Illiquid Preferred Securities Discussion

On this page folks should comment and write about illiquid securities–preferreds and baby bonds. By Illiquid I am talking about those issues that seldom trade–or only trade in very small volumes.

We have a lot of discussion on the site about these types of securities–normally $50 and $100/shares issues and the commenting gets scattered about–by using this page we can keep this topic more centralized.

A caution to all investors, but in particular those will little experience in illiquid securities. Tight limits must be used on all of these securities–if you don’t use limits you will butchered. Also while some of these issues have been outstanding for more than 50 years they can still be called–it happens and if you overpay (pay more than liquidation price) you may be setting yourself up for a loss. Always do your own due diligence–always double check the facts–everyone makes errors (certainly I do) and you need to know the facts.

Investors should know that illiquid securities will drop like a rock if there is a large move higher in interest rates. One of my current and long time holdings has been a $50/share issue from CEF Tricontinental (TY-P or TY-) with a 5% coupon–very high quality. This issue is now trading around $56, but in its life (issued in 1963) it has traded as low at $18/share–so there should be no doubt they can move sharply.

917 thoughts on “Illiquid Preferred Securities Discussion”

    1. UEPEM also available for $64.75 (6.18% current yield not considering accrued div). Callable anytime at $105.63.

        1. I saw those but I decided to clip some more CNTHO at $42 this morning. Paid a bit more than I did the other day but it’s still 6.29% and going exD early next month.

          1. Is there any friction from brokers when you try to sell these? Merrill Edge gives a message that indicates selling might be an issue/pain. I am not planning to sell, but one never knows. No doubt that limit orders are a must when selling and buying for that matter.

            1. The bid/ask are uniform across brokerages with these. 75% or greater of my fixed perps have been OTC pinks for 15 years. Never been a problem selling. You can’t force dump thousands or you would swamp the standing bids. Patience may be needed depending on volume you want to sell. Can’t always do it, but my preference is to buy into liquidity and sell into illiquidity.

            2. I got that message at Merrill with one of the cnl issues, but I didn’t have any trouble selling it last week.

              1. Grid/Irish,

                Thanks for the information. I wasn’t sure about what to make out of the message on the Merrill site concerning these securities. I already bought some despite the warning and it is good to know it probably isn’t a real issue.

  1. UEPEO has an ask of $71.75 (6.27% current yield not considering accrued div). Callable anytime at $110.

  2. So Southern BancShares released their annual report. I got an email about it.

    https://www.iproxydirect.com/uploads/sbnc/sbnc_annual_report.pdf

    So I start reading. Now I know their common shares are rarely traded. They have a very high value per share since there is only like 77-78K shares outstanding.

    So I head over to SA and pop in the ticker and I see a 60% one day loss on 77 shares traded! Yet no other places show this drop. I was like uh.. I am a buyer tomorrow at 2.5K.. Then I was disappointed. I have no idea how SA’s data is this out of whack unless I am missing something.

    https://seekingalpha.com/symbol/SBNC <- bad data
    https://www.barrons.com/market-data/stocks/sbnc <- correct data

    Anyway.. I thought I would share the link to the annual report of this ill. I have been waiting to add but the preferred never really gets much lower then a 6.7-7% yield. 10.50-11.75 per share would be nice for either preferred at this stage.

    1. Fc I was trying to figure that out myself but I then I noticed the shares trade infrequently so when I hover over the SA chart I see the date of the last trade and I am thinking they just don’t update the price on their chart.

  3. FWIW, I just received my scheduled dividend payment from my holding in Central Parking (CRLKP.) It’s ~2 weeks late. The company that holds this debt (SP Plus) will be taken private later this year and I plan to hold onto my holdings as it (may) go dark.

    1. Greg, being its two weeks late, that is actually being paid “early”. Last couple interest payments have been in that 2-3 week late window. But its been 4-6 weeks late before in the past. SP shareholders have approved merger but federal govt has had a second inquiry for more info. So its not a total done deal it will get done, though that is my base assumption. This started back in October. NuStar received a buyout from Suncor in January and already has govt blessing. Metropolis started this process back in October. This has really dragged out.

    2. Greg—I just got my dividend too. After it went xd, I sold out a fairly sizable position between $22.75 & $23, which was my cost. I had owned it for a couple/few years. I just got tired of the late dividend payments and the fact that it will probably be going dark.

  4. PPWLM trading at $115 (6.1% yield, 7% issue). Close to annual and ten year lows. What plagues this issue and its sister (PPWLO, 6%) is potential fire liability. Several sizable suits over the last year resulted in substantial real plus punitive damage awards for Oregon fires in 2020 and 2021. Pacificorp, a major west coast and mountain states utility, acknowledges the risk, has close to a 10-figure fire reserve and, undoubtedly, will ask regulators to permit it to pass along to customers some of the fire liability cost (good luck with that!). Berkshire Hathaway, the utility’s owner, publicly announced that it will not contribute any capital to bolster the company’s financials in light of liability exposure; it will allow the company to use any or all retained earnings to fund any damage awards, or so it says. The pivotal question is COULD the claims drive the company into bankruptcy a la Pacific Gas and Electric? Lots of commentary in the media about this, but I’m unaware of anyone claiming that restructuring is an imminent or a real risk. Would appreciate the III-community’s input, should anyone have info or opinions. As always, thanks to Tim! (P.S. Pacificorp is diversified well beyond Oregon, but the other business units are smaller).

    1. Oldman, Their bonds are certainly sleep walking through this. And I have owned both on and off in the past, but for me, why would I even be interested in them at 6% when I can own other HQ illiquids at 6.25% and way under par. Which in my book nuetralizes most of an “uncallable” feature.

      1. Thanks Grid. I’m not a buyer at currrent price, but I hold a bunch (one of my key sock drawer holdings) and my antenna go up when I see an issue like PPWLM (low volume with only about 16000 outstanding shares) trading considerably lower than recently (it was in the ask $125-$130 range a month or so ago). The sell volume is low and one or two sellers likely is an abberation, not a sign of imminent danger. But that’s what I’m trying to snuff out. Is something bad about to happen? See nothing in the Oregon press, but someone is selling at what could be construed as very low prices (a “fire'” sale?). Can’t argue with your reasoning. I’m looking at CHS and Ameren issues as potential buys for the reasons you cite (also Brunswick–but there may be looming issues with it!).

        1. Oldman, my opinion is it is trading now largely at market value even if there were no fire liability risk. Look at similar issues like NEWEN and WELPM that are also ancient uncallables. PPWLM at current ask of $115 is a 6.09% yield going exD tomm. I personally think that is a low yield in this world of 4.5% 10 year.
          Think of it this way, PPWLM has a lower yield now than higher cap stack PacifiCorps 2055 senior unsecured bond which is 6.24%.

  5. Hey Y’all,

    I’m looking for some ideas and discussion. I love the conversations here, I’ve learned a lot and hold many issues discussed as well as hold others that were inspired by the chats on this site.

    I am a US resident and looking for 7% ish yields, very reliable with monthly/quarterly/semi-annual coupons. Or maybe term preferreds that don’t have long left on them. The issues will be held in a taxable account so I like qualified dividends, MLPs, “safe” BDCs, or long term cap gains or? The Eversource preferreds are examples that I like but are still in the 6.X% area so I’m waiting to add to them.

    I’ve recently switched around my accounts to have distribution payers (these that I am requesting ideas on) and the higher yield experiments kept separately.

    I’ve read lots of threads and poured through Tim’s sheets. Any creative ideas or things that you think people are missing out on? I even like those creative threads that talk about shares where you have to call the company because you can’t find them on publicly traded markets. Preferreds and BBs are relative new to me (1.5 years maybe). and I’m fairly enthralled.

    What’s some cool stuff that you’d all be willing to share? I’m down to start building some new positions.

    Many thanks to you all that share your wisdom/opinions and Tim for hosting all of this!

  6. FYI – I have an offer out there for CNPWM at $33.25. Assume they will get snapped up quick. I’d buy/hold if didn’t need the cash for taxes. 🙁🙁

    1. Maine, Im sharing the crying tissue with you. I had to pull cash out this last week, too. I owed the Feds alone over 30k this year and I am just a small potatoes retiree! I have never owed like that before. And then the state had the nerve to clip even more. Unfortunately some of my better trades this past year were in taxable accounts and Uncle Sam wanted his fair share of the cut too.

      1. Grid, Stock up on tissues as it’s possible we are experiencing the lowest income taxes we may see again in our lifetime.

        Any effort to work the annual deficit down will near certainly involve both the top and bottom of US income statement.

        1. Alpha, I gotta go back to doing better in my tax free accounts and quit protecting them so much!

          1. Gridbird, your gonna have to cancel that HDO subscription from Pennyless and Riduh…they are making you too much Coin/INCOME…”Were making great Income together!!!”

      2. Grid,
        I have had those kinds of nasty surprises before, but not this year.

        I had a good year in my taxable, but really walloped by MMC getting sold and having to pay all the MLP recapture, so I sold everything that had any kind of a loss in 4Q (much of which I repurchased, some at significantly lower prices – proving its better to be lucky than good), pulled in a bunch of stuff from offshore, accelerated some charitable giving, pre-paid my property taxes, – all the tricks.

        I ended up with a refund of just over $1K (about a $20 refund from state).

        Absolutely shocked me that I didn’t owe. I put myself on an extension because I always have a few k-1s come in/revised late (etc.), but a nice surprise for me.

        1. Im envious Private. I did learn a good lesson a few years ago its better to be a high net worth person in retirement than one with relative high income, but not high net worth. During Covid, I had all sorts of golfing buddies getting multiple 10k Covid checks those years, and I didnt get one red cent! So they were just blowing it on some trips, etc., and a couple wasted it on just sodding their lawns, lol. They refused to believe I didnt get anything. I had to explain that by being cheap rich bastards they arent showing any earned income, and I cant hide mine, so I got the shaft!

  7. CNPWP currently has an ask of $33.31. I come up with a stripped yield of 6.2% at that price (the next ex-date is April 9).

    1. Dick there was some active volume on the illiquids today. I was wheeling and dealing on the golf course. I was selling anything bid up below 6% and rolling it into ones over 6%.

      1. I didn’t do a ton today. I bought a little of the CNPWP with the proceeds from a CD that just matured. I didn’t own a lot of the symbols that had high bids.

        I bought 400 shares of LTSH. I also added to CHSCM.

        Oh, the highlight of today was getting a huge packet of info from WEC inviting me to their annual meeting in Milwaukee (I own WELPP). They basically said I could vote my preferred shares but they own 99% so I shouldn’t get my hopes up. Milwaukee is a hell of journey for this old Texan so I’ll have to pass on the invite. Although I thought it would be funny to show up wearing my cowboy hat and boots say “blame it all on my roots, I showed up in boots and ruined your black tie affair” LOL

        1. Yes, the invites are a hoot. Basically inviting you to a party and saying your not welcome at the same time. The hold co will always own all the common stock shares and sometimes some of the preferred too. So you cant stir up any trouble, ha.

          1. Ok, I am ashamed to say I started browsing through all this paperwork from Wisconsin Electric. The shareholder protections for these old utility subsidiary preferreds are really something else.

            I’ll paraphrase page B-44 here:

            Wisconsin Electric Power Company (issuer of WELPP) may not pay common dividends to its parent, WEC Energy Group (common ticker symbol WEC), if any dividends on the preferred stock have not been paid. Further, pursuant to the terms of the 3.6% preferred (WELPP), Wisconsin Electric Power Company’s ability to declare common dividends would be limited to 75% or 50% of net income during a 12-month period if its common stock equity to total capitalization is less than 25% and 20%, respectively.

            Here is an excerpt from the most recent WEC 10-K (parent company of the preferred issuer):

            “We are a holding company and rely on the earnings of our subsidiaries to meet our financial obligations.

            As a holding company with no operations of our own, our ability to meet our financial obligations including, but not limited to, debt service, taxes, and other expenses, as well as pay dividends on our common stock, is dependent upon the ability of our subsidiaries to pay amounts to us, whether through dividends or other payments. Our subsidiaries are separate legal entities that are not required to pay any of our obligations or to make any funds available for that purpose or for the payment of dividends on our common stock. The ability of our subsidiaries to pay amounts to us depends on their earnings, cash flows, capital requirements, and general financial condition, as well as regulatory limitations. Prior to distributing cash to us, our subsidiaries have financial obligations that must be satisfied, including, among others, debt service and preferred stock dividends.”

            https://www.sec.gov/ix?doc=/Archives/edgar/data/783325/000010781524000095/wec-20231231.htm

            1. Yes, this is why I always say utility subsidiary preferreds are the safest preferreds there are. Additionally many PSC regulations require IG debt ratings at all time (not the hold co as they could care less if parent goes bankrupt). Now “modern day” subsidiary preferreds, ala bought out companies from like Blackstone are a different matter. Those subs need the parent. In utes its the other way around. The parent needs the subs.

            2. WELPP traded today with a 5.8% current yield. It’s rated A- by Fitch, Baa1 by Moody’s. It’s currently callable at $101.

              It’s always interesting to me that you have lower quality issues trading with lower current yields than this one.

              Because WELPP is on the OTCQB, the packet I was mailed is actually listed here for whoever is interested in reading it:

              https://www.otcmarkets.com/filing/html?id=17405625&guid=WwQ-kWli46_GB3h

              Here is the OTCQB certification:

              https://www.otcmarkets.com/otcapi/company/financial-report/369556/content

              1. This is just me, but at a certain point its overkill in terms of credit rating to getting yield. For example, there is no way in hell Union Electric preferreds are at any more risk of not paying than Wisconsin Electric’s despite credit rating tick differences. So my preference is grabbing a bit more BPS. But I certainly do own Wisky preferreds at various times though dont get me wrong.
                A positive though for Wisky ones you mentioned is they do pay the “OTC ransom” to be “fake exchange traded” listed on OTC. Them, and the Southern California Gas preferreds are the only 2 delisted ute companies I am aware of that do this.

                1. As far as credit ratings, I didn’t mean the WEC preferreds are safer than the AEE or ES preferreds. I’m not sure how much weight I put on the credit ratings anyways. The OTC ransom thing and basic diversification principles are the reason I hold the WEC preferred.

                  I was thinking of the comparison of the current yield of WELPP to WAL-A. They almost identical at the moment. About a year ago, there was speculation about the going concern status of WAL (https://archive.ph/3esra). In this old guy’s opinion, it doesn’t seem like WELPP and WAL-A both share the same risk profile.

                  I almost forgot my favorite thing about these old utility preferreds like WELPP. The right of the preferred shareholders to elect a majority of the board if preferred dividends are not paid for 4 quarters. LOL

                  “Dividend Default

                  If and when dividends payable on any Preferred Stock are in default in an amount equivalent to four full quarterly dividends for any such Preferred Stock, until such default has been remedied, the holders of the Preferred Stock, voting together as a class and without regard to series, are entitled to elect the smallest number of directors necessary to constitute a majority of the full Board, and our common stockholder, voting separately as a class, will be entitled to elect our remaining directors. When all dividends in default with respect to the applicable Preferred Stock have been paid, the special voting rights of the holders of the Preferred Stock to elect a majority of the Board shall be divested, provided that such special right to elect a majority of the Board shall be exercisable in the case of any similar future default or defaults.”

                  https://content.edgar-online.com/ExternalLink/EDGAR/0000107815-20-000091.html?hash=a7b724ef1da47b6bd096b6c4f69956145461b74236e56bb6018613405e9b7c51&dest=a2019we10kexhibit42_htm#a2019we10kexhibit42_htm

                  1. Yes, the majority control of board is a dinosaur thing. The NSARO and NSARPs, Niagara Power, CLP, and Hawaii Electric are ones have same feature. The Ameren ones do not. Of course one doesnt know how many the hold co ultimately owns. Many of these have are owned or controlled by parent via purchases or tenders of long ago where they were redeemed but not retired to treasury. For example Pacific Enterprises which is the parent of Southern California gas (Sempra is parent of Pacific Enterprises) owns most of the float of SOCGM. So they in effect would block any effort to change the board. Most I suspect are set up this way.

                    1. This is kind of interesting on page 42. I’m not sure if this means WEC doesn’t necessarily own a majority of the preferred stock of Wisconsin Electric Power Company.
                      =========================================================
                      OWNERS OF MORE THAN 5% OF PREFERRED STOCK

                      Based upon reviews of Schedule 13Gs filed with the SEC as of February 14, 2024, there were no beneficial owners holding more than 5% of any class of WE’s preferred stock.

                      https://www.otcmarkets.com/filing/html?id=17405625&guid=WwQ-kWli46_GB3h

                    2. Dick, its really hard to know for sure if the hold co or in some cases, a hold co of a hold co owns any. You have to get deep into the financial weeds to know, or like I have on some, just stumble onto some public disclosure.
                      But the most important things are the facts that issues like WEC preferreds have continuously paid uninterrupted for decades upon decades without problem. And even more importantly all of WEC’s debt is in effect subordinate to the preferreds of the electric company. So most likely, in effect, WEC will go kaput before the preferreds do.

            1. A quick note that the buying cartel has established a bid of $19 for all LTS baby bonds.

        2. A question earlier about the LTS baby bonds thoughts. The LTS baby bonds are Pari-Passu with the Advisor Group 10.75% 8/1/27 00791GAA5. These bonds were bid at 106.677 Friday for a YTM of 8.5% (at IB).

        1. D, I thought when I sold at $77 I made a good flip a short time ago…I was wrong…Who the hell would pay that much for this when you can get well over 6% illiquids with even a better credit rating?

  8. Does anyone have opinions about the Ladenburg Thalmann senior notes (LTSL, LTSF, LTSK, LTSH)?

    1. Bids of $18.75 for LTSH seem to be getting filled today at Fidelity. Looks like that’s a YTM of 15%.

  9. I picked up some NMKBP today for $58.25. Several hunderd shares have moved today so might be a good one to keep an eye on in case there’s more selling.

      1. QOL still shows it as NMK-B. It used to trade on the NYSE under that symbol. It now trades OTC under NMKBP. It’s a preferred stock so it should be QDI.

        There’s also NMK-C which is now trading with the symbol NMKCP. These have been available for over 6%+ lately. When they were on the NYSE, they both were always way over priced and typically had below market yields over the last several years.

        Finally, they also have NMPWP and those are the 3 preferreds for Niagara Mohawk.

        If you search NGG (the parent company) on QOL and then select “Find All Related Securities for NGG” that’s another way to see the entire series of issues from their subsidiaries.

      2. Dick, Thanks for the information. Being owned by a UK parent, do you happen to know if there is any tax withholding for US holders by the UK authorities?

        1. Though its a unique circumstance in which the parent now also guarantees the payment from subsidiary preferred, “the entity” is a US entity and based in USD so no 15% withholding is created or generated.

    1. Pig, I know SEC filings state all debt to be redeemed. But it largely said that the last time this polished turd was bought out. Who knows if either company knows it even exists? I can’t get a fart sound out of SP so they are no help. I treat this as a best case/worst case hold. I bought hoping for a redemption but bought at cost basis where it was above 10% YTM hold. Because if merger goes through and it stays outstanding until 2028 maturity it will go AIC style totally dark until maturity. Biden admin is slow waking this merger approval. I hope this a foreshadow for NSS too.

      1. Thanks for your take. It does have that Boston Sand & Gravel feel to it. Potential to be as solid a 10% (now a tick below 9% YTM) as can be, or it could result in someone “forgetting” to make payments on it. I like buying little pieces of these things and just holding on forever for a slight juiced return. Hold enough of them, even if not in large amounts, can really add to my bottomline nicely. Had some decent price action a few days ago and actually had a bid out at one point.

        1. Oddly enough last payment was on time. That never happens usually it’s 3 weeks late or so. I have about 2000 shares and holding. No more either.

        1. Yes it is, fc. Central Parking has been bought and sold by a few entities since Central Parking was its own separate company. Metropolis is a privately owned company formed maybe 5-10 years ago.

    1. I sold 240 shares @ $50 and 100 @ $58.08. I felt pretty good about those sales until I saw $75 LOL.

      I just got done reallocating the proceeds of those trades.

      1. Dick, now that we have established who is picking up the tab tonight, where are we all meeting up for dinner and what time?

        1. I wish someone would run the price of UEPEN up to $100 so I can cash out on some GTC sell orders. It is in my 401k so I won’t be able to spend it on dinner.

        2. Billy Bob’s in Fort Worth! I hope the new owner of my shares enjoys them as much as I did.

          That was thrilling! Who needs Vegas when you have utility preferreds!?!?! LOL

          1. Right before the close, I trimmed about half of my position in SOCGP today for $27.48. What a wild couple of days!

            1. Who in the world is buying this stuff at such high prices? Amazing. I have some of this but truly just expecting to hold unless rates go down and I cannot resist banking large profits.

              1. Fc, I wonder too. Dick has had him some nice ones recently. I have them in the past too and have no credible explanation. I dont believe it to be “fat finger” or market orders as brokerages dont allow market orders on these. I think some momentum algos get a hold of these at times for whatever reasons and chase it up.
                On opposite side I have had a few extreme illiquids for whatever unexplained reason I could drop a very low ask right next to a low ball bid just seconds before market closed. And then that price I set would magically be available at market open next day. I would quickly buy them, and then instantly something would chase the bid up quickly seemingly trying to repurchase what I bought for some odd reason. A few times it was like $10 higher crazy stuff. Kind of like the crazy BACRP trade stuff.

                1. Dick’s windfall reminds me of some happy times in the past lining up to sell AILLL for crazy prices, buying them back, then repeating. Good times.

  10. I was able to get some UEPEP for 74.75 yesterday for a 6.1% yield. Not too bad I guess. Added to NMKC recently too at a little over 6%. I don’t plan to go overboard with these illiquid types, but they do have nice returns with lower risk in some cases.

    1. Im not suggesting to buy, but there are shares of CNTHO at $42.50 which is a 6.2% and maybe could be bird dogged a bit lower. It did recently go exD though. Im just not being overexposed perpetual long duration myself, but I do own these things. Largely, its the only perps I own.

  11. Gridbird, I agree with your comments. Do you have a method of identifying when these “illiquid spills” occur vs placing a number of GTC orders and hoping for the best.

    1. Larry, Grid has commented he has made buys out on the golf course and while on vacation on the beach in the Caribbean I assume he’s watching certain ones and has alerts set on his phone.
      I just put GTC bids out there and wait collecting mm interest. When you go ice fishing in Wisconsin it’s more about being out at the lake with friends and freezing your you know what off than being warm at home

      1. Charles, what is funny is, yes, I have screeners set up that I look at when I am home. But I have never set the buy alert thing or bothered to figure it out. Mostly its just random lookins from phone after a bad golf shot or in clubhouse settling the bets. Or in last case of rebuying PNMXO, Dick mentioned they were selling at $75 the previous day. I hadnt paid attention to it in a couple weeks, but his mention inspired me to poke there and suddenly the ask at $75 showed up and I just entered a buy order. Got mine then the rest were bought seconds after mine. If I was totally committed to fixed issues, I would be loading up here. But I am just staying diversified if not chicken in terms of duration risk. I can leave some food on the table and collect 5% in 100% safe for time being. But as maturities start to roll off this year, decisions will need to be made.

        1. I look for suggestions here and then I set the bait. Have to go back once in a while to check the bait and decide if I need to cast in a different location or use a different bait to snag a bid.
          Right now, the hits have been Slim Pickens, last one was CTA PB at 67.57 on Feb. 12th

          1. Positionally percentage wise I am where I want to be. Now its just trying to move around on arb advantages. But like you said, its been slim pickings to improve from arb tradings.

        2. UEPEP. It’s funny when I buy 50 shares and it’s the total volume for the day.
          Hard to get this one. Yields 6% and it seems safe. Anyone like this?

          1. Welcome to the world of illiquid utes.

            I have some UEPEP, but bought ~$4 ago. would like some more at some point.

            There have been days when I only got 1 share on an issue (partial fill of a GTC order) and that has been the total volume for the day (and sometimes it transacts at a price significantly below my bid).

            I also have a couple of illiquids where the market maker makes no sense (drunk? an apple computer? algo that wasn’t tested? – no idea).

            I will have a GTC buy order in, and feed will show sales at lower prices than my order (sometimes by more than a $1), but not fill my order. However, if I place another order at the price of the other sales, my order will fill (at the lower price). Exactly the opposite on sales (sales below my orders).

            What is really crazy is that sometimes I can buy at the lower “market” price and sell within a few minutes at the “higher” market price (and make a buck or more per share) – and it can go on for multiple trades. I had one a few years ago that went on for about a dozen or two trades a day for a week or so. Unfortunately, it is always for tiny volumes, so it is more for fun than big money.

          2. King it’s just kinda being aware and patient. I bought 400 of UEPEP a few weeks or couple months ago (can’t remember exactly in $72- $73 range.) But anyhow I bought them all at once when I did. But I have sold and bought a few times from the low points. I’m always looking to ARB some.

    2. Larry, here is an example…I see bids creeping up on PNMXO at $76 now. That doesnt really make sense to buy this at $76 when UEPCN is just laying there for the taking at $78.10. Its a little better yield, the utility itself is a lot better, and you dont have to poke and hope at $76 for PNMXO. FWIW, I have them both, but dont need anymore as I would have to do some maneuvering which I dont feel like doing,

  12. For those who cashed out of CHS issues trading well above par or sold anything else that has run up a ton lately, here are some potential reinvestment options from OTC utitity preferreds.

    I’ll list symbol, current ask price, current yield on ask price.

    AILLO, 69.15, 6.15%
    CNTHN, 42.17, 6.17%
    UEPEO, 74.00, 6.08%
    UEPCN, 77.75, 6.11%
    WELPP, 62.75, 5.74%

    These are well below par and most have ex-dates coming up fairly soon.

    This is not a complete list. Just me looking at my list and looking at the most attractive current ask prices…Dick’s picks if you will.

    Oh, and CTA-B has a current yield of 6.25% at the current ask of $72.00. Ex-date for that one is coming up on 4/3.

    1. Part of me was hoping the delay in interest rate cuts would cause a mini disruption that would have the price of these fall a bit more. Nope. One is lucky to get 6.3% if your timing is excellent. I am still waiting with cash sitting in SGOV. Making small scattered purchases to round off positions to the nearest 100 and dabbling in other issues to watch them more closely combined with deeper research. Nothing really to recommend yet.

      1. There may again come a day where people wish they could buy 6% QDI preferreds from high quality issuers.

        1. Yes. The thing is I have plenty already and when you are discussing approx 6% QDI it opens up quite a few more choices then just ill utilities. Off hand I am not sure what I would compare them to but a lot of choices at 6ish. Thus I am looking for a little bit more of a discount on them. 6.5% would be nice.

          1. One thing Dick is alluding to is in addition to the ~6.15% yield can get, you are getting 20-30% below par. Many bank IG issues are not even 6% and are back around par. So no real cap gain opp if or ever interest rates dropped. Additionally there may be issues with near same yield at 6% and same credit rating, but they arent the same coverage quality. Preferreds are just mindless slottings off senior unsecured. Most of these ill utes are covered 100x plus by profits…. Dividends almost covered by the soda machine profits at the corp offices, lol. One cant even to begin to find any on the exchanges that have profit coverage ratios within earshot of that.

            1. Yes exactly. Also they were available for 6.5% yields last fall. No one wanted them then.

            2. You make some good points that I will have to consider going forward.

              On the other hand I sometimes forget that we are buying these ill utes at a par of 50 and 100. So when I look at share count and forget their par value I actually have 2 to 4 times the amount in dollar value compared to 25 dollar par shares. I am really heavy into this stuff and that is not even counting the other 25 par utilities I own.

              How much is too much? lol.

              1. Fc, keep in mind I was just commenting in terms of generalities. Concentration risk, sector risk, etc. are basic principals of conservative investing and should never be discounted or ignored. You are wise to ponder those implications and how they impact your portfolio.

    2. Trading volume on these is very low. It requires a lot of patience to purchase any of these illiquid preferreds.

      1. Larry it will be that way because most issuances are only $1 million to $10 million floats issued 50-80 years ago, so there are very few shares and many are institutionalized. You have to wait and be aware of random “spills”. Like PNMXO for example. It can go days or weeks without trading but over 2000 shares have been dumped this week. Not buying is considerably better than chasing a high ask.

        1. Gridbird, I agree with your comments. Do you have a method of identifying when these “illiquid spills” occur vs placing a number of GTC orders and hoping for the best.

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