The 6.25% term preferred from CEF Priority Income Fund is now finally trading on the NYSE and last priced at $24.70–ticker PRIF-G.
wedgehead made note of this early.
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4/18/2024
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Hi All,
New poster here. Quick question, I understand that CEF preferreds are pretty safe given the requirements that the CEF have at least 200% asset coverage of “senior securities” which means debt and preferred stocks. While technically the coverage ratio can stay below for a long time the fund will be unable to pay common dividends or buy back common shares while they lack the asset coverage ratio. Thus, I have seen in the past people on this site taking a pass and giving warnings on PRIF preferreds, why is this?
There’s a reason why PRIF preferreds have higher yields than other CEFs. The underlying assets are higher risk and less liquid. So while it may not be too likely, there is a possibility that the assets have to be liquidated at fire sale prices in a downturn, leading to impairment of the preferreds. So are you looking to take risk in these holdings to pick up an extra 1.5%? Or do you look for CEF pfds to be a safe source of income?
Karma makes the point perfectly.
My simple test on CEF preferred is would I buy the CEF itself? If not, then I won’t touch the preferred. PRIF, my assessment, is a poor fund. I would much rather buy a good CEF than the preferred of a poor CEF. Wait for a good entry point.
Ok thanks Karma and Bob, much appreciated.
Any takers on this one?
No
I have a small position. Got in at $24.71
On the order page, Schwab has this at the bottom:
1.This security has a yield of 6.594%. (DO3099)
Wrong. 6.25 as you say.
I also got a wonky yield quote from Schwab on the order screen on a different issue. I ignored it after double checking the symbol, but somebody could easily get confused if they rely on Schwab’s data.
As far as Priority, I had the Pref D shares and sold them for a small gain before the recent move up in rates. I sold duration in all my fixed income portfolio before and into the rate rise and not because I thought they weren’t going to pay.
I still have a small amount of Pref B shares, but was also able to pick up the Pref C shares last week at par to shorten up duration in my portfolio. I like the C shares better than the new issue so I haven’t bought any. I also like the OXLCL better than the new issue, which I bought today at par.