I will be adding a new link titled “Sandbox” in the right hand menu.
That link will get you to this page.
I had originally set up the “Reader Initiated Alert” page for ‘alerts’. I was thinking this, for instance, might be when a preferred stock is undergoing a temporary selloff and someone wants to let the population know about it quickly. Of course we all (including me) use the ‘alert’ page for general messaging.
I am requesting that we start using the Sandbox page for all general talk, and try to preserve the ‘alerts’ page for ‘alerts’.
I have had a screen up on one of my monitors all week where I see all comments – no matter where they are posted–it is a great page and I wish everyone had a page like that–believe me we all benefit from all the knowledge being shared. I don’t want to stifle any of the exchange of knowledge, but hope to get things a bit better organized by adding the Sandbox page.
RPT-D In checking old posts, I see at least two others held this at one time. Anyone else still holding and/or current thoughts? I am likely to sell this week for the cap gains.
I was a heavy buyer of this issue in the 30s and posted that here. I have traded some shares (cap gains are not an issue as I hold this in my IRA) in and out, but the end result is that I now have more shares than my initial purchases. I’ve bought some in the 40s and here in the 50s. Like the yield and the fact that it is not callable except at a price above 65. The conversion kicker is a plus. The common looks decent.
Of interest to holders of older resettable preferred issues: Libor is still around and is still not entirely resolved.
Some Libor rates will be phased out at year end 2021 for sure. Others will continue until June 2023, or maybe longer. (There’s a new regulatory dispute going on between the rate setter, ICE, and a UK regulator, which wants to force a synthetic rate.)
Libor stories abound on many websites, (MarketWatch, today,: the SEC, this month; brokerages etc.) Schwab, from January 2021, is a little outdated, but sums it up in plain English:
“On November 30, 2020, the ICE Benchmark Association announced its intention to cease publication of two specific LIBOR rates while pushing back the timeline for LIBOR rates with other maturities:
“The one-week and two-month U.S. dollar-denominated (USD) LIBOR rates will retire on December 31, 2021.
“The overnight, one-month, three-month, six-month, and 12-month USD LIBOR rates will continue to be published through June 30, 2023.”
As a practical matter, for some preferred holders, the clock may run out. Other preferred holders may face a terrible fate: actually having to read the documents to understand what they bought.
Just my opinion.
Bear, thanks for that info.
I dipped my toe into the waters of floats and resets this year. Always looked a) for a base rate I could live with on its own and b) for a float component that was *not* 3M Libor (preferably at least 5Y Treas). When I did buy an issue tied to 3M Libor I assumed it would be zero (as in fact it practically is). And in that case I admitted the risk that the float component could go negative.
Tim –
Here’s wishing you a safe, healthy. and prosperous New Year / 2022.
Thanks so much for producing such a great site having great readers and commenters. It’s definitely the most worthwhile site I’ve found.
We appreciate your hard work and dedication to helping others.
-G
Strangest pre-Christmas trade of the last few days has to be BMYMP Bristol Myers Convertible $50 face preferred. Today (12/23) it traded up 91% to $1,933 on 20 shares
Here are the last four trades
$1,225 (11/2) 64 shares
$2,000 (11/5) 12 shares
$1,000 (12/9) 6 shares
$1,922 (12/23) 20 shares
It is “Pink, Current Information” so it should trade on the regular markets.
Quite the ride. It is convertible at the holders option into 16.96 shares of Bristol Myers common BMY which closed today @ 62.05, so BMYMP should trade roughly @ $1,052. Hard to understand why anybody would pay $2,000 for it. A little too illiquid to short, but it is mentally attractive.
We have never owned it or had any orders for it in any account.
While not as crazy as your example CNLHP has gone wild the last couple of days. A plain average 4.5% preferred swinging between 52 and 60. While not high volume it is just odd.
Thank You for everything, Tim
Peace and happiness to you and the family,
Cheers !!!,
I think we are into the proverbial “got a hot tip from my shoe shine guy” territory. Invesco is now pitching QQQ to the public- be tech savvy- jump on the band wagon.
Yup,
love that story, saw it on the History channel
and as the proverb goes, that guy cashed out and saved a fortune
something to him did not smell right – stock tips from a shoe shiner
the kennedy family got rich off the crash
fast forward 80 years………………………………….
some guy shorted the housing market after a stripper told him she owned 5 properties…… he made insane money
I played golf with a guy in VT who had a son who worked at the same firm as that guy…. he was in court in deposition 3 years after the 2008 crash
I dont think we willl ever learn – even from strippers
AQNU stub pmt finally came thru this eve. $7.58 – one wk later. (Schwab)
Did they have any Canadian withholding reversed and credited back?
Nothing taken out. I saw on an article that mentioned Canadians hedge their dollar buy buying on US mkt- getting pd in dollars.
Pretty sure that stuff only happens if you buy Cdn REITs- (even in advantaged accts) but haven’t looked lately. They are a treaty nation.
the security is denominated in USD. Everything is calculated in USD and it wouldn’t need to convert anything from CAD. The issuer is on the hook if the currency moves against them.
Is it just me, or is the sandbox page REALLY sluggish?
I am experiencing that as well, Justin. Refresh lag, annoying keystroke lag (I can type almost a word ahead before it appears on screen letter. by. letter).
Justin:
When this 15% Canadian tax withholding is applied truly seems like it is the wild, wild West. The Schwab rep said that if the parent company (Alconquin) is domiciled in Canada, you pay the tax on dividends.
But I own three REITs domiciled in Canada (BSRTF (apartments), FLGMF (manufactured homes), and SRRTF (grocery-anchored shopping centers) that pay monthly dividends and only SRRTF takes out the 15% tax withholding. All three REITs own properties exclusively in the U.S.
I agree… I own SRRTF in my IRA and Schwab paid / withheld a 15% Foreign tax on my last dividend. Waiting for them to give me an explanation. I’ve never paid a Canadian tax in my IRA’s. I thought we had a treaty with them on retirement accounts.
What I was talking about -as far as the REITs up North :
https://dividenddetective.com/canadian_reits.htm
good luck
I’ll see what Schwab comes back with. I’ve never heard of getting a tax credit from foreign taxes in an IRA. I will have to ask my accountant. Thanks for the link.
AQNU payments are interest. In general, interest paid by Canadian securities is not taxable to U.S. residents.
Larry:
The way Schwab interprets AQNU is that the stub 1.18% payment is interest and not subject to withholding tax.
The 6.57% payment is a preferred dividend and is subject to 15% withholding in taxable accounts.
I am not even sure how this is possible, based on how the brokerage industry is processing this.
“The 6.57% payment is a preferred dividend and is subject to 15% withholding in taxable accounts”
Was this done wrong in any broker besides Schwab?
I have a few shares of AQNU at both Fidelity and TDA. Fidelity shares are in my HSA and TDA shares are in my Roth (I believe these to both be non-taxable accounts). Both brokerages were slow to deposit the interest portion. TDA does not show any withholding. Fidelity has taken 15% of my dividend. I have not contacted fidelity yet.
No withholding on either portion in my Schwab Trad IRA. Are you saying they withheld on yours, or speculating?
AFIN gets downgrade on credit outlook:
https://www.fitchratings.com/research/non-bank-financial-institutions/fitch-revises-american-finance-trust-outlook-to-negative-affirms-idr-at-bb-21-12-2021
Thank you for sharing, Gary! I am long the common AFIN which I know is ‘controversial’ but my basis is 7.90 and the distribution is covered and will be throughout 2022. Merger accretive to FFO.. The shares jumped nicely on the merger news. The ATM share issuance at disc to NAV ( which pre-merger I have seen est at around $14) is a concern as noted by Fitch and Trapping Value in his SA article on the pfd. As Fitch notes, mgmt performance incentive is tied to growing AFFO which I view as a positive.
Hundreds of billions are still waiting in the sidelines as evidenced by the huge BRG buyout by BX to put to work in r/e. Sure it is riskier than O or WPC but at 10%+ yield covered, I am fine w that.
Agree w all the AR Global (mgmt) hate rained on it thru the years BUT I have done well trading GNL (long at $15) thru the years and again collecting that covered div. So bottom line these are not buy and hold for me but intermediate term trades. B
Interestingly, the common seems to have risen on the credit change news.
Slow day–A little late for what is probably newbie question, but I am wondering what happens to all those fractional pennies when we get a div payment-
ex: a 7.375% payer should pay $0.4609375 /qtr per their declaration.
What is paid: $46.09 / 100shares, or almost 4/10 of a cent short since they can’t pay it– not a lot for sure, but there are a lot of shares out there and money not paid, from the looks of it.
Maybe the brokerages keep it?
I would imagine it is kept in our accounts but not displayed until it reaches a full cent.
Richard Pryor in Superman 3 gets them.
They are all swept to the bank accounts of the guys in Office Space.
LMRKO, LMRKP, LMRKN. Anyone know what’s going on with these today? I see there is zero units trading and I hold a few hundred of them in my account, so wondering what’s going on. Thank You.
LMRK was to be acquired by its Sponsor, Landmark Dividend LLC and was approved by shareholders on 12/9 with expected to close by year end…I guess they closed.. What that means to the traded issues, such as whether they’re called or just delisted I don’t know…..
Under the terms of the Transaction Agreement, at the effective time of the First Partnership Merger (the “First Partnership Merger Effective Time”), (a) each issued and outstanding Common Unit, other than those Common Units owned by Landmark Dividend or its Affiliates (as defined below) (such Common Units, the “Landmark Dividend Common Units”), was converted into the right to receive $16.50 per Common Unit in cash without any interest thereon (the “Partnership Unaffiliated Unitholders Consideration”); (b) each issued and outstanding Series A Preferred Unit (as defined in the Partnership Agreement) was converted into the right to receive $25.00 plus the amount of any accumulated and unpaid distributions per Series A Preferred Unit in cash without any interest thereon; (c) each issued and outstanding Series B Preferred Unit (as defined in the Partnership Agreement) was converted into the right to receive $25.00 plus the amount of any accumulated and unpaid distributions per Series B Preferred Unit in cash without any interest thereon and (d) each issued and outstanding Series C Preferred Unit (as defined in the Partnership Agreement) was converted into the right to receive the greater of (1) $25.00 plus the amount of any accumulated and unpaid distributions per Series C Preferred Unit to, but not including, the date of the First Partnership Merger Effective Time plus the amount of any distributions that would have accrued from the date of the First Partnership Merger Effective Time to, but not including, the 50th Business Day following the First Partnership Merger Effective Time and (2) the sum of (i) the product of (x) the Alternative Conversion Amount (as defined in the Partnership Agreement) multiplied by (y) Partnership Unaffiliated Unitholders Consideration plus (ii) the amount of any accumulated and unpaid distributions for all prior Series C Distribution Periods (as defined in the Partnership Agreement) ending on or prior to the 20th Business Day following the First Partnership Merger Effective Time, per Series C Preferred Unit in cash without any interest thereon.
Landmark Infrastructure Partners LP (LMRK) – FORM 8-K | Current report
https://seekingalpha.com/filing/6101216
Caught me by surprise for sure and still not clear as to what happened: my LMRKO (series B) was liquidated but without accumulated div, but LMRKP (A) remains. ???
Original
The accumulated dividends might be coming.
My shares of LMRKO were liquidated yesterday and I received two payments. One for the $25 and the second was $0.20
I had 1000 shares each of LMRKO and LMRKP in my Vanguard portfolio since 2016. They got redeemed on 12/22/21 due to the merger and I got my 25 bucks per share back. It is goodbye to a couple of 8% payers that gave me a real nice dividend for years. Not much out there to replace them. Guess I will start the hunt for something reasonable to replace them with.
Picked up some LANDM at 25.49. I have been on a quest to restructure my preferred portfolio to all term preferred / BB issues with 3-6 year maturities. The fact that LANDM is a monthly payer is an extra.
Proto – I assume you’re comfortable using your own equivalency rating system in adding LANDM to your new purchases? Not disagreeing with your selection, just wondering how you decided it meets your ratings requirements… Right now this is one where I own the common but not the preferreds… Owned LANDO in the past but hadn’t considered LANDM…. I should…
Tell me where I’m going wrong on LANDM. Its a 5% coupon which is nothing to shout about. Its callable in JAN. of 2023. BUT Powell has already said he is raising rates 3 times next year. I also have heard the talking heads on CNBC say one of those 3 raises could be 50 basis points instead of the 25 that the market is looking for. Here’s my point. There’s a good possibility that LAND will NOT call the issue in JAN. of 23 and there’s even a stronger chance that it will trade well below the Par Price of $25. For me I can’t see where at $25.49 this is worth buying. But thats just me.
Chuck – The points you’re making are the reasons to be focusing on shorter maturities…. the points you make would apply to any fixed instrument in general with the probably exception of F/F rate, not just LANDM. We’re all in a world where we have to put our money to work today at today’s rate – either that or let cash lay idle and be taxed over 6% by inflation…. So the important part of the equation is the focus on the maturity, not the going rate today where as interest rates rise, the lost value of your outstanding dwindles far less on your short maturities than the longer ones and the day you can reinvest at higher levels (if you’re strictly buy and hold) come that much quicker. And imho your point about call becoming less relevant is a plus for an issue like this… you can still focus more on the YTM if you believe the scenario…
Bingo! This is the issue that investors thought would not happen or be far off. The idea of pref being PERPETUALS, regardless of call dates is important. IT’s kind of like having a barn too close to the house when the wind shifts.
The Fed is reliably unreliable. The recent spate of calls and refis has been artificially created.
You are wrestling with all of the factors an independent investors faces, AS WELL an unreliable partner who does NOT have to, and does NOT live, in your world.
Hate to be blunt. Pork chops, steaks and dairy are nice but you don’t live next to that barn.
Thanks for the feedback (2WR and Chuck). I too share concern over rate increases. We know the lower coupon issues will take the biggest hits. However; my reasoning is as a term issues, they will take less of hit (hopefully) than perpetuals. My other reason is I am sitting on cash and needed to find reasonable issues.
To 2whiteroses and NWGG–
Very, very helpful comments. Thank you both so much for taking the time to write. It is certainly appreciated!
Robert
Thanks to Martin G., fc, and NWGG for your replies. I was not aware of the SA piece, so I will try to look at that. NWGG: Do you draw any overall conclusions from the highlights you posted (Looks to my untutored eye to be more good stuff than bad…..)
And if I can press my luck a bit….How about Watford Holdings Ltd 8.5% (WTREP)? I own this; it seems to have been delisted and I can’t figure out what, if any, options I might have with it. Any wisdom or advice in such a situation?
Robert – Not quite sure what the best way is to search III for it, but if you look around here you’ll see lots of discussions on WTREP… But bottom line right now is just sit back and enjoy the 7% + dividend minimum for as long as they continue without being called or until 2034 because right now, there ain’t nothing you can do about it but enjoy the ride…. Credit wise, nothing to be worried about… Liquidity wise for we owners, non-existent…. If you own it in an IRA and are subject to RMD, then enjoy the effects of the zero valuation……
2WR, We will be apparently collecting our second “gone private” dividend from WTREP in less than 2 weeks. The only real bummer is being the fixed floor minimum at 1% we wont participate in any potential rate hikes next year. So we will be locked into about 7.6% or so. Not a problem that is very high on my worry list.
Oh, darn…. I hate when that happens…. drinking from the half full cup, something I don’t frequently do, if this thing remains outstanding long enough, and you believe in Fedspeak, then maybe by end of year or early next year, we begin to act like an IBond, increasing with every rate hike…. That IBond reference is a joke, but still I agree, WTREP is not high on my cup is half empty list.
2WR, I have 10k sitting in account dying for that Jan. 1 date, to pump the annual max into the IBonds again.
Grid – I’ve been thinking about the timing for a next investment in IBonds and have been beginning to think that maybe it doesn’t make all that much sense to jump in again in January, even if waiting for the end of January…. Other than getting out from under the 1 year can’t sell time earlier I was think why not wait until late February? The next semi annual calculation happens in March, right? If I wait until Feb (March would be too late, right?) I can stretch out the 3.56% 6 month amount for almost 9 months or more from my initial purchase when including my second tranche of buying and then still participate in the next changed amount fully when it begins to hit my account… OR I’ll have at least 5 months of data in hand toward what the next 6 month amount would be so I can better decide whether by some crazy stretch of the imagination, there might not be a good reason to double up… Crazy idea???? I guess I have to take into consideration that second 10k will be sitting around most likely doing nothing if I decided to delay…
Im just back from sportsbook watching a sure $1000 beat down, turn into a $1000 win only for Army to kick game winning fg on last play costing me my money line bet, (but winning the spread bet and coming home with a $300 consolation profit night), so my head isnt all the way here. But I think this cycle runs through April. The 10k is just sitting to be used so I will dump it early. First month CPI print was what .9% already? Next cycle will be a layup interest rate wise, so Im getting in now and starting the 12 month clock as early as possible.
The I bond rates are set each November and May. If you buy in any month January through April you will receive the 7.12 rate set in November for six months. You will then receive the rate set in May for the next six months.
My expectation is that the rate set in November will be the high. So my advice is to buy the 10K maximum before May 1.
On a side note…I see that my I bonds bought in September are still showing no interest even after four months. I thought interest would be shown after three months even though they must be held for at least a year. I’m not worried about this…just thought it would be different.
Retired, You wont see a penny in interest until 6 months. And at that point it will only be three months worth, since the 3 month penalty money is withheld. I bought mine in Sept also. I wont bother to even look until early March for interest earned.
Grid, once you get your interest payment can you withdraw that without penalty or do you have to wait the 5 years?
Thanks and Happy Holidays
JB
JB, the penalty is always being withheld, so they got that in their pocket. After 5 year anniversary you get in effect a “bonus” 3 month interest payment add.
Grid – So after the first year where you can’t withdraw anything anyway, the amount shown as being in your account is the amount you would receive if you elected to sell 100%? You do not have to mentally deduct the penalty amount because the after penalty amount is the amount that is being shown?
2WR, Correct, they dont tease you with it. That 3 month penalty is always not credited toyou until 5 anniversary. And its always the very last 3 months withheld.
Grid, thanks for the info. Let me expand. Can I withdraw the interest above the 3 month hold amount when its credited to the account?
Question 2. I own KTBA. It was doing great until the new law. Now I am underwater and the bid is a joke. I have no problem holding it until I go to my grave. Are they obligated to pay me until maturity? There isn’t a call date.
Thanks again.
JB, I have never attempted to in the past, but Im assuming nothing can be withdrawn until the 12 months are up. Maybe someone knows with absolute certainty though.
As far as KTBA goes in terms of payment, nothing has changed. ATT doesnt know anything about the screwy SEC regs. They are under contractual obligation to pay the interest. They “cut the check” to the bank trust that holds the bonds. The bank then distributes the interest payment to you. If it never can be traded again, you would still be paid as long as T stays viable and not head to bankruptcy.
Robert,
SQFTP
Your eyes don’t deceive you (for now). Remember this is a company that has had lumpy CF. In the past, most of the action was in the CFI section. Most investors want to see CFO to be the main driver.
In the end, you either trust the management or you don’t. I think that SQFTP was just thrown into the trash pile with all the other nosebleed coupons. Management seems to be opportunistic and reasonably savvy about how they operate. They have been a player in some of the hotter areas of the country. I like that they “go where the action is” rather than stick to just one area. This strategy certainly can increase risk as well, so there is never a “free lunch”.
If they start to get cute with the CF or start making stupid decisions then buh bye. The common is at a 43MM market cap, so this stock would not likely be followed by the “Big Boys”. The CS is under $5 per share as well, and at the firm I used to work at anything under $10 was a penny stock. Because it is so tiny, I would imagine that it would be easier to move the price of both the common and preferred around.
I know Tex the 2nd covered hidden orders from the buy/sell side as far as execution. I’m curious if that would also hide them from the day high/low for a stock? Today I bought some Bel Fuse A shares (BELFA) on a limit order at 14 that got a partial fill with a maximum of 2 shares at a time in 19 separate trades, and yet when I check multiple brokers most show the day’s range low of 14.22 and one other shows 14.14. Or is there a more reliable place to get that information?
Dufus – I can see your 19 trades on Fidelity’s Active Trader Pro starting at 14:58.16 and ending at 15:45.57. …. And just to burst your bubble (maybe) you didn’t get the low trade of the day because 7 minutes earlier, another 1 share trade happened at 13.96 or was that you too… I don’t know if other brokers provide that ability but it is there on Active Trader Pro.. I’ve not seen an ability to see that much detail on TDA’s ThinkOrSwim except temporarily and then it goes away as far as I know….. I looked it up on Active Trader Pro sort of as a test..
Thank you both very much, maybe I need to step my platform up.
Dufus, for share prices in the range of ~ $14 like BELFA, trades of less than 100 shares do NOT show up in the daily high or low. If your buy order was for more than 99 shares, it would show up in the NBBO. But if it executed in 1,2, up to 99 shares it will not show up in the daily low quotes on any platform. And this is not the same as a hidden order since your buy would have shown on the NBBO before it was filled.
Does anyone have any knowledge of or recommendations with respect to SQFTP? The price is dropping like a rock, and I don’t understand why, other than high yields have been weak lately. Any advice/perspective would be appreciated!
Somebody wrote a hit piece on SA maybe that has something to do with it.
Common stock is not falling so maybe it’s concern over what’s happening to the abundance of high yield junky issues coming out lately. Most of them are tanking. Some of them raising money by offering secondaries at deflated prices, giving that segment of the market a bad name.
This is an interesting situation that at first glance I cannot figure out either except that they are a tiny REIT with not much info available. Tempting to buy a few shares for the high risk bucket for a short term play. Ex-div is coming up. Or maybe I am just bored lately….
This one has caused me pause. I already got a buck flip a few months ago and probably wont come back. Many times small young reits overpay the dividend and then try to grow into it as they expand. PLYM was one that did this playbook and it appears to be working their way now.
I am no reit analyst, but if one has room in their high risk bucket, it just becomes a personal choice risk reward. For me, I already have my high risk bucket full, so I just dont have the space and/or the courage ha. It does have some industrial properties which is a “hot sector”.
GB,
SQFTP
Can’t say I disagree with what you said. I could care less if anybody else buys it, but our friend Robert asked.
Here is a diddy about the common to throw some more kindling on the fire. It is a bit old and their analysis on companies in general tends to be a bit vanilla for me. Just another data point is all. I don’t plan on ever owning their common and saw this after I already bought the PS.
https://www.incomeinvestors.com/presidio-property-trust-inc-contrarian-reit/61618/
“What sets Presidio Property Trust Inc apart from other REITs?
It looks for growth opportunities in overlooked markets. Instead of buying real estate in cities like Beverly Hills, Chicago, New York, or Miami, it owns commercial and residential properties in places like Bismarck and Fargo, ND and Colorado Springs, CO. Not all of its properties are in overlooked markets, though: it also owns properties in San Diego and San Bernardino, CA.”
I think you said it best, NW. Its largely a bet on management and how they are able to grow it. I miss the not too recent past days of if something dropped 50 cents to a buck, you buy it and watch it go right back up, ha.
When one has to start thinking, it scares me, lol. I have had a few I flipped in past few months and looking back, I made the money on blind luck. It hurts to know now it wasnt skill. So I have reigned things in a lot holding a lot of decent quality call anchored stuff. Some of the trashier new issues arent aging well, and it makes me nervous.
GB,
The monkey hammer has sure come out to play. There were several days where my best performers were inverse etfs and muni CEFs/ETFs. **GULP**
The muni CEFs/ETFs I bought earlier in fall because I knew there would be some turbulence going into the year. They were nice to sell to get some needed liquidity to buy more turds.
Even “I can’t live without my celly” AT&T got hammered after I bought it. It had already made a 52 wk low before I nibbled, then another low, nibble nibble, then BOING! Welcome to WackY lanD
It has been a real mixed bag as I bought long/short/medium duration and good/decent/bad quality credit issues. Just about all of them got taken to the woodshed at any given point.
I bought CORR-A and it went down, then bought some more, and it went down, and bought some more…etc. Then it decided to come back from the dead. Typical energy market madness. Even LTSA has clawed back to what I bought it at.
I even picked up a little more IMBIL. Poor thing was sitting there looking for another sucker err buyer I mean. What a garbage factory! They completed their buyout/merger whatever of that Euro e-retailer. Since the EU countries will be all hiding in their homes this Xmas, maybe they’ll have more time to buy stuff? Ho Ho Ho
Glad to see you are back to even par with LTSA. I cant say the same, I got the sister note LTSH and Im still several shots over par on that scorecard. I will just have to sit and wait on that one. I started small balling EPD under $22 and said I would add in more small amounts if it dropped more. Well, I have had plenty of opportunities to buy more small lots, ha.
With some quick reading the problem seems to be using their cash to buy back stock AND raised the div on the common a tiny bit WHILE not investing in enough new property with the cash to eventually cover all their div responsibilities. Not even the preferred… thus it is not buyable. Moving on…
Robert,
SQFTP
I own quite a few shares (for me) of this issue. I thought some info from the latest 11/11/21 press release (summary) might shed some light.
https://feeds.issuerdirect.com/news-release.html?newsid=7475780316163641
“We are pleased to report our third quarter earnings, continuing the strong rent collections”
“we made our company’s first commercial acquisition in Texas. We collected 96% of billings in this period”
“continue to see solid leasing demand in the markets where our properties are located.”
“Net loss attributable……approximately ($1.4 million), or ($0.13) per basic… compared to a net loss….($0.20) per basic and diluted share”
“net loss attributable to the Company’s common stockholders was a result of:
A decrease in interest expense of approximately $1.1 million in connections with the reduction of mortgage notes and other notes payable during 2021;
A decrease in revenues of approximately $1.3 million due to the sale of four properties since the beginning of 2021;
A corresponding decrease in rental operating costs of approximately $0.7 million and a decrease of approximately $0.3 million in depreciation and amortization due to the sale of four properties since the beginning of 2021;
Offset by the addition of dividends for Series D Preferred Stock totaling approximately $0.5 million, not present during the three months ended September 30, 2020.”
“Core FFO… increased by approximately $122,722 to $1.67 million”
“Acquisitions and Dispositions for the first three quarters of 2021
Waterman Plaza, which was sold on January 28, 2021 for approximately $3.5 million and the Company recognized a loss of approximately $0.2 million.
Garden Gateway, which was sold on February 19, 2021 for approximately $11.2 million and the Company recognized a loss of approximately $1.4 million.
Highland Court, which was sold on May 20, 2021 for approximately $10.23 million and the Company recognized a loss of approximately $1.6 million.
Executive Office Park, which was sold on May 21, 2021, 2021 for approximately $8.1 million and the Company recognized a gain of approximately $2.5 million.
On August 17, 2021, the Company, through its 61.3% owned subsidiaries NetREIT Palm Self Storage, LP and NetREIT Highland LLC, acquired a single story newly constructed 10,500 square foot building in Houston, Texas for a purchase price of approximately $4.9 million, in connection with a like-kind exchange transaction pursued under Section 1031 of the Code 1986, as amended (the “Internal Revenue Code”). The building is 100% occupied under a 15-year triple net lease.
During the nine months ended September 30, 2020, the Company acquired six model homes for approximately $2.9 million. The purchase price was paid through cash payments of approximately $0.9 million and mortgage notes of approximately $2.0 million.
During the nine months ended September 30, 2020, the Company disposed of 39 model homes for approximately $19.0 million and recognized a gain of approximately $2.9 million.”
Hi All. I ‘ m an experienced investor but somewhat new to preferreds. Curious about the price movement in BRG preferreds. Both C and D preferreds are past first call date and I think the company is transparent about wanting to call these. Blackstone announced deal to buy BRG yesterday, which should guarantee the preferreds get called, but the price has moved higher, which seemed odd. Does the Blackstone news delay the timing of a call because they cannot redeem until the deal closes and that could result in an additional quarterly payment beyond what market was expecting? Thanks for clarifying.
mc- though you may be new to preferreds you’ve got your theory exactly right…. Though the acquisition theoretically doesn’t preclude BRG from doing something in the way of calling these in the interim, in the real world, more frequently than not, the pending acquisition takes immediate call out of the equation until the acquisition closes… Therefore, given they have announced that the acquisition will close in the second quarter, the market is willing to assume the immediate threat of a call has now gone to beyond the collection of at least two more coupons, maybe more, That being said, I think they both go ex-div tomorrow and I would think it unlikely to see either one recover much if at all from the decline that will take place tomorrow with ex-div amounts taken out of the share prices…. Martin G – what’s your take???
There’s an upcoming dividend and with the advance notice required of a call BRG issues should turn a small profit if called. or a steady profit if call is delayed. Price went up a few cents probably because when call is imminent it’s more like a short term fund where investors don’t demand high return. But I want out after the dividend capture tomorrow, Often the acquiring company doesn’t want the issues and deosn’t care what they do to the shareholders.
Has anyone ran into issues taking distributions from a Roth holding preferred stock with Medicare treating them as “Tax exempt Interest” when Medicare calculates you Adjusted AGI for purposes of determining if you owe additional Medicare premiums? 2021 is the first year I took significant distributions and I am trying to determining what my MAGI is to make my final conversion to the Roth and don’t want to move too much. Know municipal bonds can cause trouble, but preferred stock dividends?
dj – I have never done it at this point, but my understanding is that anything coming from a Roth does not impact your MAGI for Medicare limits. As you stated, tax free Muni interest does get added to your MAGI for Medicare purposes.
MAGI includes Roth conversions which are also taxable but not non-taxable Roth distributions
I’m looking at my position in 6.125% AEPPL, a mandatory convertible on 3/15/22. It is currently priced at $49.51. Based on the underlying price of AEP of $86.73, the conversion price translates to a value/price of $50.00 because it’s above the lower band of the conversion price of $82.98 and below the upper band of $99.58. If I am calculating correctly, my annualized yield to conversion is 11.35% ($0.49 capital gain plus final interest payment of $0.77). Seems too high. Am I missing something? In looking through the prospectus, there are two things I don’t fully understand: 1) there is an optional remarketing period, but it appears that would result in a value of $50 for the preferred holders, and 2) the underlying junior preferred debentures have a maturity date in 2024 which is after the mandatory conversion date? If not for the fine print, I would think this is a good short-term strategy.
Looking at ET-C, D, E. Yield (especially YTW) is off the charts compared to other BB rated preferreds. I can’t find the reason, but I’m guessing there must be one.
ET has a lot of debt which scares off people
Those are MLP’s and issue K-1’s, so people avoid them. I believe they also have a lot of UBTI, and can present a nasty surprise to anyone holding inside an IRA.
I have the ET D & E and both are held in an IRA. Last year neither had any UBTI.
Huge drop in yield when they float unless LIBOR is up a lot.. I don’t like these at all.
Talking about ET preferreds.
Does anyone know the symbol for the new RC 5.5% $1000 notes? Thanks
As per usual the answers in the prospectus or in this link the FWP –
We do not intend to apply to list the Notes being sold in this offering.
CUSIP/ISIN: 75574U AB7 / US75574UAB70
https://www.sec.gov/Archives/edgar/data/1527590/000110465921150541/tm2135379d2_fwp.htm
Anyone else get short changed on the payment from KREF+A???? They paid on the 15th but I got short changed a little over $201. I have Schwab researching it but it takes them 5 business days.
Received full amount at Fidelity.
Chuck:
The quarterly dividend payment on 6.5% KREF+A should be $.40625, but they were “late” in paying it in September (paid on 9/27/21 instead of 9/15/21) so they had to pay an extra amount which they declared as $.4604.
This quarter, they deducted that extra amount and only paid $.3521. When you add $.4604 and $.3521 together and divide by two – it matches the correct quarterly amount of $.40625.
This is the first time I have ever seen a REIT make this error on their preferred shares. Inexcusable. Glad I sold nearly all my KREF+A shares in September near $27.
Good Morning Rob in Vegas; As old Inspector Clouseau would say “Ah the plot thickens”. LOL. Thank You for your very nice and detailed answer. When I calculate that .3521 cents per share the math works perfectly. I don’t think there’s anyway most of us would have known that. So again, I thank you. May I just add for you “Go Raiders—just win baby win”!!!
I purchased KREF-A in October, so I only received the lower amount in my 12/15 dividend payment. I received no benefit or extra payment from the September screw up. Who do I need to talk to recover this? Or is this something I was supposed to know when I purchased? The fix to their screw up is rediculous.
JDC
Hi,
Does anyone own inn’f ? It keeps down recently.
I know the virus might be the reason. Is this company financially strong enough to keep paying dividends ? Thanks
Has anyone gotten short-changed on the AQNU payment yesterday?
Schwab paid only 41.06 /sh out of the 48.44 due. $50 par 7.75% $3.875/qtr
Seems like a real error.
My shares of AQNU are held at fidelity. I was paid .821 per share. Should be .968 per share.
AQNU may pay in Canadian dollars, so one might just be seeing currency conversion, about 0.848 $C/$US.
Canadians buy on the TSX and still get paid in US $
Schwab has not paid the rest of the div today.
They are paid in two pieces. interest and contract fees, so you should see 2 parts to it.
Justin:
Thanks for that feedback. So far, I have not received the 2nd part of the 1.18% AQNU dividend (as of 12/18/21), but of course Schwab did remember to deduct 15% of my 6.57% dividend for foreign taxes paid.
Not sure I’ll even attempt to call a Schwab rep to chase down the remaining dividend, since dealing with them is usually the ultimate exercise of futility.
I’ll give them thru the close on Monday.
Gary – let us know what you find out from Schwab. I have still not received the “stub” payment on AQNU. So counting the 15% tax withholding amount, my yield on AQNU is down to only 5.58%!
The good news is that the foreign tax paid can be claimed as a 100% credit on your income taxes. The bad news is that we may be chasing down Schwab for weeks trying to get paid the stub amount. I gave up this morning after talking to a rep, as this AQNU security was way, way beyond his pay grade.
“ The good news is that the foreign tax paid can be claimed as a 100% credit on your income taxes. ”
This is not entirely true. You can definitely claim it as a deduction, but that’s only worth your tax rate in savings, so maybe 30-50% and not 100% of the foreign tax you didn’t get paid.
Alternatively, you can try to claim it as a foreign tax credit on form 1116, but there are various restrictions and limitations related to how much tax you pay vs your foreign sources of income, and the consequences can easily be that you can only take a small part of it as a credit and the rest you can try to take sometime in the next decade if these restrictions somehow work out better then.
Of course if you’re holding the same income producing asset and a similar portfolio, if you can’t take it all this year, there’s a very good chance you can’t take it all next year either, and so forth, so you can end up with these increasing FTC carry forwards that you can’t actually use. Taxpayer beware.
Just sent them an email- to get it in writing. 2-4 day reply
xerty, if I am reading https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit correctly, you can claim either a deduction (reduces income) or a tax credit (reduces tax liability). And if I am reading https://www.irs.gov/individuals/international-taxpayers/foreign-taxes-that-qualify-for-the-foreign-tax-credit correctly, foreign tax withheld from dividends qualifies for the credit.
Yes, you can claim a credit for foreign withholdings. If you claim under $300 single / $600 married in total for the year, you get it in full. However, if you claim more than that, you have to use the form 1116 which may limit it to less than the full amount you claim based on the factors I mentioned. Then you can try to claim the disallowed portion over the next many years before it eventually expires worthless if you can’t.
https://www.irs.gov/publications/p514#en_US_publink1000224485
“ Your foreign tax credit cannot be more than your total U.S. tax liability (Form 1040 or 1040-SR, line 16 and Schedule 2 (Form 1040), line 2) multiplied by a fraction. The numerator of the fraction is your taxable income from sources outside the United States. The denominator is your total taxable income from U.S. and foreign sources.”
For discussion
https://www.bogleheads.org/forum/viewtopic.php?t=211120
“ Never-Ending Foreign Tax Credit Problem”
the only problem with this is that the tax is phony. It doesn’t exist outside of Schwab’s back office system.
this wasn’t a dividend, so it should not have had foreign tax withheld, and this is really surprising for another reason.
foreign tax has a longer name in the brokerage industry.
foreign tax withheld at source.
At source means it was withheld in Canada at a rate determined by your account status. (15 for US, 25 for most non-US, 0 for IRA’s and Schwab would have been paid NET, based on what they told the company’s transfer agent in Canada.
But the transfer agent paid everyone at the gross rate because the company told them withholding didn’t apply, which is why no one else who had it in other brokers got withheld.
So Schwab got to pocket the tax withholding, or told the transfer agent to withhold when they shouldn’t have.
Justin:
If true, that is a very serious nefarious action by Schwab. So now I have to possibly chase them down for the stub payment AND for incorrectly withholding the 15% foreign tax rate in my taxable account (it was correctly not withheld in my self-directed IRA account).
Can I confirm if there are any others who have invested in AQNU in taxable accounts at brokerages besides Schwab that received the full dividend amount in 2 parts ($.82125 + $.1475) with no foreign tax withholding on either payment?
Thanks!
I had a similar witholding at Vanguard on 150 shares in a taxable acct :
Total dividends of 145.32 (in two installments of 123.19 and 22.13)
Then a witholding of 18. 48
Which means the 15% witholding was all on the 1st payment of 123.19
Adrian:
Thank you for that response. At least you got the $.1475 stub payment at Vanguard. Schwab is still not forwarding that payment in both my IRA and taxable account – 6 days after it was due.
I have been with Schwab for 20+ years and love their trading platform, but they are truly awful at times. I have to chase them down for missing dividend/interest payments several times/year.
I hold AQNU in a Traditional IRA at Schwab. I received $.8212 per share on 12/15 and $.1475 per share on 12/22. There was no tax withheld.
a remarketing is where they sell the underlying bond in one piece to a third party in order to secure the cash to purchase the shares directly from the company. so if the remarketing is successful the conversion into common is set in stone at the rate in effect on the remarketing date. For AEPPL, the period they can sell the bond started about a week ago.
Make sure you watch it like a hawk between now and February 22
Justin:
Amazing that AEP common has done essentially nothing in nearly 3 years but pay dividends (stock price was $82.11 on 3/12/19 and $86.90 today). Have you had experience with these mandatory convertible utility preferreds as they approach the end of their 3-year term?
So how will AEPPL holders know when and if the remarketing is done before 2/24/22? Will the company announce it? Are you saying the conversion rate into common for AEPPL is “locked” as soon as the bond is successfully remarketed? I thought the following meant that you would not get the conversion rate until 2/21/22:
“The junior subordinated debentures is due 2024 and is subject to reset and remarketing on the third business day prior to 2/24/2022”
So assuming the bond is remarketed today with the common at $87:
Conversion rate would be 50/87 = .5747 with AEPPL trading for $49.60 (you get one more preferred dividend on 3/11/22 of $.7656/share). Assume 100 share buy of AEPPL:
Pay $4960
Receive $76.56 in March 2022
Convert to AEP common at .5747 on 3/15/22 = $86.30.
So as an AEPPL holder, you would be “locked and loaded” at .5747 conversion rate until 3/15/22? Thanks!
Received .96871 per share for AQNU on Dec 15. Holding in a tax advantage account.
Gary:
I thought I also was shortchanged on AQNU dividend – but it looks like the actual payment on the AQNU preferred is based on a rate of 6.57%. Not sure if we will receive quarterly payments on the 1.18% senior notes?
QUANTUMONLINE.COM SECURITY DESCRIPTION: Algonquin Power & Utilities Corp. Equity Units, stated amount $50 per unit, initially consisting of Corporate Units which include a stock purchase contract due 06/15/2024 and a 1/20 undivided beneficial ownership interest in a 1.18% remarketable senior notes due 2026 with a principal amount of $1000.00.
The stock purchase contract requires the holder to purchase for $50 a variable number of shares of Algonquin Power & Utilities Corp. (NYSE:AQN) common stock no later than 06/15/2024 and pays a contract adjustment rate of 6.57% per annum.
The stock purchase settlement rate will be 2.7778 shares per unit if the then current market price is equal to or greater than $18.00 and 3.3333 shares per unit if the market price is equal to or less than $15.00. For market prices between those values the settlement rate will be $50 divided by the market value. Prior to the IPO of this security, the last reported sale price of the common stock on 06/15/2021 was $16.08 per share. The stock purchase contract may be settled any time at the holder’s option and the company will deliver 2.7778 shares of common stock for each purchase contract.
The 1.18% remarketable senior notes due 2026 is due 06/15/2026 and is subject to reset and remarketing between 03/13/2024 and 05/30/2024, with a final remarketing in a five day period ending on 06/13/2024. The 1.18% remarketable senior notes due 2026 are pledged as collateral to secure the holder’s obligations under the stock purchase contract.
The Corporate Units pay quarterly distributions of 7.75% ($3.875 per annum on 3/15, 6/15, 9/15 & 12/15 to holders of record on the record date which is one business day prior to the payment date while the securities remain in book-entry form (NOTE: the ex-dividend date is one business day prior to the record date).
I did see that. You are probably correct- I noticed my previous payment was split into two pmts, but attributed it to something that Schwab was doing– pd 41.13 total then. I hope they get the other pd soon so I don’t have to call them.
thx
Oops- they paid 44.13 last time- but it was new. Should now be paying 48.4375 for the two components. Owed $7.3775 , but the div on the 1.18% bond, is only 59¢ / yr or $ .1475 / qtr – that leaves shortage of $7.23. Not sure how they get there.
Getting brain dead– looks like the .1475 /share of the 1.18% bond does bring the remaining to the proper amount.
disregard priors.
TDA withheld foreign/Canadian tax from my payment. Resulting in payment of $0.8212 after tax.
No, they didn’t. they split the payment into 2 pieces.
$82 and $.14.
Received a call from a former client….his current “advisor” wants him to sell his KTBA that he bought on my recommendation way back in 2000 at $21. I asked what the advisor was recommending instead… turned out to be managed money. Of course. Client was told that he may never be able to sell KTBA in the future. Gee..I hope that’s not true!
I usually hesitate to make suggestions of this nature…I am after all retired…but this client is a really good guy. Since he is looking for stable income, I suggested he keep the KTBA and consider firing his broker. I would have offered to buy it from him at the current $26 if he REALLY wanted to sell….but it is in his IRA.
Ha, Broker, you got him pegged right! If he was an advisor he should have offered advise before the barn door was opened, not after all the horses got out.
Yeah…where was the recommendation in the 30s? But you have to give my guy credit…he has held through the 2007=2009 credit crisis and the covid downturn last year. I’m thinking the “advisor” (gotta use quotes) thought there was finally something that had changed so commissions could be generated.
And I have to admit that the current situation with OTC illiquids is not something I saw coming. But I have held KTBA since the last century….so I will continue to collect interest…
ha ha….managed money
I worked for the one the shops that loved the managed money. Delicious fee income every quarter no matter if it went up or down. Fees from .25 bps to 250 bps!
This was in the 90’s so I’m thinking fees are much less now with competition and automation (robo advisors etc). There were guys that had a book that was almost 100% managed money and got paid 4x year.
This is what I was referring to as the “sausage” in an earlier post. Never can figure what’s in the sausage but those quarterly performance reports were sure purdy.
Actually you both held it through delistment too! It was delisted in 2007. Do you remember its original ticker symbol?
Gridbird…actually I don’t. I used to trade in and out of the A B and C shares in my IRA based upon which had the highest yield. Good times. Of course only the A shares remain as they were the only non callable issue. I viewed the delisting as a non event…that is until the SEC started “protecting” me lately.
NWGG….ah managed money…such a great deal for brokers. Steady income and someone else does all the work. If there is a problem, just switch managers and reassess at the next meeting. In the meantime, don’t call me. This was (and I guess still is) the double allure of managed money. Steady income…and less time spent talking to clients.
Retired, one of my buddies was a broker “advisor”. She retired 3 years ago, and has someone else manage her money. She is through with it. I thought that was funny. She also told me she didnt like clients under $5 million dollars. As they were the ones calling in panic every time the market swooned. The ones with more wealth took the swoons in stride and werent needing their “hands held” which she didnt like to do, ha.
Story reminds me of a co-worker that came into my office in a panic.
Stated my account is down $1100 from the month before should I find another financial adviser.
Had to put on my best serious face. His account was over 60% CDs.
I just saw this Micahc. That is funny! But I bet you have more stories, lol.
https://schrts.co/XhVweWkf
$TNX – This long term moving average has been resistance for a very long time
FWIW- I see the PDO (PCI PKO) merger completed 12/10, but my PCI shares are still there with their ending price. Should have updated yesterday, I would think. But then, Schwab has its own pace. Tonight?
Also, they are showing a 49¢ distribution ex 12/13 pay 12/21. Plus the reg of .1184
Nice
I meant PDI merger- mistakenly read the PDO div- ackk! Sorry
For Dec, the three are doing regular divs.
Schwab did get the shares switched over tonight.
METCL now 27.40. With a call date of 7/30/23, the YTC is now ~3.60%. With that 9% coupon, I have to think that there’s a high probability it will be called. I would guess that the high coupon rate and the relatively short call protection went hand in hand. It’s been a good ride in the 5 months since it was issued, but with a 3.60% YTC it might be time to consider whether it’s worth continuing to hold.
I wouldn’t be a buyer at these prices, but it seems a bit early to be having YTC concerns about METCL. If you have gains though, there’s nothing wrong with ringing the bell.
I always have YTC concerns.
Interesting fill at Schwab for me today. Yesterday, I entered an order to sell 1000 AFINO @ $25.94. Today, it opened at $25.93 and traded lower. I changed my sell order to $25.85 with the current bid @ $25.82. I then got filled @ $25.97 Don’t quite understand how that happened, but I can’t complain.
Was it below the Ask price? It’s not unheard of to get that much price improvement when there is a big spread.
My fill was above the quoted ask price
I’ve seen that too but never for 1000 shares. My guess is the fast computers were having a bidding war over your order but I don’t know how that works.
Randy, I think Martin is correct that you got a “price improvement.” Here is what I think happened. You can never tell 100% for sure, so this is an educated guess. All times are in NYSE aka Eastern Time
12:53:38 300 shares trade @ 25.82 while your 1,000 shares @ 25.85 is the lowest ask price
next trades
13:08:59 two trades, 63 @ 25.85 on Nasdaq and your trade, 1,000 @ 25.9691 on a “Dark pool” with the new lowest ask is 200 shares @ 26.26
Since your 1,000 share trade is “sub penny”, we know that it was done on a dark pool. We also know that Schwab sends the majority of its stock orders to Citadel, which is the largest wholesaler. Best guess is that Citadel’s algorithms saw the next inline ask was @ 26.26, so it decided to buy all 1,000 of your shares @ 25.9691 and assumed it could flip them today at a profit. There were several trades above 25.97 after your, including 34 shares @ 26.2459 right after your trade.
So Citadel/Schwab gifted you with an extra 12 cents a share of $120 on your 1,000 share trade. Citadel in turn made ~ 3 cents a share in the 1 hour they held the shares. They are VERY happy to make 3 cents a share.
So everybody won this on this deal, except for the buyer who paid ~ 26.00 for the 1,000 shares you were willing to sell for 25.85, so he/she arguably overpaid by ~$150.
There is some percent chance that another dark pool trader, NOT Citadel, bought your shares, but I think that is less likely. If it was NOT Citadel, they would likely have bough them at your 25.85 ask.
For those interested an outlook on shippers, including dry bulk (e.g., SB-C, SB-D holders), here’s the Fitch outlook, released this morning:
https://www.fitchratings.com/research/corporate-finance/strong-market-supports-neutral-global-shipping-sector-outlook-13-12-2021?utm_source=newsletter&utm_medium=email&utm_campaign=Fitch-Wire&utm_content=main&mkt_tok=NzMyLUNLSC03NjcAAAGBU4AS6wJ4AX8coIYeMXRQ4HmxbbjegInqGtz9reciAf69lcaHSWPwvLZPTx1c2yzUUkdeAQz6xzCafSqVOfyFwihSvFmKuH64cQ5Yh7VYFgZ4e9HbvdM
Here’s their take on the dry bulk segment, in particular:
The dry bulk segment’s growth will moderate to 2% in 2022 from 4% in 2021, partly due to lower coal and iron ore volumes. Fleet capacity growth is likely to decline to about 1.5% in 2022, which we expect to support dry-bulk rates in 2022, despite a gradual dissipation of port congestion.
Thanks mbg
Structured Investments – Bank Sponsored CD’s Linked to Various Indices
Heads I win – Tails I don’t lose – Every now and then I see these types of CDs being offered at Fidelity or TDA. The example I’m linking to is a JP Morgan issue…. They’re structured products that guarantee that you are at no risk of loss of principal over the course of the maturity of the CD and yet also you participate at a greater than 100% of the performance of the specified underlying index to which they are linked….. I’ve always been tempted by these but have never done one – Has anybody had any experience with these types of structured products???? Here’s the one I’m linking to…. No need to get hung up about the specific indice listed – it’s just an example. There’s always various different indices to choose from and they all come with varying degrees of participation.. prospectus.bondtraderpro.com/$48128WEF8.PDF
They always seem to me to be too good to be true on the surface….. I suppose the downside is that they’re probably impossible to get out of until maturity Any III’ers use these things?
2WR, while it’s true that you can’t lose money, you shouldn’t expect to make much, either. Sure, it participates in the performance of an index, but it’s not a stock index. It’s something JPMorgan concocted with dynamic hedging and a very low 3% volatility target.
As a general rule, you shouldn’t expect something like this to perform much better than a fixed rate CD, and there’s a decent chance it will be worse.
KC – Thanks for your input… As mentioned, it’s the concept I’m more curious about than the particular exact index I used in the example… I’ve seen these things based on the S&P, the Dow, the NASDAQ index etc., in other words more plain vanilla indices as well as esoteric indices as used in the example…. I agree with you that were I to actually participate in one of these, it wouldn’t be in one tied to something as incomprehensible as the illustration…. It just happened to be the most recent one I had seen… Did you see the 3% volatility target right there in the prospectus?
So this is my good deed for the day. These structured complicated CD things always suck. If you can’t figure out WHY they suck, you just haven’t figured out all the tricks in the fine print. Do you really know how to price call options on a JPM custom trading index that reflects the excess return of some hokey and highly variable futures rolling strategy? Because that’s what they’re selling, and if they’re selling it, you don’t want it.
Things I noticed in reading this –
1. The index is a mix of excess returns of futures over some benchmark. What wasn’t clear, but I think they’re selling you outperformance over a hurdle, not raw performance. It would be like saying SPY usually returns 10% per year, so this is the amount it beats 10% annualized. Obviously much lower upside than you might think.
2. The index is a variable trading mix of big stocks, 2 year treasuries, and cash depending on market volatility.
3. They target 3% annual vol. Market vol is high now, so this means they’re more likely in cash or bonds. Bad for your upside prospects
4. Of course if this call options on their index doesn’t pay out, you get nothing for all 4 years. A decent CD from a good rate bank would pay 1% APR. that’s your opportunity cost.
5. A 3% annual volatility means about 6% volatility over the 4 year period. How are your stats? The average positive move, if it is positive, is about 4.75% if you assume a zero mean for this excess return index.
https://en.wikipedia.org/wiki/Half-normal_distribution
6. Of course it’s not zero mean, they charge 1%/year, so the mean is -3% plus or minus whatever the index does.
7. Say half the time the index is down, so you make nothing. Half the time it’s up by its average of about 4.75% (not counting the fees in #6). If you get a 1.5x multiplier, the max they will offer, that’s about a 7% return, or 1.75% annually over 4 years.
Did I mention half the time you earn nothing? So you get 0.9% annualized return, with extra risk and that’s before the expenses drag down the index performance by another 3%.
Where do I sign up?
Thanks, xerty – Thanks for your good deed of the day… lol… I do remember actually studying one of these much more thoroughly than I did this one a long time ago and uncovering some of the important fine print negatives limiting the upside beyond the headline illustrations, but not as many as you have…. I did pick up on that 1% annual fee that comes right off the top though….. . lol. If one were to prioritize the plusses and minuses, I suppose these can have some appeal to those willing to accept a 1% or less plain vanilla CD of comparable maturity or those where avoidance of loss is more important than maximum gain…. In theory, there should be fewer of those people around in a higher inflation rate environment.
2whiteroses,
There are a wide variety of structured investments products. They have varying amounts of upside participation as well as downside protection. The underlying construction of these products tends to utilize options and the insurance company is selling you a product where in one form or another, you have less profit potential and more risk than they take on with the synthetic option position. That amounts to indirect fees (hidden), along with not giving you the dividends (another hidden fee).
While I am not familiar with the construction of the one that you describe, I am familiar with the one that offers 10% downside protection and an annual cap of 8-12%, depending on the index chosen. For example, as of 12/10, AXA offers 8.1% upside with 10% downside.
The upside cap and downside risk protection increase during volatile market periods due to the increased implied volatility of options. I use this strategy on beaten down large caps that I like, sometimes obtaining 20-25% of downside protection with much more upside gain potential.
I’ll spare you the details unless you are actively interested in them.
Couple of months ago I saw similar structured (but annuity like) products with 5 years duration, 10% protection and 200% capped upside for S&P 500 (and no cap on european index). There wasn’t explicit fee neither – it was baked in. I use a couple of such products and it worked quite well for me
Agree that these are generally poor investments. The ones Merrill used to offer were CDs paired with future contracts all wrapped up in a package.
One thing to consider is that while the index is tracked, there is no income or dividend in the guarantee.
If you want downside protection in an index, I suggest looking at long dated options.
My suggestion is to contact the fixed income section of TDA. They have new structured products available at the beginning of each month, and they will explain exactly what the product is. I own one from BMO, the Bank of Montreal, and it took an explanation from them for me to understand what I purchased. I like it. howard
Howard – Your experience with fixed income reps at TDA or at any other broker must be entirely different than anything I’ve experienced…. it wouldn’t even cross my mind anymore that they would be able to explain exactly what a product like this is all about… I ultimately came to that conclusion after a rep questioned why anyone would want to buy any called baby bond or preferred at a premium to the “par” price of the issue.. If that’s not obvious to a fixed income specialist, then what’s the likelihood they would know the nuances of a complex structured product like this???? I’m in the right pew when bringing it to here to fellow III’ers, that’s for sure.
My last 2 Merrill reps at the so called diamond status did not know what a preferred stock was. My last rep at TDA did not know either. I don’t call either unless I have to.
I had to call rep at one of my brokerages last week as I was trying to sell. After a week or trying occassionally it would always reject the sell order and cancel it. So I called rep and he said after checking it was market maker rejecting it and not their problem. I finally said watch, its not the market maker, the problem is at your end. I own it in two different accounts. Watch I will change the lead ask price, and then I said watch I will change it again. So that got him serious, and finally they resolved the problem because it was their problem.
The two fixed income reps for the East coast at TDA are knowledgable and helpful, to me at least. and they took the time to give an excellent explantion of the structured product I purchased. 5 year maturity, no call date, 5% annual yield, pays quarterly, and while not a bond, has excellent protection from the Bank of Montreal. It is based on the S&P 500 index and in order for me to not to get my full value back at maturity, the index would have to be WAY down. BMO has numerous structured products of this type. That is my experience.
**If you are speaking to a representative that does not understand what you wish to discuss, simply ask to speak to another one.
As someone who has dealt with these extensively, there is a definite “heads I win, tails you lose” to almost all if not all of these, because they are very one-sided in how they run.
e.g. they get called early when the reference index hits a certain threshold, and the bank that sold them gets a part of the upside, but they rarely have the opposite protection, where you end up lending the bank your money for 5 years at a 0 cost of capital to them.
And they are deliberately designed to be profitable for the issuer, because they get you 3 ways. return cap, 0 return or the commission they earn on selling them And the other little secret is that they generally don’t sell them to their accounts. The phrase “you don’t Sh!t where you eat” comes to mind. We saw an exception to that rule years ago, but that was evidence of a much bigger issue
I once bought a structured product linked to energy. At the time I thought there was only one way to go for oil and gas – UP. Five years later I ended up breakeven – oil and gas did not go up.
If you have not done so already, you might want to take an options course or two. Not so much to learn how to trade options as much as to learn how to deconstruct structured products and the current bumper crop of esoteric hedged ETF’s. (I took the excellent free classroom classes offered by the CBOE way back when. These days, there is plenty of free information online.)
There’s a cost factor and a convenience factor built in to these products. Years ago, I found an amazing equity index-linked bank CD that guaranteed the safe return of principal and also promised part of the S&P 500 upside. Then I figured out I could put 95 cents into a bank insured CD and a nickel into a long dated call with pretty much the same result.
It’s like shopping in the produce aisle at the grocery. Some people like the convenience of taking home a 12 ounce cello bag of the Dole chopped salad kit and being done with it. Others like to buy their iceberg lettuce, carrots and onions separately.
(FYI – Everbank, now TIAA Bank, was a pioneer in offering these types of products plus foreign exchange linked CDs. )
Just my opinion.
When I click on Reader Initiated Alerts, it always starts on the date 11/29. I click on ‘newer comments’ and can display them. However, when I click on another link, such as Sandbox, and then click back on reader initiated alerts, it starts at 11/29 again. Any suggestions? Thanks
Tim has probably read your comment and will have the software program adjusted. There is no reason for any section to begin on an earlier date, so that would require a software fix. Just my reasoning.
When youiare done in a category, go the the top and click on the lightbulb icon to take you to newest page, then select from menus on right again.
Dats my technical limit.
Anyone have a view on what is going on with FG Finanicial Group, specifically the non-rated Preferred, FGFPP? I believe the company is planning to issue more preferred, so substantial dilution may be coming? Is FG Financial have cash flow to cover the preferred dividend?
FGFPP held up over the last 5 months that the common was falling a lot– both have reversed in Dec.
You’re thinking it’s time for another issue on top of the 2/18 and 5/21 issues- because? Also, they did a rights offering in Oct.
thx – long FGFPP
I can’t speak about the preferred’s recent price or any new preferred stock issuance. (There was a filing back in May 2021 about issuing ~169,000 preferred at par.)
It has been a while since I looked at FGF closely, but this is a very odd little company.
I believe that they started out as a private company insuring churches, went public insuring homes in hurricane prone areas, then sold their home insurance operations to a micro-cap insurance holding company. A smart move except the buyer paid FGF with a chunk of common stock, which dropped after hurricane losses, leaving FGF with a deflated asset on its balance sheet.
FGF went into the reinsurance business which is still at the start up stage. Reinsurance can be a good business but you do need a lot of capital to do it right. Ask Warren Buffett.
Now for the odd part. FGF is now more or less controlled by some investors out of SPAC world. So you’ll see FGF touting its SPAC expertise and SPAC deals. My recollection is that the principals are well respected in SPAC land but have occasionally gotten some bad press for not treating shareholders fairly.
Also, SPAC world of late has lost some of its sure-win luster. One of their SPACs is off ~50%. Another deflated balance sheet asset. Another SPAC seems to have done well. IMHO, they are batting like 50-50 now.
There are pro’s and con’s here. They pay a nice qualified divvy. They are small and speculative.
All the above just my opinion and based on my failing memory. DYODD
https://schrts.co/https://schrts.co/NDSUqFGR
This is a chart I will be watching next year. How many rate hikes will it take to invert the yield curve? Any guesses. ATB
https://schrts.co/FCtGbmAh
I have owned and traded preferred stocks for 20+ years. They have been big board investment grade issues such as BAC, WFC, GS, PSA, etc. which are well known companies that don’t require much effort to understand. Sadly, the number of these available is shrinking each year.
Many here are buying and trading 5 letter OTC issues of which I have never heard of and know nothing about. Are there any resources that would help me to understand the quality and safety of such companies? TIA.
Theo,
https://www.quantumonline.com/search.cfm
Start there. I feel the most useful feature is that some of these odd preferred actually belong to major companies with significant cash flow. So pop in the ticker and click on parent company link below. While many others can be high risk but that has nothing to do with being on the OTC or not.
A classic example. NSARO and CNLTL. Both are BBB+ rating and belong to Eversource. ES has quite a few old preferred. Illiquid stuff, high quality. Something satisfying about my very own electrical provider has to pay me every 3 months…. 🙂 So in summary an odd ticker just needs more research and the site above makes it pretty easy to figure out some basics.
fc,
Thanks for the info. Quantum and this one are my go to sites. I surmise that the problem is that I have to do some due diligence on the individual companies and that’s going to be a learning curve, perhaps protracted. I was just hoping that there might be some existing source that might shorten.
I like the idea of getting paid by your electric provider. I have always felt that way about mine (Nextera) but unfortunately, they have called a lot of my issues.
Theo if you can be more specific on what types of 5 letter tickers maybe we could assist better. You have the old delisted utility preferred 5 letter tickers all the way to dirt bag 5 letters trading on an exchange such as FATBP and HCDIP.
Grid, I wish that I could be more specific but I know diddly about 5 letter tickers. With so many 2 and 3 letter issues having been called, my pool of choices has shrunk dramatically so my thought is to explore the 5 letter universe. I’m at the wide end of the funnel wondering if there’s an easier way to get to the narrow end (a pool of acceptable 5’s) without having to research companies one by one.
I know that you’ve probably heard this many, many times before from others but I appreciate the wealth of preferred knowledge that you share on various BBs. Give my regards to Dimdragon :->)
Oh he is Theo. He was discarding the thought of buying IBonds because he thought he was smart and knew what he didnt know. Then a week or so later the idiot is penning an article advocating them!
Anyhow, as far as the old utes tickers go. There really arent too many things to research. Remember these are actual companies with common stock. Except the holding company owns the common and its not tradeable anymore. When researching the main things (besides knowing proper entry point in relation to yield quality which that stuff you are well aware of) here, its just knowing, the profitability, coverage ratios, credit rating with financial overview. And also deciding if you want any credit linkage with holding company.
Take for example Connecticut Light and Power which has a slew of old preferreds. Eversource is the holding company parent and chooses the board of directors for CLP. CLP is Eversource’s biggest money making machine, usually in the $400-$500 million annually in profits. Regulators are trying to lower CLP’s ROE to sub 9%, but that is Eversources problem, not CLP preferred holders. See holding company cannot extract dividends from subsidiary unless they pay the preferreds first. CLP in total payments are ~$5 million so coverage ratio is about a 100 times which is off the chart. Throw in fact its only a T&D ute there is no power risk, and its a monopoly.
So typically you throw the ticker into quantum and find the hold co. Then just google credit rating for parent or specific subsidiary such as CLP and something will pop up that gives you the cheat sheet info. Such as this…
https://www.fitchratings.com/research/corporate-finance/fitch-revises-outlook-on-connecticut-light-power-to-negative-affirms-ratings-21-09-2021
And you can just google info of specific company to catch some regulatory stuff like this.
https://ctexaminer.com/2021/02/21/strong-revenues-in-connecticut-boost-1-2-profit-for-eversource/
And of course know your charts, interest rate directions, sentiment, etc. to determine price point of interest. And then wait and dont chase! The key above is know the holding company to find other info about subsidiary. This works with any of the issues that are still left. Sometimes I deeper dive, like when I wanted to know what Indiana regulators were going to do about IPALCO request to possibly redeem AES Indiana preferreds and hunt into state filings, but not much.
Side note some of these issues may be owned by a holding company that is owned by another holding company. The AES Indiana’s (renamed from Indianapolis Power and Light recently) holding company is actually IPALCO, while holding company AES (and a few minor partners) own the IPALCO holding company.
Then you have stuff like OCESP which you end up at a historical website reading Cranberry monthly newsletter pdfs from the 1940s and 30 year old year financial reports from Ocean Spray that somehow are still available for random years.
But since a lot of the really strange and dangerous stuff is now expert or grey market it is almost a moot point. But grid still dabbles in the obscure 100 year old railroad preferred under CSX and what not. Then you find yourself on ebay looking for a canceled stock certificate example to read 🙂
In the end.. there is really not that many once you eliminate non-payers, grey/expert, etc.. and are familiar with the sortable spreadsheet that this site offers. Then you might only have 100 left to explore now days as real candidates for purchase. Then toss 25 of those away due to being almost unbuyable as they trade so rarely at a fair price.
FC, I cant even dabble in railroads anymore thanks to SEC/OTC. Those days are gone I guess. You are very right, the tradeable herd has been culled significantly thanks to the above dolts. Sometimes you get lucky a shake a few nuts off whats left of the tree. I got a good buy on some IPWLG in one lot and a more common as dirt price on another lot. But since it basically hadnt traded in almost 2 years I was lucky to get a couple hundo. But I am hoping more a tender and or redemption than anything. But since I sold some other shares of that yield I didnt over expose myself if it stays perpetual status as I would own a certain percent of that ilk anyways.
I do wish I had a shot at Ocean Spray again on that sell off late in days of it being phased out, but couldnt get a broker to assist me. But, did come across Ocean Spray in a Co Bank article. Seems Co Bank is a lender to Ocean Spray. And they were promoting the partnership so that means Ocean Spray is good and not trying to stiff them, ha!
FC said: “Then you might only have 100 left to explore now days as real candidates for purchase. ”
FC, I am thinking the universe might be larger than 100. I count 838 preferreds/babys that are currently paying their dividends/interest. I show 96 that are NOT currently paying. Not that it is for everybody, but the big winner of the week has to be HOVNP which announced they were restarting the dividend. It has been suspended since 2007 and as Grid pointed out is NOT cumulative. It jumped 36% yesterday. (Somebody(s) really smart made three massive trades (19k, 61k, 144k) on Tuesday, ONE day before HOVN announced the reinstatement.)
Bond buyers are fond of saying “there is no such thing as a bad bond, only bad prices” which is somewhat pertinent here. Out of the 934 issues I mentioned, at some price most of them are buyable. There was one of the new high yield junkish $25 ipos recently that I said I might buy for one year of dividends ~$2.00. I do NOT have an open order, but I would buy it for $2.00.
Point being there might be a few more fish in the ocean worth catching. . .
Tex, If I understood correctly, I think FC was directing in terms of old US ute type preferreds, as that is what Theo was inferring interest in. But you are correct there are a bunch of them out there. And also in your totals there are a bunch of 5 letter Canadian utility and pipers that are in OTC land that are certainly high quality type issues too one could consider.
You are so right about price points. I just dont have the nerve on them and I have seen some big gains that could be had. But my luck would lead me to a loser that heads further south, ha!
You say somebody was really smart to sell big one day early. And I say it smells like insider trading.
Tex,
I was thinking of the more obscure stuff. Everyone knows about BAC preferred but few know about BACRP. Maybe people know about HE (Hawaiin Electric) but can they make heads or tails of their oddball preferred outstanding? Etc..
Also if you use the OTC screener, select all markets except expert/grey, US issues, and preferred you only get 154 securities now. With so many being non payers, garbage, etc.. that 154 might become only 60ish.
So now head over to the major exchanges and you get the BANFP, C.N, GJH, MER.K, etc… trusted preferred/synthetic/whatever leftovers from the old days when they were popular. Can’t be many of them left that I recall.
Now toss in uncallable and broken converts. SOCGP, SBNCM/N, RLJ.A, NYCB.U, WFC-L, BAC-L, etc… not many of those around.
Which leaves us with pretty main stream stuff that is pretty easy to lookup or relatively new. I really do not follow Canadian or (correct me if I am wrong please) preferred that issue a K-1 like ETP-C.
The only reason I could ever become somewhat proficient in this “crap” so quickly is due websites like this. Even people who give paid advice on fixed income know little to nothing about this realm. So in summary… I really think the world of odd stuff has shrunk due to the SEC rules pulling in approx 10ish good odd balls which was a significant percentage of the fun. SLMNP, DMRRP, OCESP, BANGN, MSSEL, CTPPO, KTBA, etc…
Man, that’s all you have to know?????????? Heck I might consider retiring my dart throwing monkey now knowing this is all that simple…………ha
Google will spoon feed most of the stuff he is looking at, 2WR. Now those old railroad preferreds were a bit more work. And really that wasnt needed. All you needed to know was CSX paid it. And google CSX credit rating, and then you buy if the price was right. And really none of that is needed with utes. As long as you google the credit rating and see it high quality, the research can end there. The rest is just detailed amusement.
Inverse condemnation in CA is an issue that one has to wrestle with. But presently EIX just raised common divi 6% yesterday, so I assume they are fine today anyways…Useless trivia, did you know Alabama Power preferreds are also subject to inverse condemnation laws? Somehow I just cant envision a $30 billion dollar forest fire gone wrong in Alabama though….But they have nuke I think!
Grid – I’m sure you realize that what I was saying was intended to be a back door way of complimenting what you do…… Just like most people who have God given talent, you feel like what you do is pretty easy stuff…… Most people, no matter how much educating they receive, will not be able to replicate the effort you put in to understand in advance what you own and mentally compile it into a mound of usable data to act upon. To this day, I’m gob smacked your talent and expertise is self taught and you were never in “the business.” So glad you take the time to share it with us all on III.
Thank you for the kind words, 2WR, but it that 10 year ever jumps quickly over 2%, I aint gonna feel so smart then! The market interests me but its all relative I guess. One of my golfing friends has a wife who retired from a major brokerage 2-3 years ago after a long career as a financial advisor.
He never handled the money at all, but I asked him what investments she is doing now. He said she doesnt know, as she has someone else handle their money as she is done with it! So maybe if I had “been in the biz” I wouldnt enjoy it.
You bring up a good general point I’ve been meaning to ask of all contributing III’ers. Now that we’re presently in an over 6% inflation rate environment, how are you going to approach your participation in the field of preferreds and baby bonds? When you look at yields as they are in the primary and secondary markets right now, unless you are willing/able to accept moving down the ladder in credit quality or are willing to accept high duration risk, OR have the talent and will to be an active flipper ala Grid capable of juicing yields thru active trading, all that’s available in our areas of normal concentration is an ability to lock in rates that will not even keep up with inflation. So do you look to abandon this field? Diversify more into other areas such as stocks or alternative investments such as real estate? Buy a bigger mattress for cash stuffing purposes? What’s your best laid plan for 2022?? It’s an open ended question with no right or wrong answer – jus’ wonderin’…….
To me for more conservative investors looking for income, before one should buy anything or even pick their nose, one should fully fund yours and wife’s Ibonds this month and reload max again in January. If you have trusts you can load those also. I told my best friend about these in October, and between himself, his wife, children and dad (who is an old farmer, and its basically my friends money now anyways), he will be able to stick $120,000 in Ibonds presently drawing 7.12% within 3 short months. And he can do 10k more in paper Ibonds next year if he chooses to. Plus the bastard got away with over paying 10k and just got a warning, so he could have $140k in IBonds by April. I got screwed and got mine refunded, lol.
As far as owning preferreds and giving a wink to capital preservation, current economic environment lends the “safer” issues to more call anchored, higher market yielder, past call issues. There are several that are over 7% and in solid economic standing. Take BRG-B (BRG just declared the preferreds next divi in short order yesterday) issues like these that are bought under next divi price. A bad common stock outfit, due to their structural set up but I lose no sleep getting paid my divi from them anyways.
Throw in some term dated issues, adjustables, floaters and resets, and some old safe lower yielders as anchor and thats there I am. When ever I make trades, I try to be mindful of all of above and dont get all my weight on any one side of the ship. I also like to own a lot that dont trade in sympathy with daily market moves either.
BTW, if you dont mind, stay on Somers Group ass, and make sure they keep paying our ~7.5% WTREP quarterly divi if they are not going to redeem it! 🙂
Grid – I meant to essentially say the same thing about IBonds as an add-on but just click Send before doing… We’re full up on them, including gifts given to each of 5 granddaughters and will be doubling up in January…. Don’t forget we already now have 2 months of CPI-u data already in the hopper for calculation of the next 2 months rate for IBonds and they’ve been hot, so we’re beginning to get a decent picture of what to expect come March’s adjustment.
Didn’t know you were in BRG. I’ve owned BRG-C since March ’19 and actually have a couple of flips in there to boot.. No surprise to you, what appeals to me on C is the shorter term aspect of it with the 2 percentage points increase in coupon if it remains outstanding after 2023.. That creates the “pinned to par” characteristic I like and allows me to enjoy higher returns until they figure out it’s time to call them. I should be paying closer attention to its market price though, because I don’t expect these to last until 2023…
Only problem wiht ibonds is treaduriesdirect is bureacratic and people report hassles withdrawing money. But for that amount it’s worth the hassle.
New pinned to par MYMTM went under stripped par Friday. So did BW-A tho it’s more shakey. CIM-A not called yet. That’s most of my sweeps account.
Martin, I owned them for several years about 10 years ago, and never had a problem with depositing or withdrawing. And I linked a couple years worth of paper Ibonds onto account without a problem. And I dont even know how to change an internet browser on a computer!
2WR, excellent point and you are very correct about BRG-C being the better call anchored play. I deliberately bought the D series thinking I would get more call length protection, being C should be called first.
2wr,
Like everything it’s relative. Even relativity is relative! (I’m going to copyright that one).
Wait. I know I do not want to end up on your list with Gb, so….
It depends on how much capital one has available for the allocation.
Ironically, the LESS capital people have, the more risk they seem to consider. Thus potentially defeating their own purpose. Of course, they would be trying to make up for TIME. Time is the great ,low risk success element. Time is related to ERA too. We have had that wind in our sails our whole lives. Luck.
I know a banker who started with Mike Milken at DBL right out of univ and always put her annual bonus into a range of treasuries. That’s it ! and an apt in NYC which is now $$.
That’s MY answer. Even a basic amount ,not lost ,can be quite well positioned, even in this market. To offset market risk , after all that got us up to this HIGH PERCH, here I am sticking with IG and up. Companies that can avoid BK, Keep paying and eventually reassert after da poop flies. It will happen. I feel those securities, even lower fixed rates will still be foundation blocks., like a heart beat and breathing.
Over the next two years: I hope to begin paring down rate resets before next four year election since I do not think rates can go WAAY up, but will trend up as an illusion of responsible governance (haha),. THAT did NOT happen after WWII and it is WORSE now, but as the Fed does rise, sell resets into that strength.
PS: I will never go back to work as an option in case my plan fails, oh hell no! (arrogance risk)
No more…….JA
2wr – I do absolutely nothing. More people have lost fortunes preparing for hedging, trading around, buying assets they do not know to prevent an event that never appears.
My strategy is simple. Keep fully invested with a target 4% income. Have 2 years of cash sitting around for personal needs. Maintain 2% of total assets in gold/silver/diamonds.
Feed my animals well and don’t forget 30min of exercise a day.
Most money I have ever made is just keep buying at the bottom when the big one comes.
Thanks for your input, Micahc… As a request, though, please be sure to let me and Elizabeth know next time when the big one comes….. ha
FATBP falling off a cliff but FAT holding steady. Any explanation?
Somebody mentioned a secondary dilution awhile back so i got out at 22 I haven’t seen the secondary yet. Is this it? and is anybody buying it?
Martin:
FAT priced a secondary offering of FATBP at $18 in late October – management obviously has little concern for preferred shareholders and likely will have no problem doing more of them.
But have not yet seen any filings for another FATBP secondary.
Has that $18 secondary been issued yet or just filed for?
Martin:
FAT issued another 1 million shares of FATBP on 10/28/21; in fact that is probably why it has quickly fallen below $18 today.
Some of the retail buyers who bought in the secondary (via Think Equity) and inexplicably did not sell at $21+ over the last month+ might be panic selling now that it has “broke” price.
I might nibble on some for a trade.
well I hesitated at $16.50 then it shot back over $18. Wild Thing.
Speaking of FATBP, can someone explain (in simple terms) the warrants that are mentioned in the prospectus? Did they stay with the initial purchasers of FATBP, separate from the preferreds, to be exercised or traded independently from the pref’s? I see there’s a FATBW trading around 5-8…I guess if you got 5 for free with a $25 (or 18??) preferred purchase, you’d feel OK selling your FATBP for well under your purchase price.
TIA
CR:
FAT initially offered 360,000 shares of FATBP at 8.25% for $25/share back in July 2020. To entice investors to pay $25, those shares underwritten by Think Equity also came with 5 warrants each to buy shares of FAT common for $5/share (FAT traded at $3/share at the time). 1.8 million more shares.
They trade separately under the FATBW ticker and are well in the money now with FAT trading for $10+. Only those who participated in the original offering from Think Equity got the warrants. The warrants don’t expire until July 2025.
Those initial 360K FATBP shares were the only ones issued with “freebie” warrants. The secondary offering of FATBP in July 2021 was done at $20/share, with no warrants, while the secondary in October 2021 was done at $18 with no warrants.
FATBP just went ex-div yesterday, but its a monthly payer so that should not drive the price down. Not news related, maybe year end selling…I’m a cautious nibbler here.
What’s going on with corr-a? Down 16%+ since ex-div in nov.
Maybe because the common is off 31% since Nov hi, and over 35% since Oct hi?
Or just craziness. I don’t follow it.
Hi,
I am new to this site but I own many preferreds. I don’t know if this topic has been discussed: My question: ( is) there a way to know when purchasing a specific prerferred that every time you receive a dividend the value of the share goes down. I would love to know upfront so I would not purchase one of these clunkers.
The price gradually rises to reflect the accumulated dividend, then falls back on the ex-dividend date. Whoever owns it at the start of ex-dividend day gets the dividend on the pay date some time later. They’re not like bonds where you adjust for the accumulated dividend in a transaction.
The situation I am asking about is different. I purchased Fortress(FTAI.A) for $25.00, my broker statement now says I purchased it for $20.86. What the company is doing is paying me dividends out of my own money. Also, I show a gain of 21% because the preferred is worth $25.26. If I sold the share I would pay capital gains. I can give you at least 4 more examples of this issue.
Sounds like dividends may have been declared Return of Capital. Which means they weren’t paid from earnings they were paid from equity. You weren’t taxed on them but your cost basis was reduced accordingly. When you sell your total taxable amount should be the same just maybe not in the year you wanted it taxed.
It actually may work out better because you’re paying Long Term Capital Gains instead of continuous tax on dividends taxed at the full rate.
All dividends are effectively paying you dividends out of your own money because exchanges reduce share price by the exact amount of the dividend on the ex-dividend date.
As for your broker, is it possible that the dividend in question is a return of capital and therefore they are resulting in an adjusted cost basis?
Martin g-
Maybe you meant to say whoever bought/owns it before the ex-date gets the dividend? You can actually sell it on or after the ex-date and still get the div.
I often enter a high limit order before opening. Sometimes I catch a seller who forgot to close a standing order.
Hmm. would really like to see how that works.
thx
Simple. Instead of waiting for the new price I guess and submit a higher order. If it gets executed it’s usually a good trade but there’s always the risk that you set the price too low.
It doesn’t matter if someone forgets to close a standing order because FINRA Rule 5330 (Adjustment of Orders) which requires that all open orders must be reduced by this amount of the dividend unless the dividend is:
1) less than one cent or
2) the trader marks the order “Do Not Reduce”.
well then that’s not the reason but I sometimes do get high fills on the way down at the opening of ex-div date. Whatever the reason I’ll keep bidding for them as long as it’s working.
Martin, I don’t doubt that you’re “getting high fills on the way down at the opening of ex-div date” but I suspect that’s a function of the resumption of trading and finding counter parties who are willing to pay a little more than the discounted ex-div price.
Martin G – You must own the stock before the ex-dividend date to be eligible for the dividend.
John – You say you can give more examples of what’s been happening – my question is are they all issued by partnerships or similar companies set up to be treated as a partnership for Federal income taxes? I generally avoid these issues so am not overly familiar with them as a class, but as with so many questionmarks one might have on any particular issue, the place to go for answers is the prospectus… I’m not sure whether the language is essentially boilerplate for all entities treated as partnerships, but your prospectus does tell you the following on p S-33 under United States Federal Income Tax Considerations: [note paragraph 2 in particular]
“Treatment of Distributions on the Shares
“As a partnership for U.S. federal income tax purposes, we are not a taxable entity and incur no U.S. Federal income tax liability. We intend to treat distributions on the shares as guaranteed payments for the use of capital that will generally be taxable to the holders of the shares as ordinary income and will be deductible by us. Although a holder of the shares will recognize taxable income from the accrual of such a guaranteed payment (even in the absence of a contemporaneous cash distribution), the partnership anticipates accruing and making the guaranteed payment distributions quarterly. Except in the case of any loss recognized in connection with our liquidation, the holders of the shares are generally not anticipated to share in the partnership’s items of income, gain, loss or deduction, nor do we intend to allocate any share of the partnership’s nonrecourse liabilities to such holders.
“If the distributions to the shares are not respected as guaranteed payments for the use of capital, holders of the shares may be treated as receiving an allocable share of gross income from the partnership equal to their cash distributions, to the extent the partnership has sufficient gross income to make such allocations of gross income. In the event there is not sufficient gross income to match such distributions, the distributions to the shares may reduce the capital accounts of the shares, requiring a subsequent allocation of income or gain to the shares until such deficit is eliminated. In such circumstance, the gross income allocated to U.S. holders of the shares during a taxable year would exceed the distributions accrued to such shares during such taxable year.”
I suspect that is what’s been happening….. You might check the prospectuses on your other examples to see if you see similar language… If you do, maybe that’s the key to putting yourself into position to avoid “these
clunkers.”
Yes, you are correct all of these preferreds are partnerships. Now my issue is whether to keep them /continue with them, any suggestions
THX
Your choice. Their complexity can be annoying. But like I said you might end up paying less tax in the long run you’re just paying it all at once.
John – as a K-1 avoider personally, I’m not one to suggest an answer to the hold or fold question…….
this is a fairly common feature of active business partnerships. It isn’t return of capital per se, but works similarly. The weird thing about partnerships is the income and basis calculations are almost completely separate.
take a look at your last K-1. Your ending capital account balance divided by your share quantity should give a rough estimate of your current cost basis.
Anyone—how does one save settings on the OTC market screener? I bookmarked the site, but when I click on the bookmark link, my settings have not been saved and I have to start all over again. Thanks.
Randy Eyler
After you create your result, click on ‘download data’ in the upper right hand corner of the main page. You can save the screen, etc. Hope that gets you what you want.
howard
Between 2009-2010 and beyond; you had high quality investment grade bonds regardless of duration with 5% or > coupons consistently making higher highs and so forth i.e. from Walmart to Cisco to JNJ etc.
I distinctly recall at the peak even several years down the road or at that time the peak; there were long term high coupon bonds trading 20% over par. All of these are obviously long gone now but there are a few non-callables that went on to trade nearly 40% over par.
Where I’m going with this is now the pendulum will ultimately and perhaps finally start swinging the other direction; and we are seeing now with certain issues trading at par that were 10-20% higher for an extended amount of time.
Has anyone really crunched data and numbers to extrapolate out, say 5 or 10 years from now, for an investment grade perpetual — good example is that JPM 4.2%. What does price per share really look like?
All over the web you keep reading verbiage about how all these perpetuals will get crushed and price tank etc. But it’s important to actually quantify this. I just want to start building some tactical cash because what’s the point of putting new money to work today if PPS can lose 10% in 12-18 months from now…….
I think it is safe to say there is nothing in your post that most of us have not thought about over the past year.
I have a shopping list if IG issues to build an annuity of sorts, JPM.M/ USB.Q
but interest rates rising will give them a spanking. So I’m on hold.
For the time being I have moved up the risk ladder to at least make something on my money PSEC.A for example and looking at some BDC.
5 years from now the IG issues of today will be lower but the IG issues 5 years from now will have a higher coupon
10 years from now there could be a recession and the Fed will cut rates and everyone will be buying the IG issues from 5 and 10 years before.
Being an income investor for me has become a life style. If it is fixed you cant do anything about it. I can watch the stock market all day as i used to but income investing is boring and things dont change much. Allows me to worry about other things like keeping the ball on the fairway. So maybe it’s best to build the cash for the next year who knows but for the next month its best for me to enjoy whiskey and time with family.
Theta; Let me give you some “perspective” on your comments of “Investment Grade Bonds”. I’ve been at this old game for a thousand years now. Let me give you some “real world” examples of bonds I bought right at PAR when they were issued. Berkshire Hathaway 5.75% of 1/2040=Price $141.31. Goldman Sachs 6.75% of 10/2037=Price $142.22. Walmart 6.5% of 8/2037=Price $152.41. Target 6.5% of 10/2037=Price $150.80. Verizon 6.55% of 9/2043=Price $154.37. As you can see I’ve been at this game a Long Long Time. Now, these are BONDS not PREFERREDS, BUT I think you get my point which is there is NO YIELD TO BE HAD RIGHT NOW. I have had to look long and hard to find ANYTHING of decent value. Thank God, my bonds are either NON-CALLABLE or MAKE WHOLE CALL which makes it very expensive for the company to take them away from you. I get tender offers every other day from the companies wanting to buy my bonds back. I say are you kidding me????? LOL. Just got one a few days ago from Kraft Heinz. Let me finish by saying I guess it depends upon your criteria of what you consider a GOOD VALUE but my humble opinion is that Its Going to Still Be Quite a While before we see things that will truly get us excited. If we do I would say you should rethink things if you are a flipper (Iam not one) as if something really good should come along I will be a buyer for my SOCK DRAWER as Tim would say.
Chuck:
Thank you for that informative view from the investment grade bond trenches.
Going forward, I guess it all depends on the time period that ends up defining “Quite a While” in your statement:
“but my humble opinion is that Its Going to Still Be Quite a While before we see things that will truly get us excited.”
Skyrocketing residential rental rates really have not hit the CPI numbers yet, as they tend to lag by 6-12 months. We are likely entering an inflation period that has not been seen since the 1980s. The Fed’s “easy money policy on steroids” is being reversed, so it will be very satisfying to FINALLY see bond market participants primarily decide where interest rates should be.
Hope everyone has cash reserves to pounce on the opportunities that will arise.
Tim,
I am not sure if it is my computer or your system but am not seeing any comments on Reader Initiated Alerts since 11/29. I know I posted something since.
Revert, above the 11/29 comment look for the “newer comments” line and tap it . It will then bring you to the most recent comments.
Leslie Joy
Did you click on NEWER COMMENTS on top left after accessing the section ? All the new comments will then appear on top by date.
Otherwise, try clearing your browser cache, history, etc. or try using another browser. I am using Firefox and can access all areas of this site.
Let us know what worked.
Howard
ACR/PRC is getting hammered this morning. Just picked up a couple of hundred more for 25.22.
Maybe ex date came a few days early? Don’t see it tho.
GUT, GGZ and GDV – On Nov 17 Gabelli had this announcement on GUT saying “The Board of Trustees of The Gabelli Utility Trust (NYSE:GUT) (the “Fund”) authorized the redemption of all outstanding 5.625% Series A Cumulative Preferred Shares (the “Series A Preferred Shares’). The redemption date will be announced at a later date. The redemption price is $25.00 per Series A Preferred Share, plus an amount equal to any accumulated and unpaid dividends to the redemption date.” On the same day they made the same announcement for GDV-G and GGZ-A. To date, there’s been no further clarification.. GDV-G and GGZ-A seem to be trading with fear of call in mind, but GUT-A , which immediately fell to the 25.25 range after the announcement, is now consistently trading around 26.50-27.00 range…. That range of price on GUT-A is a clear cut sell imho on GUT-A. 27’s almost a year and half of dividend payments.
This seems an odd way to handle a call by Gabelli… I’ve seen guys like PRIF announce a range of days that a preferred would be called, but I can’t recall another outfit announcing a call on their issues that says we’ll tell you when later when the call date is….. this differs from saying in Use Of Proceeds on a new issue that they’ll use the funds to eventually call another issue.
I bailed out of GDV-G when they made such an annoncement. More than 2 months ago and it’s still accumulating dividends. Still have a little GGZ-A looking for a good exit price. Rather have a smaller long term loss than a taxable dividend.
Oh No! Guess who from SA has joined the IBond bandwagon???
Let me guess….The idiot a couple weeks ago who stated TIPs were a better deal than IBonds. And then after being humiliated (again, its daily, so he loves the humiliation and chronic market underperformance) he reverses course and suddenly likes them without admitting he was the village idiot again…
Grid:
On a different note, was that you that snagged another 100 shares of IPWLP yesterday near the close at $95.01? I was “pennied” and ended up with nada.
Bid today is $97.50. Very frustrating.
No Im just dabbling there. There is no guarantee when or if those are redeemed. Its worded as such that its possible the only thing in their cross hairs is IPWLK.
I think they preferred this previous tender in 1990s when yields were high and they low balled tender which most took, thus why the floats are now roached out.
4% Series of Preferred, at a purchase price of $71.38 per share, net to
the seller in cash;
4.20% Series of Preferred, at a purchase price of $77.72 per share, net to
the seller in cash;
4.60% Series of Preferred, at a purchase price of $85.12 per share, net to
the seller in cash;
4.80% Series of Preferred, at a purchase price of $88.82 per share, net to
the seller in cash;
6% Series of Preferred, at a purchase price of $103.00 per share, net to
the seller in cash
Rob, Did you see a 1000 share block of IPWLP went by the board a half hour before close at $100? That was over 2% of the float dumped in one transaction. AES Indiana has been given permission also to buy any shares out in the market the document said. I dont know if they have any designs to do so though.
Grid:
Thanks for the heads-up. Would not be surprised if that is AES buying back shares at $100 that are redeemable at $118.
That was the largest volume trade since August, but I guess it could just be a big-fish retail investor investing $100K to reach for the upcoming $1 dividend.
On a different note, just saw a block of 192,000 PW+A trade at $25 – bid is already back at $26.26. This issue only has 337,000 shares outstanding!
Someone just did very well. Safe to say the largest holder just got out.
Companies can’t just go into the market and buy their own securities. The board would have to authorize and announce a repurchase plan first.
2WR:
Of course! My guess is that group gets many of their initial ideas from this website, while subscribers bizarrely continue to pay them a pretty penny to do so.
https://seekingalpha.com/article/4473867-safest-7-percent-yield-government-guaranteed-park-your-cash
And not surprisingly, there’s not a single mention of the actual 3.56% rate being received for 6 months implying that’s what you’ll get for 12…. Only mention is of the 7.12% rate received for 6 months… you wouldn’t want to ruin the sizzle by stating the facts more factually, would you….
Grid – did he really recently state he thought TIPS were a better deal than IBonds???? doesn’t surprise me…… alright, ’nuff said I guess…….
Yes, me and a couple others had to straighten him out. Then we started making fun of him and they all got deleted. But the pack of wolves had fun chewing on his leg while it lasted.
I’m not even allowed to post positive comments there so more power to you…. and of course, it’s the SA editors who are doing that to me, not them even though I can post elsewhere….
Ya gotta try bulk volume, 2WR… 90% of mine get blocked, but the 10% that get by the occasional lazy moderator are worth my time. As it makes them read them, get ticked off and then call the moderator, ha.
Rob in Vegas–have noticed that many times items pop up on SA after either I write–or folks chat a bunch on a given topic. Years ago a couple of them would steal my lists and use them in there articles–which I didn’t mind except it would be common courtesy to ask first–after I called them on it they stopped using them.
They say imitation is the sincerest form of flattery.
Rob in Vegas
Thanks for the link. I posted a question over on SA but doubt I will get a correct response so I am going to ask it here. Concerning I-bonds, do you get a 1099-INT every year or just when you cash out? I have a business with a EIN but I file taxes for it using my SS. I would like to get another 10K bought through the biz but I don’t want to have to file a separate return for it every year if it gets a 1099 each tax year.
You dont receive anything until you sell. They technically mature in 30 years if you hold though and would get one then. They also are state income tax exempt when selling if applicable.
Grid, thanks for the answer.
Over at Treasury Direct I have an individual account limited to purchase 10K per year. I can set up an account for my business (a sole proprietorship) under a EIN or SS. If I set up with a EIN I am pretty sure I cay buy another 10K per year. If I set up the biz with my SS will I be limited to 10K between both accounts (individual and business)?
Good question. All I can say is people I have read contributed in their own name and their revokable trusts with their same SS number and it has been fine. Let me check in a bit and see if I see anything.
35, If this info is correct your SSN doesnt appear to matter in terms of using twice to purchase 20k.
Harry, enjoyed your article very much. I am a sole proprietor and I learned, after reading your article and following the links, TD allows an entity account for a sole proprietorship. It appears that I could open another account for the business and potentially purchase another $10k per year. Does that sound correct to you, and if the business is dissolved, I assume there would be some kind of form to transfer them or redeem them? Do you have any tips for this situation?
REPLY
Harry Sit says
JUNE 16, 2021 AT 6:29 AM
Yes, a sole proprietor account is another type of entity account. As the business owner, you should dispose of the business’s assets before dissolving the business. You can either sell the assets for cash and distribute the cash or distribute the assets in-kind. If you don’t want to sell the bonds in the sole proprietor account, use FS Form 5511 to transfer them to your personal account.
The above was lifted from this article. If you havent seen it, you may want to read it and the comments below it.
https://thefinancebuff.com/buy-more-i-bonds-treasury-direct-trust.html
Grid, I read the article and posted my question there as well. The author is still responding to questions as of 12/06/21. It is still not clear to me but I have seen enough to believe a trust can use the same SS. So I guess the logic is any entity account has it’s separate 10K limit while using the same SS as one’s individual account.
For anyone interested, I was able to open and fund an entity account at Treasury direct using my Social for the business tax ID.
Thinking of buying a few shares off GPMT-A. I think I may have too many financials already, but this one looks solid at 7% just a bit above $25. The FF rate can’t go below 7% and could possibly be higher with a few interest rate hikes by the Fed. Any thoughts ?
Hi Bill S,
I like GPMT-A. 7% floor is gold these days. I subscribe to the Kamakura Risk Information Service (KRIS). Google it for more info. KRIS rates GPMT at BB- with a solid credit risk of 1.18% 1 year and 1.91% 5 year probability of Bankruptcy.
For comparison, ABR is rated BB+ with a 0.51% 1 year and 1.73% 5 year.
Both have dividends which serve to protect the Preferred distribution.
I suggest you look at both and see if you feel the extra risk with GPMT is justified by the roughly 75 basis point higher yield.
FWIW, I own both. Hope this helps.
Gary H
Gary
I’m also long GPMT-A and like that 7% floor.
I was wondering if KRIS has a ranking for New Residential (NRZ) as I’m recently long NRZ-D.
Thanks in advance.
NRZ-D my largest holding. Moving around NRZ- preferreds and it’s all in D now priced better than the others at the moment. The reset rate in 5 years not much lower than GPMT-A’s 7% floor. I bought some GPMT-A new issue but I don’t think it’s one of he best.
Also liking CIM-B a few cents above stripped par. and CIM-A until they decide to call it.
Martin G
I have a small position in CIM-A as well.
I like the pin to par issues in our current environment.
Hi Greg,
KRIS provides credit risk info for all publicly traded companies globally.
NRZ is rated BBB- and has a 1.51% one year and 5 year 2.32% probability of BK.
I currently hold the D shares.
Have a good day.
Gary H
Gary Hargreaves: Thanks for the info on KRIS, I will check that out.
I have looked at ABR-D a couple times recently as well as GPMT-A. I will see what the market does tomorrow. I was thinking of buying GPMT-A but only 200 shares. I will probably get 100 of ABR-D and 100 of GPMT-A and spread the love around 🙂 Thanks !
Too many financials?
Like a bank financial?
Granite is a REIT, so it definitely is not a financial.
Granite Point Mortgage is a real estate finance company focusing on originating, managing and investing in commercial mortgage loans. ….Its definitely a financial business, its just chosen to be taxed as a reit,
“Granite is a REIT, so it definitely is not a financial.”
REITs are a type of financial. Until about 10 years ago, REITs were part of the financial index XLF. Then they spun off REITs into XLRE.
Gary,
What does a subscription to KRIS cost you.
THX
John,
I paid $1,000 at my last annual renewal in March 2021. I would suggest you try the SA Corporate Bond Investor free trial and work with Don van Deventer to get more details on a free trial with KRIS as well. Feel free to reach out to me offline as well at gary.w.hargreaves@gmail.com.
Gary H
FYI to Tim et al – I have no business ties to SA or Kamakura on these services. Just a PSA for those with an interest. If I have broken any rules please delete this post. Thanks
Gary, speaking personally I appreciate the transparency.
Does anyone here own HMLP-A? I’m trying to figure out why I’m seeing this drop. I can understand why it dropped to about $20 when the company lowered its common dividend to 1 cent. But now there’s been a buyout offer and the preferred is dropping again. Probably I’m missing something but the new company, if the buyout goes through, assumes liability for the preferred shares, Yes?. These are cumulative and not callable until 10/2022. Shipping is so volatile, I only invest in the preferreds but sometimes even the preferreds can give ulcers. Does anyone have an opinion on this? I’m not seeing it as a chance to add more as I already have a 1% position which has given me more than 1% of my angst.
I found this note on an SA article:
Here is another important clause: “Unless we have received the affirmative vote or consent of the holders of at least two-thirds of the outstanding Series A Preferred Units, voting as a single class, we may not adopt any amendment to our partnership agreement that would have a material adverse effect on the existing terms of the Series A Preferred Units.”
But caveat, I have not read the prospectus myself.
Good afternoon, I am reposting my question from last Friday, appreciate feedback from others with more knowledge and experience. Thanks
Good afternoon and Happy Friday to all,
I have a large position in TGP-B 8.5% not callable until 2027 and then floats at 3 month Libor (probably SOFR by then) plus 6.241% .
As you probably saw, TGP is being taken PRIVATE by Stonepeak. The B shares plummeted with the merger announcement but have recovered. Trading above $26.50, current price is $26.22. The merger announcement stated that the A and B shares are EXPECTED to remain outstanding and continue to trade on the NYSE after completion of the merger. FWIW I did speak with their Investor Relations and they assured me the B shares will not be affected by the merger.
My understanding is that Stonepeak can stop paying the distributions as they please with no real negative affect to them other than a negative view within the Lending / Capital market community.
I wanted to share this information and get Tim and others view on this Preferred. All thoughts appreciated.
Gary H
You’re thinking they could stop the div without stopping the common div ? Or stop both?
Hmm….
Gary,
There will be no common after the merger.
No answer could mean nobody knows what will become of the delisting nightmare scenario. I have enough annoying private issues now so I sold TGP-A just because.
The new SEC rules changes things. But historically delisting didnt really mean anything if a new OTC ticker is assigned, All Ameren and Eversource Fortune 500 company preferreds are delisted and trade fine on OTC. So delisting in itself isnt bad unless to a private non disclosing company….Now deregistered can be whole different ball of wax. For example WTREP is deregistered. So they are untradeable and essentially a private placed issue.
Thanks Gridbird,
IF they delist and stop distributions what happens to investors holding the B shares ?
Will the accumulated distributions and par value be paid on the CALL date 10/15/27 or can they let them ride as perpetual indefinitely ?
What “penalty” is there to Stonepeak if they do these things ?
Thanks
They get screwed, that’s what happens. The “penalty” is bad investor relations which may mean nobody wants to make future investments in them. But not always. Brookfield abandoned ALIN investors legally stopping the dividend payments and their stockholders praised them for a wise business decision.
Gary, Martin summarized it, IF that base case occurs. It just stays stranded and if it goes to the expert market it just goes lower… Case in point today…CTGSP I see just sold shares for over 11% yield. This is an investment grade utility preferred that hasnt missed a payment in well over 100 years! The payment is safe and will continue, but the SEC screwed the owner of any value here when they sold here.
Now just because an issue delists and is deregistered does not change the terms of issues and most still carry on paying. But… Companies with some financial stress are better served to suspend payment for a year, choke them off and then become the “savior” by offering a tender to buy for 50 cents on the dollar or so. I have a couple delisted and or deregistered preferreds, but I dont want to make a living off it. Remember Directors are always looking after the common shares (or bottom line if private), debt issues typically have stronger covenants. Nobody really looks after the preferred holders much. They redeem you when they can and it benefits them. And they suspend you when things are tough. There is one builder outfit that has suspended their preferred for around 10 years and its way below par, and last I looked a while back the common stock price was near $100!
Girdbird,
Thanks for confirming my fears (you too Martin).
I have enjoyed the great cash flow from these since they were issued in 2017.
Hate to see it go but cannot risk the PE issues.
Cheers
Gary H
Does anyone have an opinion abut ECF-A? This is a CEF managed by Gabelli. Thanks
Gabelli preferreds are solid. Problem here is you’re looking at no gain if they call it next year. Historically Gabelli has been slow to call issues though they are calling a couple now as low as 5.2%. So you have call risk on on side and possibly interest rate risk on the other side in exchange for the dividend.
Looks like Rida’s sell of QRTEP is actually looking pretty good.
A minus 2.00 dollar ex div date on 11/29 will make it seem more correct at first blush. Plus their cash going down and rewarding common seems normal to me plus they are wrapping up their busiest quarter.
Yes.. if you sold before ex-div and bought back now you are in better shape but will Rida say buy back now or recommend some other turd? I am still holding and expect the preferred to recover over the next 30 days.
WSJ reports today that Fed increasingly likely to raise rates next year 1/4 point more than once (likely twice). So for those of you who have been investing in preferreds a long time through various cycles, which preferreds to you think will be crushed by this and which will not lose too much value? I would expect issues under 5% to get hit but do you think they will go under par (banks,,etc) with a 1/2 point interest raise next year? Excluding the more risky 8-9% issues, what are your thoughts on 5%+ – 6%+ issues. And also are perpetuals with a first redeem rate of 2022 and 2023 more likely to be hit harder (w/the 5-6% coupons) than perpetuals with first call of 2025 and later. I know this is a broad question but having learned much from this site I’m eager to hear what the long-time investors here think of this scenario.
Its a tough question to ask. Just raising short end some dont necessarily mean anything. If market determines its aggressive, it could be a positive and anchor the long end. If economy sputters and short end rises that could invert the curve. Tapering could also cause long end to rise though.
Or rates do nothing but market goes “risk off” and credit spreads widen and perpetuals could drop that way. Or just HY spread widens while IG doesnt which could hurt the riskier ones and the quality remains solid.. Or vice versa…
This is why nobody knows nothing and why things tend to happen few were expecting. So it becomes a risk management question and what part of your backside you want protected as best as possible. Logic dictates though, that recent HQ perpetuals issued at record low yields and total junk companies sneaking in preferreds that have no business being sold to income seekers are the ones most exposed though. But the market tends to take its own path no matter how much we try to trench the path for it to take.
Personally if you are looking at lower yielding high quality issues, I wouldnt buy anything until you filled up your Ibond quotient this year and in January.
Thanks Grid. I knew I knew nothing, and you just proved it, LOL. Seriously though, that does help a lot and I am filling up on the Ibonds, which i learned about from you and others on this stie.
Franklin, there is an underlying assumption to your question that has not held true in recent years. The assumption is that preferreds/babys will react in predictable fashions if/when interest rates move around. And yes, this is how I think of them and model them. You build a model that says if interest rates do X, credit spread do Y, inflation, and general company specifics do Z, then the preferred will trade at this price.
Much as I wish and hope that it would work that way, it has been a failed approach to a certain extent. Most recently in the March 2020 Covid meltdown, broadly speaking all preferreds took a big hit. Grid’s issues were the big winners as many of them literally had no trades during the sell off. So on paper they were flat to mildly down while more liquid issues were way off. There were differences but many high quality issues with low default probabilities were also crushed. And from a modelling standpoint, it broke the models! Stated differently, everything got sold.
Since the Covid crash, many of the issues have fully recovered and then some. A few of them remain down or worse, BK, like those in hospitality and shopping malls. The Covid crash happened in the blink of an eye, as opposed to some long drawn out, multiyear change in interest rates/inflation for example
As an investor, you get to decide which scenario to plan for: the helter-skelter markets of tamper-tantrum/Covid or rational slowly changing economic fundamentals. How you answer that question will go a long way towards helping decide where to allocate your funds.
Franklin -There’s no way to know if preferreds will be hit hard or not by rate increases. It’s not so much about the facts as much as it is about the perception of the facts. For example, in late 2018, investment grade issues were down 10-20-30% when the yield curve inverted yield curve and the fear that was presaging a recession. It was a massive overreaction which isn’t an uncommon event.
In general, the low yielders take a larger hit and IMHO, they’re good candidates for shorting. Just make sure to stay away from the ones with high borrow rates and avoid being short on the ex-div date since in that case you’ll pay out the dividend as PIL.
Good afternoon and Happy Friday to all,
I have a large position in TGP-B 8.5% not callable until 2027 and then floats at 3 month Libor (probably SOFR by then) plus 6.241% .
As you probably saw, TGP is being taken PRIVATE by Stonepeak. The B shares plummeted with the merger announcement but have recovered. Trading above $26.50, current price is $26.22. The merger announcement stated that the A and B shares are EXPECTED to remain outstanding and continue to trade on the NYSE after completion of the merger. FWIW I did speak with their Investor Relations and they assured me the B shares will not be affected by the merger.
My understanding is that Stonepeak can stop paying the distributions as they please with no real negative affect to them other than a negative view within the Lending / Capital market community.
I wanted to share this information and get Tim and others view on this Preferred. All thoughts appreciated.
Gary H
Definitely of interest- I hope they don’t intend to let it go to the dark side. Guess it depends on keeping it NYS vs OTC, or at least up-to-dat on reports.
thx
“The Series A and B preferred units of Teekay LNG are expected to remain outstanding and continue to trade on the New York Stock Exchange following the completion of the Transaction.”
https://seekingalpha.com/pr/18497681-stonepeak-to-acquire-teekay-lng-in-6_2-billion-transaction
Feeling better. Have to wonder why people jumped ship ? pun not intended
Gary,
People dumped it initially – down to $25.03 from $27.33 but it has recovered to above $26 consistently but I continue to see negative comments on PE taking over Preferreds and stopping the payments and even delisting the stock. That is my concer.
Thanks
Gary H
I had bought on the downturn but have sold. I got burned by ALIN-E when Brookfield took TOO private. Burn me once…
G H-
PE?
Might be worth a few steak dinners. . .
Everyone knows that the current tax law lets you claim up to $10,000 for real estate and sales tax if you itemize deductions. This is called the SALT deduction. If and it is a big if, the Build Back Better plan becomes law, it MIGHT either eliminate the $10k cap or raise it to $80k. Both changes have been proposed but they are controversial because they mostly benefit high income people in high tax states, primarily California, New York and New Jersey.
The recommendation is that you make sure you do NOT pay your real estate taxes that go beyond the $10k in 2021. If they do pass BBB and it raises the limit, your real estate tax payment on January 1, 2022 might be a lot more valuable than one made on December 31, 2021. The only way you lose would be if you defer the tax payment until 2022 and you itemize and you did not use up your $10k SALT and they do NOT change the tax law and your state does not charge a penalty for paying the taxes in January. (California for example charges a penalty if you pay after December 10th.) Lots of booleans in that one. . . Obviously you have to run your own numbers to see if this makes any difference.
Is the tax deduction limit of $10,000 also include interest deduction as well?
SALT is just state and local taxes; property tax, sales tax, income and capital gains tax, and excise taxes.
The SALT tax limits impacts more middle class families than people realize. A large majority of homes in Boston and Massachusetts are impacted. So people now have to take the standard deduction.
But the real issue with SALT is the damage its done to charities. With more people using the standard deduction, the charitable gifting is no longer deductible. Fed govt did some corrections here with the 2021 $300 charity deduction over and above standard deduction.
Tim, when time permits, could you please add AFINO to the Master list?
Thanks!
Thanks furcal will get it.
furcal–checked and it seems to be in everywhere. ??
Tim, argh, my mistake, sorry. I was looking at AFSIN, followed by AFSIP, with no “O”
when I needed to be looking a few lines up. I was wearing glasses at the time, but no one was around to tell me I was doing it wrong.
No problem furcal–you’re normally correct.
Would love to draw on the collective wisdom here to enlighten me on this situation: ATLC is 7.63%, call protected until 2026 and trading under par. Yet other lower coupon issues, say T-A, are trading far above par. T-A, 5% coupon, protected until 2024 trading for 25.98. This doesn’t strike me as a quality problem as ATLC parent company seems to be in good shape. Thoughts? Thanks in advance. (disclosure: I own ATLC, sold T-A a little bit ago near 27.)
I too bought back some ATLCP when I it trading below par and re-confirmed that ATLC the parent rated well at Schwab & CFRA. I too am perplexed and would love to hear any rational explanations or even rumor / conspiracy theories on the why!
I keep thinking – if it seems too good to be true may be it isn’t (and I may be the chump holding the bag!)
mSquare:
ATLC is still a small-cap company. Common shares were trading as low as $5/share 18 months ago. Balance sheet is so-so. $1 Billion market cap and $1 Billion of debt.
It is an auto lender and personal credit lender. This is not exactly BofA.
I own the preferred, but hope to eventually switch over into the baby bonds.
Simply FYI – the ICE Exchange-Listed Preferred & Hybrid Securities Index (PHGY) constituents for the month of December, 2021 were published a couple of hours ago. (PHGY is the index followed by PFF.) Fixed income issues added to the index that I recall seeing discussed here include Atlanticus, Fossil, and Bank of the Ozarks.
https://drive.google.com/file/d/16o4yq1LmzpwrFaDC_q36xLkRTlPrOjEg/view?usp=sharing
Do you have the previous month so we can see what weightings changed?
Here you go – thought I had posted it last month, but I guess not.
November, 2021 PHGY constituents:
https://drive.google.com/file/d/1bSovD9fsK7f314ewjbIDF1L9yjPIHVM1/view?usp=sharing
October, 2021:
https://drive.google.com/file/d/1AzrTn9xfO0s-b6rQr7nLI0TpK_j_vHIK/view?usp=sharing
Here are the ICE Exchange-Listed Preferred & Hybrid Securities Index (PHGY) constituents for the month of January, 2022.
https://drive.google.com/file/d/1P-hi03nX1uxaKArMy6CUYPDEjx9XtZpq/view?usp=sharing
Thanks for sharing ESW3. I perused the list and out of my 27 only 2 are on their list. But I have certainly owned many in the past and probably the future at some point again, too.
I hate to show my ignorance but what is the significance of either being on the ICE Exchange-Listed Preferred & Hybrid Securities Index list or off it???????? Is it just knowing that these are the securities that have to be owned by funds that track the index?
2WR – may I take a stab at your question? Since the preferred ETF PFF tracks the ICE index PHGY, it can occasionally be useful to see what gets added (and especially, removed) from the ICE index. We typically see this at month end, when PFF rebalances to track PHGY:
Here are a few examples:
* PEI filed for bankruptcy 11-1-2020. PFF didn’t begin selling until November 30th (the final day of the month). It liquidated its position in $PEI.PC on November 30th, and it took until December 4, 2020 to sell off the last of $PEI.PD
* When PEI exited from its prepackaged bankruptcy in mid-December 2020, PEI preference shares were added back into $PHGY effective January 1, 2021. PFF added 351,294 shares of PEI.PC and 344,626 shares of PEI.PD on December 31, 2020, the final day of the month. (This created upward pressure on the $PEI preference shares, and a nice opportunity to exit.)
* GLOG-A was removed from the ICE index PHGY effective October 1, 2020; PFF began selling September 30th, again the final day of the month. Their selling created a nice opportunity to buy GLOG-A at a nice discount.
* Costamare was removed from the ICE index when $PFF transitioned from the old S&P U.S. Preferred Stock Index to the ICE transition index in December, 2018. As of December 31, 2018, PFF held over 600,000 CMRE-E shares; it sold down those shares in increments with the two biggest sales taking place on January 31, 2019 (-260,473 shares) and February 15, 2019 (-204,279 shares). Again a big opportunity to buy these prefs at a discount.
* Tsakos Energy Navigation, Ltd. was also removed from the ICE index when $PFF transitioned from the old S&P U.S. Preferred Stock Index to the ICE transition index in December, 2018. PFF held over 500,000 shares of both TNP.PE and TNP.PF on December 31, 2018; it sold down these shares in increments with again the two biggest sales taking place on January 31, 2020 (-186,625 and 186,218 shares, respectively) and on February 19, 2019 (-104,456 and -79,835 shares respectively).
* When LTSA was delisted effective early March 2020, it took PFF until mid-July, 2020 to finally sell off the last of its shares. LTSA shares traded as low as $6.00 / share (!!).
* GMLPF is another example of forced selling by PFF; by this time, people were anticipating the selloff, so the opportunity wasn’t as pronounced.
In short, PFF has a long history of dripping out shares into an illiquid market when the ICE index that it follows removes a position. I know others here have taken advantage of this – “like shooting fish in a barrel” was one comment I recall.
Got it, ESW…. That’s what I suspected…. So in fact, what’s probably as important or even more than what’s in the Index is awareness of what’s being added to it or subtracted from it, right???? Thanks for posting the list..
CDZI – Cadiz. (also CDZIP)
Does anybody have any info on what has happened here. CDZI issued a perpetual preferred (CDZIP) on 6/29 with an 8.875% coupon. Cadiz owns significant water rights. “The company owns 34,000 acres of private property within Mojave Trails National Monument, just north of Joshua Tree National Park. ”
They’ve been trying to get a ‘water-mining’ plan thru to monetize these rights.
Since 6/29 The CDZI stock has gone from 13.61 to 4.06 (-70%). The new preferred has dropped from 25 to 20.50 (-18%).
Does anybody have any insight as to what the precipitating (pun intended) event was? I’m thinking the water rights have real value and CDZI owns those rights, so after the huge decline this might be a bargain??? Or this a ship headed for the shoals?
It appears that the state of emergency declared in CA due to the drought will limit the amount of water CDZI can sell. You may also want to read this… https://mojaveproject.org/dispatches-item/the-trouble-with-cadiz/
Thanks Chris. Great overview article which sets context.
PPWLM – I don’t understand something. I have had a sell order in at $170 for the past few weeks. I see at least 130 shares trade above my ask price and yet not one of mine have been sold. These are held at TDA. Does anyone have any insights as to why other shares trade and yet mine sit there? Are these institutional or ‘expert’ trades that don’t go through the normal channels? I know this is not an ‘expert’ market issue, as in it’s pink – current.
Just wondering. I’ve been trying to raise money in that account for some other opportunities and it is frustrating to see these trades happen in spite of my lower ask.
OTC is not a centralized exchange, there are no protected quotations so there is no guarantee your lower ask will be executed against.
Thanks mcg, I guess I wasn’t thinking about OTC as a separate platform. I just see it in my TDA page and think of it as all the others, even though I still have to pay commissions on these.
….I continue to learn the nuances of the investing universe. And this site continues to be the most valuable place I visit in terms of knowledge …and profit …and a few lumps (which are also stick in the knowledge corner 🙂 )
Thanks Tim, and all the other great minds on here.
A follow up question… How does OTC markets decide which trades to execute? They must be able to see the bids and asks. I suppose it’s mostly computer driven these days, but still, I would think in the name of market efficiency, there would be some logic to it. I suppose mine would just show up as x# of shares available from TDA at x price? There would be other bids / asks from other brokerages? Would OTC markets have any incentive to favor some brokerages over another? Would there be any reason that they would be trying to match #’s of shares? Someone has 50 to sell and someone else wants 50, so those 2 are paired? Is there any incentive to not do partial fills? I guess I really have no idea how the back end of any of these platforms actually works.
OTC markets isn’t an exchange (literally stands for over the counter) it is not centralized, consists of various market makers who may or may not see bids from each corresponding counterparty. So when your broker routes your order to the market, they send it to the best offer THEY see which may or may not be the actual best offer out there.
Over 41 Active OTC broker dealers.
https://www.otcmarkets.com/market-activity/broker-dealer-data
Help me out here. I see $ volume about $900M and share volume about 9B. This translates to about $0.10 per share. Can that be right?
most volume happens in sub penny names, check the otc m arket scanner to find em
I did that after I posted. I saw one that traded at $0.00001 per share in the “expert” market. I had no idea. I guess that’s the same kind of market where KTBA belongs.
Inefficient markets. Large orders often seem to have priority over price.
Mark,I placed an order to sell 19 shares uepco at $118…1 sold for 159. 95…still have 18.
Call the trade desk and explain your discrepancy. Let them look up time and trades, this will include a time stamp and any adjustments you made to the order and when.
If there is evidence the investigating broker can put in a request for fulfillment. No phone broker will be able to do it but it will be reviewed by a principal and usually, it is interesting what is discovered, in that our memories are basically faulty and those damn computers CAN do it better. They can NOT count votes worth a damn though.
Don’t know if this link will open, but it’s Watford Holdings 3rd qtr report.
https://mail.google.com/mail/u/0/?shva=1#inbox/FMfcgzGllCmbvBbgXGnQkNGdWZGvFChN
Randy: It will not open for me. Can you give a brief update on any significant information? Thanks
LTSA, I own this preferred and had it set for DRIP with TDA. I am aware that it now is OTC and the last couple of months it did not DRIP. I Left my auto DRIP on just for kicks. Today it did DRIP @15.50. That is fine with me but I do have questions. Where did the stock come from? Was it purchased on the open market or issued from LTSA? This raises new questions to me such as how is the price determined, regardless of where it was purchased? I read the prospectus but couldn’t find anything. Can anyone shed any light on this for me? Thanks in advance.
If you go to ‘QuantumOnline.com’ you can read about the product, as well as follow links.
Aesplit, that is very interesting. I wonder if I could do that with some of mine. SLMNP for example. Drip more at 1000-1010 sounds appealing instead of the 1030+ it used to be. But could it also backfire and buy some at 1200?
T is off > 5%, what the hell? No news that I can see.
Its down for the year
Tax loss selling is my guess
Dividend cut on the way
The problem has been the mgmt of the company. There is zero confidence left. Stankey, if not replaced, will destroy the company. The board all has to be replaced. What more can a person say except the only thing they know is how to pay themselves for doing a terrible job year after year. With them in place there is no bottom.
Have a long position with T for years. Just at the point of forgeting about the investment and treat it as an insurance annuity. So disappointing.
Vz is down hard about 10% over a few months. Possibly on the bad news that 5G may impact airports and airplanes comm. Or an industry out of favor.
Yes T has been miss-managed as has VZ – both buying media content businesses then having to unwind the investments and servicing huge debt. And really T buying Direct TV – I guess management completely missed the memo that selective over-the-top subscriptions were the wave of the future – like Disney+ and yes Discovery Channel.
TalkDollars:
Did you see this little nugget from a recent “Almost Daily Grant’s” post? Infuriating as a T shareholder:
Coming and Going
Wall Street investment banks scored $320 million in fees from AT&T’s spinoff of its WarnerMedia unit and subsequent merger with Discovery Communications, the Financial Times reports today. Telephone, which forked over $85 billion for TimeWarner three years ago, said it received $43 billion in cash and other considerations and will own 71% of the new entity upon the deal’s projected close early next year.
That 2018 transaction proved ill-fated for AT&T shareholders and management, as the stock has since returned negative 5%, inclusive of dividends, compared to a positive 78% return for the S&P 500. The bankers made out all right, clearing $234 million in fees for that deal per Refinitiv.
TELZ
I had a bit of discussion with some folks on TELZ when it was issued. That inspired me to write an article which was just published at SA. Would be interested in folk’s comments!
https://seekingalpha.com/article/4472406-telz-8-25-percent-bond-from-a-future-lng-export-company
I read it this morning. Very well done. I didn’t know that was you. I own a small amount of TELZ. Charif did very well for me at Chenire.
30% chance of bankruptcy. Ouch!
30% chance of bankruptcy is a the probability implied by any B- rated risk over 7 years. Most people have no idea how high the average bankruptcy risk is for high yield fixed income. Nonetheless, the bond market is pricing this level of risk at 5% which is the average yield for this rating. It’s all about relative value.
Own a CCC equivalent shipping preferred? That’s a 50% chance of bankruptcy.
Default probabilities:
https://www.livewiremarkets.com/wires/quantifying-the-risk-of-bonds-with-s-p-credit-ratings
Thoughtful and thought- provoking article.
Is the 30% probability somewhat tempered by the possibility of some partial recovery in the event of a default? In other words, the 30% probability of default doesn’t equate to a 30% probability of total loss?
Yes, I think average recoveries are around 30% for unsecureds. When you do the math on interest payments, default probability and recovery rate, the total return for every credit rating is very roughly similar. There’s no free lunch.
That said, I think the actual chance of default for this security is substantially less than 30%. However, to be conservative, I assume it is 30% and even then, fair market yield is ~6%, so it is a great relative value. Price would have to be 27.40 for YTW to be 6%.
That said, the energy space generally trades at a discount to the rest of the market, both bonds and equity, so this isn’t the only strong relative value available in that space. For example, CEQP-PR traded down to 9.20 yesterday.
Defaults tend to happen in waves. Due to contagion, failing economy ,or problem sector. Historical odds are long term averages but not short term measures.
Also, though rating agencies use same rating scale for all sectors, different sectors are more prone to bankruptcy and rating agencies will show the break out of such numbers. So a B rated issue of company “A” in sector “A” could be less predisposed to bankruptcy of company “B” in sector “B”.
As we know ratings are as much art as science, as they are making future projections with management guidance. And that is assuming variables way beyond ones control.
I would trust B rated CEQP-, considerably more than this issue, because their business model is more proven, defined, and contract driven. And some of the reasons CEQP has a lower rating has nothing to do with their debt and coverage ratios.
While LNG liquefaction is a newer business model, the long term prospects are much brighter than traditional energy businesses. There’s a structural tailwind to LNG.
TELL’s business is also contract driven. They’re under take-or-pay contracts to sell 90% of their capacity for their first 10 years of production.
TELL has a bigger market cap than CEQP but CEQP has about $1.9B in debt while TELZ has only $50M of debt.
The question is if TELL is so much riskier than CEQP then why are banks willing to lend TELL at what I expect will be L+4% while CEQP bonds yield 5.5%?
That said, I own a lot more CEQP-PR than TELZ.