Quality Preferreds Still Hated

We had mentioned before how we like to watch REIT Public Storage preferred to see how the market is ‘voting’ on various quality preferred stocks.  We like the Public Storage preferreds because they have lots of volume relative to many preferreds.

Here is a vote today AGAINST this preferred (it is down $2/share since July)—

You can watch the big movers in the $25 preferred segment here on this page.

18 thoughts on “Quality Preferreds Still Hated”

  1. wow 10yr 3.12, 3m LIBOR 2.41.. pfds down again.. you folks may get your 6% soon on many issues.. when I click Tim’s pfd change link, most have been down all week.

    1. Bea, I get my 6% already. Buying AILLL whenever it drops below 26.60, including today snagging a few hundred more to go with my overbloated position. Going exD this week essentially makes it 26.18. That is essentially a 6.34% yield for an electrical utility preferred. This is an old illiquid issue of course. Useless trivia….When was the last time a QDI electrical utility issued a plus 6% preferred to market? In the 1990s when 10 year was sniffing 5%. This one wont see par for a long time.

      1. Grid, I had also picked up another 200 shares a couple days ago at $26.65. Am now grossly overweight on AILLL.

        1. Inspbudget, you have been with me for many a year now with this one…I know you are losing no sleep being overweight here, lol.

        1. MP, I had a 1000 sold 600 around $26, and bought 200 more at 25.50 the other day, so I am back to 600. Im really 200 shares above my comfort zone on a lower debt rated issue and I am butting close to assumed $1k UBTI in my tax free accounts. So for me this is my upper reach and will not buy anymore.

  2. I just added NNN-F and FRT-C at $22. These are dividend champion REITs with strong positions and I’m happy to hold these forever with the current yield and YTC made possible by the low purchase price. With these buys and the HCXY I snagged at $24, my interest and dividend income exceed my monthly withdrawal amount. Now holding 10% of my portfolio in pfd and 21% in ETD.

    Now if I could just sell my RNR-F which was an impulse buy and the only pfd in my portfolio which makes me nervous. Especially with news today that a large shareholder may force the sale of the company.

    My thanks (and my wife’s thanks!) to Tim and all the posters on here who so helpfully share their knowledge and experience. Tim, where can I make a donation to help offset your costs?

    1. Bruce, can you provide more details, or a link, to the news about the activist shareholder? Should a sale be forced, would it not be at a higher stock price and not a fire sale ? In such a case RNR preferreds should not see much selling, especially if the acquiring company is a big player in the insurance space.

      1. Inspbudget, here are the links from SeekingAlpha:

        The shareholder’s letter:

        The company’s reply:

        And sure enough, the common was up today:

        I bought this pfd when it first came out, thinking I’d make a small cap gain. Instead I got my money back plus one dividend. I feel better to be rid of it, but the scenario you describe may come to pass. I’ll watch and hopefully learn.

  3. I have been waiting for a long time. It is very good to see stuff coming down. I am slowly starting to buy some stuff. AGO-E, SLG-I, AED, VER-F. Still have a ton of dry powder. Hoping we have another 2 weeks. If a very high quality 5% turned into 6%+ that would be great.

  4. All good points and I still maintain it’s each individuals circumstances. For me, I have a mixed bag of preferred, ETD. However, I lean more to IG like Public Storage, Associated Ban-Corp, a few of the Gabelli CEFs and others. They are all under from where I bought in. My preferred portfolio is for income only. Doesn’t bother me all too much to see a security from where I bought in down 1%, 2% or more. If company financials and fundamentals are sound I’ll stick to it. The economy and rates are the drivers of what’s happening and we all know it. Of course I would like to see and prefer my initial investment higher but I got into this game for income to support my retirement years. I’m careful to not invest more than what I should in this space thus not creating a problem of needing the cash when the chips are down. GL To All…

    1. Many of my Preferred and ETD positions are in the red, some rather badly so. Guess this is the time where income investors’ strategy of focusing on the income and not the NAV will be sorely tested.
      Most definitely rather discouraging and disappointing to see prices get slammed again & again over the past few weeks, and hoping to remind myself to be comforted knowing the income stream is unaffected.

  5. In the nature of glass half full I have sold all of my larger loss positions in Pfds and BBs and will use the losses to offset gains on equities I wanted to sell. I look to buy back into many of the sold issues after a bit more blood has been spilled. Maybe a lot more blood.

    This ain’t all bad.

  6. great points, I never get how people equate “safefy” in income without consideration to large potential losses in capital.

    When the pfd etfs and cefs go out of favor if rates keep rising ( LIBOR has moved off the steady needle and is rising again..) wait till they disgorge their holdings.. all those who piled in will say “I still get my income…” hope they don’t need their principal! Bea

    1. It took me a couple years (way back 10 years ago) to figure out the junk stuff works better when rates rise–I love safety, but the time is not yet right for moving into ‘safe’ stuff.

      1. LOL. Yes since my strategy is Investment Grade mostly, I see what you mean. Fortunately, I am on the “junker” side of investment grade since my portfolio averages 6.2% and I was eliminating my low end 5.625% anyway. Stuff like BACPRB is still hanging in around $25.85. But I will move move out of low end IG into non IG investments paying more as opportunity presents itself.

  7. This will ultimately be an opportunity. Panic selling almost always is.

    As much as I dislike this Fed chair, the facts are the long term neutral fed rate is 3%

    1. As usual I agree with you SteveA. I long for the days of 7% Public Storage preferreds—those were the gravy days–we just didn’t know it at the time, but with 20/20 hindsight we sure know it.

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