MS+P is at $25.31. Seems like a pretty decent “value” for a pretty rock solid company. Not callable till 10/15/2027 with a 6.5% coupon. I always say to myself “What am I missing here”. Hope all is well with everybody.
I guess the MS-E 7.125%, now 7.06% is first up to be called- but at what point?
MS-Q, about the same price as P, ylds more now, but call is 10/15/29 — too long?
I have residual, recurring nightmares from 07 – 09, and the big investment bank preferreds definitely require better payouts given the risk embedded there.
PFXF Non-Financials preferred ETF might be one to keep on the radar. Risks could be: heavy on REITs and Utilities & many long term holdings.
Chuck – if what you are really asking is why shouldn’t GLU-B’s yield (no matter which yield you use) be more like MS-P’s then what you are missing is the differing risks you take on with a perpetual preferred with only a ’27 call date vs. a 2 year term preferred issue (with term being at the holder’s, not the issuers discretion). It’s “maturity” [put date] date v call date comparison with the call date only issue being subject to greater duration risk and with no guaranty of it being outstanding for only 2 years vs the bird in hand safety of having an out every six months. They appeal, or should appeal, to 2 different sets of buyers or 2 different buckets for the same buyer,
Non cumulative could be a problem for some. I seem to recall Grid didn’t like banks because they are non cumulative. I think large banks are pretty safe, I own a few shares of MS-F, had them a long time, callable for over a year.
Bill,
IIRC, rule changes after the 08 financial crisis required bank preferreds to be non-cumulative to be booked as equity (otherwise they are booked as debt).
So, all banks issue them as non-cumulative.
I think those rules affected some other types if financial companies, but I don’t recall exactly how the rule was written (looked at it too many years ago).
I think a number of older issues were grandfathered, but I can’t remember any specifically (sorry, I am out of office and can’t research much).
I have no idea how/whether rules restrict GAB similarly.
Unfortunately, I think a lot of non-financial companies jumped on the non-cumulative bandwagon (hiding behind the bank trend).
I traded every day during that period, and I never had a more profitable period before, and certainly not since. That period served to point out the one risk that should cause financial fixed income securities to trade at a significant yield premium to industrials: “Jump To Default” risk.
Grid came up with 2 bank preferred that are grandfathered in as cumulative.
One was NYCB PU now FLG- PU The other is one I haven’t mentioned before. I own 750 shares of BANFP at an average cost of 25.35
I tried to sell a few shares of my BANFP holdings today and Fido wouldn’t let me even when I went down to 50 shares. I got tired of trying at that point.
Just a heads up if anyone is thinking of trading these at Fidelity. It would be quite a slog to acquire or liquidate a position a couple of dozen shares at a time. I am glad I got my 1500 shares before Fido started abusing everyone, but I am going to have to transfer them all out.