Spark Energy Preferred Slowly Creeps Higher

The fixed-to-floating rate preferred from Spark Energy (NASDAQ:SPKEP) has slowly crept higher–day by day as we close in on the ex-dividend date of 6/28. The dividend for this period was declared a month or two ago and it looks like buyers want to lock in a tasty 55 cent dividend.

As readers know we are totally overweight this security and are now at (or very near) break even on our total return. Of course with the benefit of hindsight we wish we would have bought even more down around $22.

Spark announced lousy earnings last quarter and won’t announce 2nd quarter earnings until the 1st week of August. The company predicts a flat year to last year. This f-to-f issue traded over $27 prior to a reopening of the issue.




7 thoughts on “Spark Energy Preferred Slowly Creeps Higher”

  1. Tim,
    I thank you again for your great pick. I did not buy at the IPO because of some SA writer indicated that there were lots of unhappy retail customers for this electric reseller or provider. When you gave the alert for more preferred offering, I took at look at their financials. They do have real income, but lots of Capex. The commons, preferreds followed, went to another dip. Apparently, they either want to enlarge their footprint OR the more Capex is needed to sustain. I have huge holdings, a little over 1,200 shares, with about half bought at low $22 on 2/21/2018 with the other half bought at low $24 on 3/9/2018. I am not worried. For whatever is worth, Schwab.com gave SPKE (the commons) a grade of B, with A for Quality and C fo valuation but a F for sentiment. Fido analysts are neutral.

    1. Tim,
      If you are looking for high dividend with reasonably safety, ARCC (my largest BDC) looks still okay. I have sold all my under-performing BDC’s with some offset by dividends. For mlp’s, ETP (require K1) should be okay according to Morningstar analyst (available in abbreviated format at Schwab.com). For mREITS preferreds, CYS-B could be a hidden jewel, 7.5% coupon, after CYS got bought by TWO (as compared to TWO-C, 7.25%). TWO had a history of sustaining as compared to NLY during the falling knives period of mREIT drawdown. They have some commercial loans in their portfolio, not a pure mREIT play.
      My 192 sharfes at FIDO order for COWNL got filled at $24.92. I have placed another 200 shares of COWNL at Schwab at $24.91.

      John

      1. EVA has been my favorite MLP., safer than ETP which has a horrible history. They are in the woodchips, actually not oil/gas. The sponsor has established business and use EVA to manage the distribution, it seems. This is one of the best pick of Rida Morwa. I do not have huge positions on the commons, except for some quality eREIT, like EPR, with very good credit rating.

  2. Say what do we know about how COWNL thinks about marijuana? Are they investing in all of it or just medical?

  3. Tim, On the 7th I asked what to do with $20,000 worth of preferreds that was called. I then bought 200 more shares of Spark Energy and TKLing, the rest I put into Alerian MLP which is paying about 8%.

  4. Does the fixed-to-floating aspect of SPKEP mean that the security essentially does not have the interest-rate risk of the typical perpetual preferred? I have been avoiding preferreds, other than those with failure-to-redeem clauses, because of the rising interest rate phenomenon (Fed,etc.), but am wondering if the F2F aspect means that such securities would avoid seeing their prices drop as interest rates rise. Any feedback would be appreciated. Thank you.

    1. Hi Jay–the fixed-to-floating feature typically REDUCES but does not eliminate the interest rate risk as it remains a perpetual. Anecdotally the volatility should be reduced.

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