As everyone knows we have been holders of mostly term preferreds and baby bonds with shorter dated maturities. This has served us fairly well in the last couple of years as interest rates have risen. We had to give up coupons that were maybe 1% higher than we would like, but we most comfortable with the reduced volatility holding these shares bring with it.
We knew the time would come where one would have to start considering the purchase of higher coupons perpetuals (actually one never has to hold perpetuals if that is best for them) because interest rates discontinue moving sharply higher. This time would appear to be now–or maybe in a couple of weeks.
Our intention is to move into the perpetual issue area slowly–very slowly. In fact early this week we bought a position in the CHSCN issue with a 7.1% coupon with a current yield of 7.05%.
For later in the month we are looking at a number of areas for potential buys. We are looking at the high quality retail REITS–Kimco and National Retail. Also we are looking at single family home owner REIT American Homes 4 Rent and all of the mortgage REITS (although with the current inverted yield curve these are riskier). We are also looking at the various NuStar Energy high yield issues. We would be looking at the high quality LNG ship owners, but we already own the recent new issue from GasLog Partners. We consider the high quality LNG ship owners as decent holding for the next 2 years (after which many, many new builds come on stream).
No matter what we do we will do it slowly-very slowly. Much of our buying will come from cash (money market) where we have dry powder parked. We will continue to hold most of our conservative holdings–term preferreds etc.