Investment Grade Preferreds and Baby Bonds Now Callable-REPLAY

About 2 weeks ago I posted this spreadsheet which is Investment Grade Preferreds and Baby Bonds Now Callable.

I am reposting–I did not update the dates as little changes over a 2 week period (although since the original post 6 issues have been called for redemption), BUT prices do change and I see a couple I don’t own that are in the list which I may pick up.

Currently I own the following off the list–

Axis 5.50% preferred (AXS-D)

WR Berkley 5.625% baby bond (WRB-B).

Vornado Realty Trust 5.40% Preferred (VNO-L)

So I now see a couple others that I will look closer at for potential purchase.

1st is the DTE Energy 5.25% baby bond (DTQ).

2ndly is the Kimco Realty 5.50% preferred (KIM-J)

The idea is that if interest rates don’t move too violently up or down these issues should stay relatively closely tied to liquidation preference ($25) while providing high levels of safety. I don’t really want to deal with any issues under 5%, because the redemption likelihood is small thus exposing the issue to bigger share price moves (down).

Here is the list again.

Note that the yield to worst DOES NOT include accrued dividends so the actual yield to worst is slightly better than that listed.

For those wanting the full investment grade list of baby bonds and preferred stocks you can click here. You can toggle on the bottom for investment grade.

36 thoughts on “Investment Grade Preferreds and Baby Bonds Now Callable-REPLAY”

  1. JERICHO, N.Y.–(BUSINESS WIRE)–November 29, 2019–

    Kimco Realty Corp. (NYSE: KIM), in an effort to further reduce leverage, today announced that it will redeem all 9,000 shares of its issued and outstanding 5.500% Class J Cumulative Redeemable Preferred Stock (the “Class J Preferred Stock”) and all 9,000,000 depositary shares representing the Class J Preferred Stock (the “Class J Depositary Shares” and, together with the Class J Preferred Stock, the “Class J Shares”) (NYSE: KIMprJ — CUSIP No. 49446R778), representing an aggregate liquidation value of $225 million, on December 31, 2019 (the “Redemption Date”). In connection with the redemption of the preferred stock, Kimco will recognize a non-cash charge of approximately $7.2 million or $0.02 cents per common share in the fourth quarter of 2019. This charge will reduce Net Income and NAREIT Funds From Operations per diluted share by the same amount but have no impact on Funds From Operations as adjusted per diluted share.

  2. The issues that are below par all show a YTW that’s below the coupon and the current yield. For these the YTW should be the same as the current yield if they’re perpetuals, or the YTM if they have a maturity, since the worst case is that they’re not called at all.

    1. Coaster–the assumption is they are called tomorrow–the 1st available call date.

      1. Hi Tim, how are u?
        I wanted to know what would be the criteria you used to say whether or not they are investment Grade

        Saludos from Argentina

          1. Hi Alpha, thanks for the info.. Yes, but my questions is because I see in the table. for example AllianzGI Convertible and Income II has no agencies rating (NR).. but for Tim it is an investment Grade..
            That´s why my question about the criteria Tim is using.


            1. Pablo–yes they are investment grade–the sheet only have spots for S&P and Moodys. I will add a note to this sheet.

            2. Pablo–I noted I had previously added the Fitch AAA notice to the top of the securities pages.

  3. Least likely to be called, Qwest.

    As for the list it’s incomplete but still worth discussing. You hold on to these if you’ve owned them for a long time…..i call this bonus time. If rates and markets move against us these will tend to hold $25:better than most.

    Personally I recommend always dumping neg ytc but that’s just me

    1. Qwest is split IG. I consider the IG rating from SP to be very generous. I’m a recent buyer of CTBB below 25.40.

    2. What is the point of buying the above issues? Is the idea that if they aren’t called, their price will hang around $25, limiting downside risk? But if they are called, you lose because the accrued dividends are less than the above par price? Am i getting this right? Really am asking for educational purposes.

      1. For people seeking some kind of yield without investing in a high risk company. Or a place to park some money until better opportunities come along. This doesn’t seem like the best time to invest boldly.

        Estimating the odds of a call is tricky. Most people avoid issues trading too negative while some people here will take a smallish risk in some circumstances.

      2. “ But if they are called, you lose because the accrued dividends are less than the above par price? ”

        A notice must be provided at least 30 days prior to a call so you will accrue at least 30 days more dividend for each of these issues. The idea is to buy it at a price that current accrued dividends plus what you will accrue in 30 days exceeds the amount it is over par.

  4. I like WRB-B because it has a “call buffer”. I define a call buffer as having a callable security with a higher coupon. That security will be called first, giving you a warning before your security is called. Do any from Tim’s list have a call buffer other than WRB-B?

    1. Landlord Investor,
      I traded 4,000 shs of WRB-B last week.
      I initially sold all my WRB-B the week before at 25.27 to 25.29.
      It had gotten ahead of itself.
      I bought back in at 25.21 and sold at 25.25.
      $60 here, $80 there adds up to
      I’m stocked with 2,121 shs now .
      Ten days from now WRB-B will be worth 25.21 .

      “My ambition is handicapped by my laziness.”

        1. Doing it once is probably a waste of time. Doing it multiple times as part of an overall strategy can be profitable. Traders are already spending time looking for trades so the penny trades don’t really take additional time.

      1. How often are multiple preferreds called at the same time? Can’t say I remember seeing that but I’m sure it’s happened. But it’s a lot less likely than the normal sequence of calls which is to call them one at a time.

        1. I remember a couple years ago Baltimore Gas and Electric had 4 preferreds and they redeemed two of the 4 at the same time. People got confused on which were getting called and I had a field day buying and selling those for a few days.
          Many times in the old illiquid ute universe the utility will just call them all at the same time. It happened last year with all the Entergy Ark preferreds.

        2. I’ve seen it several times with REITs. Call 2 issues while offering one big new one. May be less common with the lower dividend preferreds.

          1. “KIM-I and KIM-K recent example. happens all the time.”

            Technically true, but c’mon, KIM-I was a very partial redemption. They only redeemed 7000 shares of KIM-I. The vast majority of KIM-I was redeemed two years prior to KIM-K.

    2. This is good strategy. Problem is, with so may calls, there are fewer buffer issues out there. I have many “on the bubble” now.

      Don’t dare touch my STT-C!

  5. Great alternative to sweep accounts especially TDAM.
    I computed the yield to pay date assuming they are called on pay date sans accruals.
    I added a penny to the closing price, because it’s hard to get the bid price.
    VNO-L 3.24
    AXS-D 3.10
    WRB-B 3.05
    DTQ 1.45
    KIM-J went negative

    1. I calculate YTC based on 30 days after today.
      AFGE 4.65% $0.09
      VNO-L 3.30% $0.07
      AXS-D -1.91% ($0.04)
      KIM-J -2.39% ($0.05)
      BSA 19.3% $0.36

    1. Thanks Martin–got it–I missed it as it is still trading–updated the list.

    2. Only surprise is that NTRSP made it past first call date. Dropped 115 bps on the new issue.

    1. 6% coupon

      COF-P is one I have added. Capital One did not call it earlier in Nov. Technically they could surprise everybody and announce a call on 12-2 payment date but I would rate very unlikely. After 12-2 next call date is 3-02

      I own this one. Earring 1.6% until 3-2 based upon the price I paid.

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