Since there are only a dozen trust preferred issues remaining outstanding at this time we have added them to the ‘Master List’ which we published last week.
$25/Share Master List of Preferreds, Baby Bonds and Trust Preferreds (will open a spreadsheet in a new window and you may make a copy if you want).
For newer investors Trust Preferreds are preferreds issued by a trust which is created by the issuer. The trust purchases debentures from the forming corporation with funds the trust generates by selling preferred shares. The distribution to preferred shareholders is treated as interest – NOT dividends and thus is not a qualified distribution. The reason for this is because of the payment is simply a pass through from the company to the trust to the end shareholder.
Why would a company create a trust? Because the interest they pay the trust is interest and thus tax deductible while dividends are not tax deductible.
Generally Trust Preferred shares should be safer than regular preferreds because the trust owns debentures which is higher in the capital stack than preferred shares this your distribution is safer.