It is strange for me to use the word ‘beautiful’ to describe a new issue of preferred stock, but it seems to fit pretty darned well when describing the newer NiSource 6.50% fixed-rate reset issue (NYSE:NI-B).
This issue has acted perfectly from a new issue buyer perspective. The issue came to market on 11/28/2018 with an initial fixed coupon of 6.5%. The issue is rated low investment grade by Standard and Poors and 1 notch below investment grade by Moodys.
The share price of this newer issue has moved higher day after day at a modest pace–a nickel here a nickel there–then a little pop and back to nickels. One could have bought this one on the OTC Grey Market upon issuance for as low as $24.70–we bought some in the $24.80 area if I remember right. Today the share price is at $25.69–closing in on a gain of near a buck.
The demand for this issue has been constant–even during the sharp sell-off of most preferreds in December this issue held firm.
So what is the ‘secret’ with this issue? 1st it was priced at 6.50% which is a strong rate for any investment grade issue. 2ndly it is a utility which is being bought by ‘strong holders’-not by folks looking to flip out for a 50 or 75 cent profit. I believe that the strong holders are the biggest factor in the march higher in the share price. Now if we could just see about 5 more issues just like this one we will be most happy.
It simply doesn’t get any better for the new issue buyer than this issue.