Yesterday I made a purchase of a 1/2 position in the South Jersey Industries 5.625% Junior Subordinated notes (SJIJ).
While the issue is a notch under investment grade it appears that the risk/reward was about right for the price I paid–$24.80–a current yield of around 5.70%. These shares had traded solidly in the $26.50 area prior to the pandemic.
As I have mentioned I am pretty loaded up with utility issues–mainly electric utility baby bonds and with closed end funds (CEF) preferreds–most bought at bargain prices last month so have been mostly lying in the weeds in the last couple of weeks around 70% and watching for reasonable buys.
I am quite convinced we will see lower prices in many preferreds and baby bonds–but when? In the meantime I really want to get back on the dividend train so will get some decent quality issues here and there to get the dividends and interest rolling.
South Jersey Industries is the natural gas supplier for a portion of New Jersey and recently reported solid earnings for Q1 ending 3/31/2020. More importantly they affirmed their forecast for the balance of the year–very solid numbers (of course who can totally forecast in this environment).
The shares go ex dividend on 5/29/2020.
I was doing some research this evening and this old post popped up in a google search. This post was like opening up a time capsule.
Tim sure was right about seeing lower prices in many preferred and baby bonds…it was just about 2 years after this post that preferred prices started to come down dramatically due to excessive stimulus/government spending, money printing (brrr), inflation and then Fed rate hikes. For many people, the response to Covid was so much worse than the virus itself. Clearly there were a lot of horrible mistakes made (fiscal policy and otherwise). It would be nice to hear talk of what should’ve been done differently but I have little to no hope of that ever happening. I wonder if anyone learned anything.
I bought SJIJ through the bond desk for around $13.40 in the summer of 2023 (after it was delisted). Could you imagine a sub investment grade issue trying to come to market with a fixed 5.65% coupon for 60 years these days? A 5 year reset issue from Nextera recently came to market with a coupon of 6.7%.
(https://www.sec.gov/Archives/edgar/data/753308/000119312524048362/d793825dfwp.htm)
Dick, I bought a couple rounds in the $12-$13 range last year. It still is on my mind. I have a lot just milking the NSS cow until redemption. I will revisit SJIJ at that time. Interestingly mark to market doesn’t work at Vanguard with this issue. It just sits at the last price I paid. But all that matters is the interest payments continue to pay nicely and on time too.