Recently a number of folks here and on other websites have mentioned some utility ‘illiquids’ for a possible purchase for those wanting a very safe income stream.
The very old (issued in the 1950’s and 1960’s) preferred shares from Connecticut Light and Power (parent Eversource-ES) are now selling at attractive levels providing current yields of 6.3% to 6.9%. These issues are all $50 issues and trading volumes are pretty lite. They may be redeemed at anytime at various redemption prices – $50 or above. They are cumulative and qualified.
I have a spreadsheet of $50 and $100 issues here – I do not keep this well updated but it is a starting point for potential investments.
Users who liked this:
Tim-
On your 50 & $100 chart, what is the unlabeled column after volume?
thx
Current yield is my guess.
Yes- of course. Doh.
Gary–yes it is current yield–I put the label in now–thanks for the heads up.
Anyone reading and following this conversation needs to look at Tim’s list and his comments above the illiquids and Sock drawer discussion boards. They also need to look at long term charts to see the history. Especially look at the volume. A lot of these preferred are very old and investors interest in them has fallen off over the decades and yes, I mean decades.
People my age and older here remember when 4% to 5% was normal for long periods and people were happy to get those returns. Then the 80’s and 90’s came along and people wanted higher rates of return in the market and these fell out of favor.
The last 15 to 20 years we have had ultra low rates that people thought were normal and these stocks had a small following because investors wanted a safe return above what they could get with CD’s and money market funds and remember, they have always paid.
Now we have entered a new era in investing and we really don’t know what will change or how long it will last and where rates of return will settle out at.
These low volume stocks are not safe for flipping and I don’t recommend doing that. What I am looking for is income and safety. Utilities are one of the safest things out there. It also used to include Telco’s in my wife’s and my time our parents owned all the regional Bells and they never looked at them or sold just collected the dividends and their pension and SS.
At this point with very few of us having a pension the most we can depend on is our SS and our investments for income. I don’t lose on my principal unless I sell so the safer my income is the better is what I am more concerned with. Also this has to work with a time horizon I may have.
I think everyone should have core holdings and then add to those to get the income you want. Right now I see and hear of people reaching for 10, 12 and even 14% return with MREITS and BDC’s , Equity REITS and ETF’s etc.
I prefer taking a little less return and staying in the preferred and Baby Bonds if I am going to add to my risk.
For those who started late, now may be too late to be taking risks to try and catch up as taking a loss you may never be able to make up.
“don’t lose on my principal unless I sell”
“safer my income is the better is what I am more concerned with”
Constancy of Income.
Safe positions that can averaged down over time.
100%.
There’s a new extremely risky preferred share:
LuxUrban Hotels Inc. 13% Series A Cumulative Redeemable Preferred Stock
Ticker Symbol: LUXHP
CUSIP: 21985R204
I am looking at LUXHP, but have no experience with this type of investment, so I ask: why is this risky, or did it appear risky at first? Reason I ask is they have been paying the monthly amount. Share price is down so it is now in the 30%+ range. Also, I don’t see a redeem date and am not sure what the redeem price would be (is it the issue price?). Thanks for any help.
See what you can learn by going to https://www.quantumonline.com/ where you can not only see details but a link to the original prospectus…. This begs the question though, if you have no experience with this type of investment why would you try to start with a 13% coupon preferred trading with an astronomical 23% + current yield? Most likely what you’ll learn are the bitter lessons about chasing yield, but I don’t know anything at all about LuxUrban Hotels.. You’ll get a better more satisfying learning experience by exploring Investment Grade issues first then eventually and selectively branching out.
BTW, you might be able to find the same info right here on III, but out of habit, I always default (ironic”default” comes to mind while writing this….) to QOL for searching.
BTW,
For the fearful KTN been being had at $26.15 and matures 1/27. The issue goes exD end of year for $1.02 or so on biannual payment. That gets you over 7% plus if that does anything for ya. I plucked several hundred at $26.15 to keep those funds out of serious trouble for time being.
Grid, I know you play too much golf to be in front of a computer screen and your too conservative with money to be letting it sit in GTC orders or should I say Cheep? So you must be following on you phone with these low volume stocks.
Actually Charles, I was at home on TOS, as I had just been out all day 3 days in a row golfing. I saw it dropping but didnt pay a lot of attention as a highest low bid gets jumped anyways on a large spread. But when seller later in day dropped asked to 26.20 it was worth my time to put in a 26.15 bid and hit for a couple hundred. I also got impatient and threw a 100 more market order at it and got them around 26.18.
I have basically for the large part of past 2 years been playing 4 corners offense and looking for the easy back door layup. Its done very nicely to increase capital, in a horrid income market. But the negative is yield has not increased any in totality past couple years for me. Those now horrid 1 year 4.5% CDs will be maturing very early next year. And I am essentially replacing these now with a few of these quality ilk types. And then hopefully after the string of 1 year CDs start maturing do what Alpha just posted about.
But…with 1/3 of all $33 trillion debt needing to be rolled over in next 12 months, plus QT still going… it does give me pause.
I agree with Alpha and averaging down is what I try to do as long as I have funds coming in. I have the AQNA being called in a couple weeks and I still have the opportunity to do my annual IRA contribution. As for the government, I still have about 10% in an ultra short term Treasury fund getting about 5.39% right now that I don’t intend to touch as I am unsure where the rates and economy are going just taking into account this massive refi of government debt as you pointed out.
Outside the government I see businesses slowing down and this will affect hiring and employment even with a tight labor market.
Long term I don’t know where the Treasury rates will be to support the debt but the general economy can probably live and grow with rates around 4 to 6% and none of this zero to 3% nonsense. Although I am one to talk having bought a new truck in 2021 with a 5year 1% or zero percent loan that Ford finance is holding.
I’ve been playing with the illiquid utility preferreds somewhat. I’m actually down more on those than anything else. But it’s just that for the yield to increase say 1% the price has to drop maybe 10% it seems.
I did have a few successful ‘quick flips’. I’d place OCO buy orders a few cents over the bid for all the tickers in a group such as the Connecticut Power and Lights. Then I’d wait until something filled, which in some cases was the same day and others was several weeks.
Then I’d immediately place a GTC sell order just under the ask. So a few times those filled and netted hundreds of dollars of quick profit. However, since I was not hedged on those, the ones I now have left are well under my cost basis.
I noticed a game the market makers play on OTC is if your 100 share sell order is a better price than theirs, they will buy 1 share of it at your ask. Now you have 99 shares left, and selling an odd lot on OTC seems difficult to fill.
Generally the odd lot will not even fill at the bid. The only hope seems to be to let the order sit on the book until it fills, or accept well under bid for it.
>> I noticed a game the market makers play on OTC is if your 100 share sell order is a better price than theirs, they will buy 1 share of it at your ask. Now you have 99 shares left, and selling an odd lot on OTC seems difficult to fill.
One share executions might be High Frequency Traders looking for price discovery. Maybe one of the experts here can expand on this.
Then buy 99 shares at a lower price and reset your GTS order
or change the order from 99 to 100 shares buy ; and you get your round lot back
UEPEO is out there today for $69.99 which is a 6.42% yield. It’s callable anytime at $110.
I own this one and pray nightly for a redemption haha
Not attractive enough for me.
For safe-ish income, I have been nibbling at the Too-Big-To-Fail bank preferreds in the $16-$19 range with yields above 6% qualified. They have been dropping so I am DCA down, but at some point interest rates need to peak and there is potential for nice capital gains if they are ever called.
Tim as you mentioned on your illiquid chat page these can drop unexpectedly and leave you with a loss of principle. So they are not something you should buy if you think you might need to sell. During their history they have been lower than what they are now so it could be possible they go lower. A few readers here have flipped them in and out and made money and some here have held for years.
I personally balance a buy in one of these with a buy of something paying 8%
Charles–yes for those that are looking for a safe income stream without so much sensitivity to share price movement.