If you hold the 10.625% Wesco Reset preferred (WCC-A) you can claim your gains by selling this issue now. This issue has a reset on 6/22/2025 at a rate which would be in the neighborhood 14-15%. The ‘spread’ on this one is 10.325%. Current yield to maturity is under 2%. The company already has announced plans to call this issue.
The SiriusPoint 8% resettable preferred (SPNT-B) has a year before it will likely be called and is trading at $25.23 right now–so if one could grab it a little lower it would be a nice replacement for the Wesco issue. The yield to maturity (depending on where one can by it) is around 7%
Users who liked this:
Tim – Appreciate and thanks for your suggestion! Having watched SPNT-B off-and-on, I started a position @25.19 yesterday. Expected (or hoped) pricing would have come off more than it did on account of the dividend.
SPNT-B had a decent sized sell imbalance “market on close.”
Unofrtunately, I had not read this post . My brain was Sprint-ing.
Have to wonder if there as an end of the month dump by PFF or one of the other preferred ETF’s as total volume 750K, 90 day avg 21K.
Frugal we have come across times when someone had advance notice of something happening and not saying that is the circumstances this time but I wouldn’t be surprised if this was called by the next dividend.
Done. Thanks Tim.
I am full up on SPNT-B now.
Got nice fills on both out at 25.895 and in at 25.18.
Not a bad idea to extend out if you’re staying with the same theme, but I do disagree with you on YTC on WCC-A…. YTC = 4.79% when taking into account the accrued with x-div still in front of it… SPNT-B just went x-div but agree on 7% or a little less for its YTC
2wr–let’s put it this way if held to maturity. Maximum dividends $1.33 then you will lose 90 cents on the redemption (from 25.90 now), There are 2 dividends ahead–March and June. Looks to me like I am pretty close?
not going there yet again, Tim and Mark…. lol…..
HA! yes, this poor horse has been pretty beaten up
OK, but I have another question.
When companies figure the quarterly dividend, it is based on a 360 day year.
Since there are actually 365 days in a year, where do the extra 5 days of dividends end up?
Mark–it is normally outlined in the prospectus,
That’s a good question….however asked the wrong way I think…. The 360 day year gives you the amount of accrued that’s generated daily. So in other words if you have a $25 bond with an 8% coupon, the daily amount that accrues is .005556. So the question is where do you subtract the 5 days out of the 365 day year when trying to calculate the actual amount of accrued? The normal assumption is that there are 12 30 day months, so that gives you a guideline as to when it’s obvious that a day needs to be subtracted from your count of days, but still, IMHO, other than that, it’s always a guess that could leave you plus or minus one day when trying to calculate your actual amount of accrued. Thankfully, one day doesn’t amount to much… And as Tim points out, there are slight variations from one prospectus to another that also can make the accrued vary slightly. Some pay based on the number of days in the quarter while others pay a set amount every quarter which also makes for minor variations between what you might calculate vs what you end up getting…
Yes, as Tim noted, even when always calculating based on a 360-day year, some use the “twelve 30-day month” while others use the actual # of days.
Some pfds even calculate both ways, changing from one way to the other during their lifespan.
RITM-A for example. During it’s fixed coupon period, it used twelve 30-day months. When it switched to floating, it kept the 360-day period, but changed to calculating each dividend based on the ACTUAL # OF DAYS in the quarter. From the prospectus (p. S-21):
“Dividends payable for any Dividend Period during the Fixed Rate Period will be calculated on the basis of a 360-day year consisting of twelve 30-day months, and dividends payable for any Dividend Period during the Floating Rate Period will be calculated on the basis of a 360-day year and the number of days actually elapsed in such Dividend Period.”
MS-E has this in its prospectus too. In fact, even though the company kept MS-E at it’s fixed rate, it changed to the “actual # days” to calculate each dividend. The quarterly used to be $0.4453125. Now the amount varies slightly when the # of days in the quarter is more than 90 days.
There were 92 days (pay date to pay date, 2wr) that accrued in both the 9/30/24 and the 12/31/24 ex-date div periods, and each of those divs was $0.455208.
“I’ve done the math. It checks out.” (from “The Martian”):
7.125% * $25 par / 360 days * 90 days = $0.4453125
7.125% * $25 par / 360 days * 92 days = $0.455208
https://www.nasdaq.com/market-activity/stocks/ms.pre/dividend-history
Oh right, I see my error. Thank you for the gracious redirection. I was thinking there were a phantom 5 days of dividends that weren’t being accounted for, but now I realize that the daily accrued is actually inflated by a fraction by essentially eliminating 5 days from the calendar year. Not sure how I got that backwards.
Thanks Nathan, but when 2WR didn’t want to abide by my laziness, (that’s meant as a dig at me, no disrespect intended) I guestimated 82 days accrued and got $.6050.
Interesting examples, mbg. Always informative tidbits being shared around here.
I know we’ve gone over this before, but I’m still having trouble grasping it fully. When looking at YTM, it is agnostic as to holding period? YTM calculation always assumes I am buying it on that particular day at that day’s price? And my cost basis and holding period are irrelevant?
Where I get bogged down is (and maybe I am saying this wrong too) when I try and look at something like the total return on the investment. But maybe that is also irrelevant since it is all in the past, and the only thing that matters today is my return going forward? That’s why swapping a 5% YTM for a 7% YTM is a good investment decision? Even if it results in a capital loss on the initial investment? To be fair, I’m going to have a cap loss anyway because I paid higher than redemption value, but my original thesis assumed a holding period to the reset date. I guess I just have a mental block around selling for a loss.
I’m being lazy by not figuring this myself, but do you know what the final div payment will be off hand? I know it’s less than a full qtr. worth.
I’ve been using this as a sample case in my XIRR based spreadsheet for preferred that have mid-quarter calls, so I might as well offer the numbers I currently have. There may still be bugs!
I’m still a little fuzzy on the exact means of calculating it, but the call date is 8 days short of a nominally 90 day quarter, so about 92% of a full dividend. If I try to do exact math, I get $0.606 for the final dividend.
At a current price, we pay $25.870 on March 3, get $0.664 on March 31, then get $25.606 on June 22. Total cash received is $0.400 on a 111 day investment of $25.87, which naively gives us a 5.08% annual return ignoring reinvestment.
If we care about the fact that we actually could reinvest the first 66 cents early, we need to use XIRR or equivalent. =xirr({-25.87,0.664,25.606}, {to_date(“3/3/25”),to_date(“3/31/25”),to_date(“6/22/25”)}) claims a 5.28% return if you were to invest at today’s price, settle on Monday, and get paid on the call date.
This is WCC-A. I’m sure by now you know that Fido comes up with 5.188% for your example…… could be nothing more than a rounding error for all I know…. You can double check the accuracy of their approach assuming you accept their parameters, by using a purchase price of the 25.664 first payment and 25.604 second payment…… Once you subtract the accrued of .465 you should theoretically come up with 0%, right? Fido comes up with -.01%, a rounding error. So I guess it’s a matter of whether or not you think your assumptions are more accurate than theirs or if the difference is close enough for your needs. Who knows? Maybe they are.
I do have a (very modest) holding of WCC-A but with the upcoming ex-dev only two weeks away, March 14th, if my match is correct, it already accumulated roughly $0.56 per share so my ask is set a tad high so that either an execution compensates for the “loss” or I’ll collect the payment and then lower my ask accordingly.
PierreK–alternatively you sell it now at 25.90 and reinvest in SPNT-B and grab and higher return.