Guess They Wanted the Dividend Badly

Yesterday we had a good example of someone who was “asleep at the wheel” as someone bought just a little over 700 shares of the Kayne Anderson 3.50% Mandatory Redemption preferreds (KYN-F) at $25.36-$25.38. This was 30 cents above the last trades and the shares have traded between $24.95 and $25.15 all year.

The shares go ex-dividend for 7.3 cents on the 14th–a heavy price to pay to capture a 7.3 cent dividend.

Just a reminder to newer income security buyers (and sellers) that you must always use limit orders to buy or sell securities that are somewhat illiquid. If you don’t use limits you will pay a heavy price for entry to the income security arena.

Disclosure that we own around 2,000 shares in this issue (and our returns sure looked good yesterday–certain to reverse today).

65 thoughts on “Guess They Wanted the Dividend Badly”

  1. Anyone have any thoughts on RILYG? or RILYZ? (I’m holding both.) Great yield and they are term but something about the parent company bothers me.

    1. I used to own RILYZ and RILYL, but sold out a while back. I was not happy with their buy of Magic Jack, as it is a technology being eclipsed and rendered obsolete by new development.

      But that is just my opinion and persuasion, so you have to research that for yourself before considering alternatives – I agree the yield and term maturity are strong points in its favor.

      1. B. Riley also owns an internet service provider and it is my understanding that the Magic Jack Voice Tech purchase was somehow helpful to that business. Those businesses plus a 30% stake in online retailer Bebe make up the Principle Investments segment of the business and contribute about 11% of the total revenue.

    1. I have been flipping a portion of the IHIT position in my portfolio. Sold 500 shares a few days ago at $10.30 on the spike ( and I know others did way better than me ), then bought back yesterday at $10.19.

      Today is XD day, and IHIT is at $10.20, a cent higher than when I bought it. I like these outcomes !! :-))

      Has anyone taken a look at BPRAP ? I think Tim mentioned this a while back, but memory fails me.

      1. I took a partial position after Tim’s note. Was considering BPR or BPY for a while but went with the preferred instead. Not rated but I like backstop from BAM. Still under par but past call, ex div in about a month

        1. Timdman, I also took a small position a while back, after reading about it on this site ( I think it was Tim who mentioned it originally, but I forget )

          As usual, consistent with my near-impeccable record of “buying high”, my cost basis was just below par @ $24.86, and BPRAP is currently trading around $24.36. But I intend to hold, and hope “selling low” does not happen for me, lol.

          Should be a good income stream for a while, and if they be called, so be it.

      2. Tim’s mention of BPRAP was very helpful. I looked it over and bought at the right price. Just checked and I’m up 7%, so need to get ready to sell if it starts to drop.

      1. Ken–the yield to maturity kind of goes to hell if one pays 25.38 for shares–guess they got an expensive lesson.

        1. Tim, I found another 500 KYN.F in a retirement account and sold at $25.12 today; still a bit lost just why anyone would pay such a premium. I will rebuyagain (yes, I made up that word) near $25. Time flies over us but leaves it’s shadow behind, Nomad

    1. Hi Walter–don’t know what you mean. They are 3.50% coupon and I hold them as I always hold some ultra conservative, very safe stuff–they perfectly fit my needs of being able to sleep well at night.

      1. So many things to like about this website. You got people backing up their truck to buy soon to be delisted securities, or utilities in bankruptcy, or pretty much anything else with an outsized yield. You also have people buying stuff that pays 2%. You got some people flipping more stuff than an IHOP. You got some people who just hold stuff like it’s illegal to sell or buy anything, ever. Then you got the data. Having lot’s of really good data is good, that’s one thing everybody should agree on. Thanks for everything Tim.

        1. AMEN! Tim and many others here have saved my bacon many times in the short time since I found III.com. Thanks to all and especially Tim for his generous spirit.

          1. Thanks mikeo for your kind words. I try to do a good job, but fail sometimes-most recently I forgot to ‘approve’ new posters for a number of days–simply an old person zone out.

        2. P–I hope they’re not ‘flipping’ based on anything we write because while we do a little out of boredom (and the need for a steak dinner as Grid would say) we mostly do long term holds. On the other had when someone wants to pay sky high prices for issues we hold they are most welcome.

          1. One nice thing about not having to pay brokerage commissions at ML is it allows you to buy/sell a small number of shares without penalty. This nibbling satisfies my need to be ‘in the game’ without doing too much damage to my portfolio.

            1. Yes, having free commission makes it a no brainer if a partial or small fill occurs on sell orders. The savings do add up over time.

        3. P, that is too funny…..The truth can be funny! Add this…You even got people buying on their phones on vacation in the mountains, lol. I dont really study data anymore…I did that long ago, and just stay in my rotational list. I might flip a lot but generally already know all I need to know. Stay in my lane and flip around in the same players. I think I have been in SCE preferreds four different times and out of them three in past few months alone.

          1. Grid and P, Remember the mad-money buy in PCG at $7.20 couple weeks ago? Flipped it last Friday at $15 ($14 call plus $1 call option sold 10 days prior). Rolled into AGO-E at early Monday. Coulda been taken to the shed on this one but the competing interests in the PCG outcome were (and remain) compelling – now back to the IG low-drama salt-mine.

            1. Yes, I do. That was a fearless trade! Congrats on the quick wallet fattener trade, Alpha.

            2. Alpha, I’ve been watching PCG because of my SCE holding, and of course been thinking about your buy. Governor made some dour comments about PCG yesterday and now it goes up more today. I’m scratching my head over it all, but glad it ended well for you.

              1. P, Some of governors comments are being construed as being beneficial to SCE and Sempra as they look for long term solutions. I have been playing the SCE flips with fortunate hops. They jump; I sell, they sag, I buy and they pop ever higher. They jumped nicely again in past 2 days…What the heck, bought some SCE-D at $18.80 today to go with my L and J series…Learned something today…A buy isnt a buy no matter how long ago purchased…Vanguard called me telling me they were voiding my CKNQP trade from a couple weeks ago. They tried to make it sound like it was CoBanks fault, but little did they know, I knew what was going on…I made them admit it was their fault not CoBank that I cannot hold them with Vanguard. So they voided sale today.

                1. Have they sold you pinks before? CKNQP trades on pink, the mother of all scams. Maybe they don’t want the liability of selling you a pink, even if CKNQP is solid. Maybe somebody’s 96 year old Grandma bought a million dollars worth of oceanfront property in Arizona and they got sued over it. In this case they probably just put the CKNQP in their inventory for resale, so no real harm to them. Wouldn’t be so easy to do with Grandma’s worthless property deal. Lawyers said don’t do that crap again, so no pink trades for you.

                2. Grid I’m sure you shared with them that CoBank is one of the safest banks in the world as was discussed here a few weeks ago. P’s correct, lawyers. Another loco policy like FIDO’s “mother may I” call requirement for every FTF purchase.

                  1. P, they tried to be sneaky and assumed I didnt know. But it is a 144a preferred which means only qualified buyers can buy. The brokerage deems that process though. Vanguard doesnt want to mess with it, and that was bottom line. They just wanted to leave it at I bought a security that I shouldnt have been able to buy. Gives me something to look forward to buying soon, lol.

                    1. So, how do you buy CKNQP? I’ve tried at Interactive and Schwab and been denied at both. No real explanation as to why; just said they can’t process the trade. Any ideas/thoughts?

                    2. Steve C – I’m able to put a bid in on TD Ameritrade, and been successful with a partial fill, but this thing goes for days without a single trade. As above, some brokerages just don’t want to deal with it. Good luck. I put a bid in every day for $102.50. One of these days…
                      (there was no reply bar on your post, so I stuck this here)

                    3. Thanks, Timdman. Hate to set up another account and Ameritrade’s fees aren’t the greatest. Might just need to pass on it for now.

                    4. Steve, the security is a 144a preferred. Basically this means the brokerage has to ensure purchaser is an approved buyer. Some brokerages will trade these and some wont. Or in Vanguards case they allow it then cancel it, many days later, lol.

                    5. Thanks Gridbird. How would you define a Qualified Buyer? Or maybe it’s easier to define a non-Qualified Buyer?

                    6. Steve, its just craziness or laziness which ever you want to define it. The brokerage in effect defines it. There isnt any real specific criteria. Vanguard doesnt want to mess with the paperwork is really what it comes down to as they admitted they could allow purchases if they would set it up to do it. But they wont.
                      Vanguard is just randomly crazy…Take this as an example today…They wont sell me ERRAF or many like it…But they will allow me to buy ALTGF. So I put a 500 share bid in to in effect sell my shares from another brokeage into here so I could free up HSA cash to buy ERRAF. I put in bid at 19.10 and sell at 19.00. Somehow I buy at 19.03 and sell at 19.08. Didnt get fleeced anyways, lol.

              2. P, This SCE preferreds has just been shooting fish in a barrel. They just keep popping and every time I sell off a bounce, and repurchase, I buy even more the next time on reload. At some point I may have to sell for the 4th time already. But, I think market is getting sane now that SCE is not PCG. And with all the rain dumps they have had, fires are not a near term comcern.

                1. Although I call irrational exuberance on PCG, I do agree market has stopped close association with SCE . I bought in January at 7.1% yield. First I said I’d sell them at 6.4% and then they just blew by that. So then I said keep till 6.2% and they blew by that. So then it was 6% and there now. So now guess I’ll just hold and be an observer to see if they go to 5.75%. I see a dearth of replacement issues, IMO things are getting frothy. I ladder bonds so already have bond cash coming in to find a home for. Bond market is very stingy right now and not attractive to me, it’s become a stretch to find a home for cash.

                  1. P, I am keeping to for now, but who knows for the future. I rolled more funds into ERRAF taking advantage of currency strength of dollar buying 500 more at $14.91. When I can get near 6% with reset preferreds off 2% 5 yr reset and still have 4.5 years protection, I find that better relative value. If rates in 4 years just modestly uptick from here these will really pop… I have roughly a quarter of my stash in various Canadian resets and will sit and hold these long term now. Staying in my lane with all utilities or Enbridge issues.
                    Anyways, SCE preferreds may have a bit more running room, still down roughly 6% from a year ago. These sure have been a good play though.

                    1. SCE was a jackpot. I think you have a good plan with the Canadian resets. I like liquid in general, but have smaller amounts of “144a” illiquid too. I know 114a has been discussed before but will chime in. Almost all are tradeable at some point after the issue. The broker is the gatekeeper, or perhaps I should say the broker’s lawyers are. Etrade has been very easy to trade them. I will add that since they trade infrequently I found best to use GTC and let the order sit. When some magic happens, they sweep the board down to a limit. Things can get stuck until the magician shows up. I picture him as a grumpy old trader at Etrade who uses this as an excuse to leave the floor and get away from people. That’s just me, it may not work exactly like that.

              3. P, you may be interested in this useless fact. The SCE preferreds B through D rank senior to the SCE trust preferreds of G through L. And generally they trade with historically lower yields than the trust prefereds do (some of this is the lower par yield and push towards par being past call which all old illiquid preferreds exhibit).
                I indirectly knew this but comfirmed it tonight due to my rollover into SCE-C today. Largely was a rare opportunity to get the same yield for higher stack. I think the price rises in SCE preferreds are topping out, so I am trying to squeeze out a bit more cap gain potential in these by going to C which has not exhibited the bounce back the other trust issues have. They are still 15% below 52 week high and down on the week, while say SCE-L for example is now only down a bit over 4% past year and up almost 5% past week…
                Now I suspect if SCE blows up, they all go down together,but over time, one clearly sees most of the time the “traditional SCE preferreds” trade at a premium to the trust issues. This is what I am trying to squeeze out more gains as they yields are essentially the same now, but C hasnt recovered yet to its normal perch like the trust issues are zeroing in on now.
                The original preferreds A-D are old illiquid ones..For example the C series I bought was issued in 1956.
                There prospectus are a bit different.
                https://www.sec.gov/Archives/edgar/data/92103/000082705217000163/exhibit31q22017.htm

                1. Interesting play, good luck. I noticed the older ones trade at a premium but didn’t know why. SCE also has that H as F/F. Getting pretty frothy everywhere so maybe L goes up a little more, but who knows. Income Underwriters starting to party like it’s 2018 and the bond market isn’t paying now either. I’m not crazy about current prices so amusing myself by rummaging around in some pretty obscure spaces.

                  1. P, if looking for long term plays consider the Fortis Series G. Where can one find a quality utility QDI reset that yields 6% and is 25% under par (if you can accept the issues one assumes holding a Canadian issue). Compare to NI-B at each issues current price…If both have 3% resets, NI-B would trade at ~ 6.15% with a negative YTM. FTRSF would go to ~ 7.15% and be 25% under par from purchase price.
                    ALTGF is a more higher risk and reward at present 7% QDI. But it was reset off a crap 1.71% 5 year US Tbill from 2017 and is traded in USD so no currency issues. It is 20% under par also, as it shakes off the problems from just digesting big utility WGL Holdings which includes Washington Gas and Light. I own this issue also. It will reset again in 2022 with 5 yr US Tbill plus 3.58% kicker.
                    https://www.altagas.ca/newsroom/news-releases/altagas-ltd-provides-notice-series-c-shares-conversion-right-and-announces

                  2. P, the all in rollover into SCE-C out of the trust preferreds is working day one anyways. Up 49 cents today, plus the bounce Friday. Dont mind holding these longer term so I am looking for $20 before seriously thinking of an exit.

                    1. It’s just crazy, L almost hit $21.50 this morning. I spent the weekend rummaging around Canadian issues despite my aversion to them based on some past experiences when Etrade had a great foreign desk (not anymore) and you could buy direct off world markets without paying a fortune. So no preferred enticed me but I did buy a small position in Alta Gas common this morning at $11.63. I would have bought more but price moved up although balance of order is still open. That company is a mess.

                    2. P, I agree on Alta…That being said I did enter a small position of one of its preferreds ALTGF with the 7% yield. It reset in 2017 off an absymal US 5 yr Tbill of 1.75% or so with a healthy 3.5 ish kicker. So that is why its 20% plus under par. But its payment and terms are in USD. They are trying to hide more in the regulated monopoly utility area so if they can delever into it, this could be a nice long term hold. Not a high conviction purchase though as it reaches the outer bounds of my safety….Which is still considerably safer than most things since their debt is still lower investment grade.

                    3. P, the game continues. Just bought a big slug in low 20.80s on SCE-L after its nice 2% drop…I am back in…Reached 6% threshold plus divi is fast approaching. Obviously would not have bought without the sell off. Now I have a slug of this and a big chunk of the Series C. Might have to hold these longer… Hoping to keep C and get a flip out of L around exD time.

                    4. P, this SCE game is getting kind of fun… I had rotated all out of L into C and bought those from 17.80s to 18.30s. Then I restarted a position in L 20.80. The C shares spiked on volume yesterday so I sold a couple thousand shares at 18.67-75. And L was tanking at same time so I rolled that back into L at 20.25 and 35. It was still sagging at close down to 20.21. So now Im essentially flipped again with 2/3 in L and 1/3 in C.
                      This is an example of why I like to flip, as I dont like to ride the wave up, just to watch it go back down. If this is deemed a tradable issue which this one is. L is now back to a 6.19% yield and will be going exD in less than 3 weeks. These SCE preferreds have been fun little things lately. Have hit and ran on the G and J series too on that earlier run up.

                    5. You are making a killing on SCE. Good job on spotting that winner, it was a pretty unique trading opportunity with lots of volatility. Looks to me like the million share days of accumulation are about over, or at least got paused on high price. The mom and pop volume can’t hold it up, at least in the short term. I just held all along, partly because I don’t mind holding it anywhere around 6%, but also because I am almost fully invested. I hate being boxed on inability to sell immediately. The little cash I do have is lines in the water on a couple illiquid issues right now. I do think flipping is a heck of a lot of fun and can be quite profitable. Couple years back I flipped so much that I probably paid for the broker Christmas party.

                    6. P, that is why I will miss Vanguard if I consolidate. I can leave bids out with no cash to support the bids and then have until market close to sell something or move cash in. My liquid open home equity line serves as a temporary “leverage” if need be. I see no problem as a hold with SCE. I just predetermined it as my hot cash trading issue as it is hogging up most of it anyways. Thus my focus on it while I accumulate more resets if opportunity arises.

                    7. I didn’t know that about Vanguard, very interesting. I don’t use margin so have no have no ability to do something similar using Etrade or Edge. All I get is threatening pop-up warnings. In all the broker discussions here this is the first mention I have heard of this. Great feature for Vanguard, great feature for flipping.

                    8. P, they never told me about it, I just stumbled onto it. I screwed up one time as a bid hit at close and I forgot about it. I moved cash in next day but I still got the nasty phone call. I was warned by email if that happened 3 times in a year, one loses the privelage for 6 months or so. It only happened that one time. The only other nasty call I got was when I sold an illiquid out of roth into taxable to myself. They let it go but didnt like it.

                    9. If I don’t have hard cash or unsettled cash then the red pop-up says “NO”. Actually worse for me is the yellow pop-up “can’t sell a issue bought using proceeds from an unsettled sale until some funds settle’. Sometimes it would let me do some stuff anyway but includes some jibberish about notifying the Government if I do it. I really don’t need any unwanted attention from the Government so I haven’t done it to find out what happens. Not fighting with pop-ups is my version of staying in my lane I guess. It’s rarely an issue for me because I am largely a buy and hold with a little mad money set aside, but last December I went crazy trading and was tormented by it.

                    10. P, that part is standard for me on Vanguard and TradeKing..If I sell something, then immediately buy something, I cannot sell it for 2 days. As that is the time it takes for the first transaction to clear. Now TD is different. I can turn around and sell again, but the money is “impounded” until the 2 days to clear.

                    11. If I understood correctly, you have benefit of buying without cash or unsettled cash as long as you are balanced at end of day. I can’t do that, I need cash or unsettled cash in order to place a buy without the threatening pop-up.

                    12. P, yes that is correct. My just previous post was just speaking in general on trading transaction process of unsettled funds. But yes, I can definitely buy with zero money in account. However, it appears the max I COULD do is about 40% of my balance as I was playing around with it one day. After that limit is reached the next attmepted purchase goes to pending where they would review it. I cancelled order after that. I suspect the reason is they want the cushion in case they had to liquidate some securities to cover the trade if I did not cover the trade. In fact they state with a warning on each transaction that securities would be liquidated to pay for the purchase if I did not cover the trade by market close.
                      That one time I didnt, they did not sell anything because they seen the cash was deposited before market opened the next day.

                    13. P, to buy with no money down? Yes. I have a taxable and non taxable account through Vanguard. The same principals apply. Except my limit is lower in tax free because I have less tax free funds than taxable.

                    14. Your IRA form of limited margin is superior to what was offered to me through either Edge or Etrade. It would be nice to have it.

                  3. P, the SCE game continues, I rotated all out of my D shares pocking almost 75 cents in 4 trading days and pushed all proceeds into bloated C position at $18.34 when my standing bid caught a several thousand dump in a few seconds a couple hours ago. There was no reason to hold lower yielding twin sister when I could bang out the cap gain and move it into the C with a higher yield.
                    There is fire legislation in the pipeline in CA. This will be a nice piece in the puzzle to fully prop SCE preferreds back to where they were. The trust issues are drifting back near 52 week high, while higher in cap stack SCE-C is still 15% off 52 week high and 25% below 5 year high. I think it will be tougher sledding going forward, but it I believe it has more upside potential than the rest though.

              1. P, You may have scored. Appears to be another entry into the low-liquidity meets a market order Hall of Fame. CHKDP was off 12% today on a volume of 25 shares. Too bad the seller didn’t drop 50 shares. lol. Checked CHK site for news/announcements – zilch. This thing may have legs. The after-hours Bid/Ask is 565/580 and B/A Size is 1×54. Printing up your Mad-Money ID and badge now.

                1. Only got 20 of them, the guy in front of me got the other 5 for $580. I’ll pin the mad money badge on my fishing hat for good luck.

      2. just curious,seems there is more out there and I know we all need to sleep well . Money is money coming in etc/
        I am shooting for 6.5% and at least BBB or higher on S and P ratings.
        No guarantees in life.

        Walter

        1. UNMA is BB+, currently under par, 6.25% coupon, 6.29% current yield, ex div 2-28. I don’t own but I keep shooting bids at $24.50 which gets you close to your goals. Good luck. It’s a BB, due 2058, callable 6-2023

        2. Walter, OAK-B is a BBB, but non-rated on Moody’s. It is bid/ask 24.95/24.97 this morning with good volume. Might take a look at it see if it meets your criteria.

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