I am retired and take educated guesses on all things financial.

January 29, 2010

January 30, 2010: Dividend Hungry? A Buffet Of Higher Yields

For investors tired of miserly yields with minuscule annual increases from common stock,let alone trying to squeeze out another 1/8 percent on a cd or money market fund, the selected purchase of preferred stock may be a much better alternative at this time.

My criteria for initially screening preferreds is simple. The call price (if applicable) is $25.00, buy at a discount from that price, a company rating that is in the investment grade realm with solvent prospects and the security being researched is liquid(trading over 20,000 shares per day). Those investors with a more liberal screen will find a large number of investment-grade preferreds with yields over those listed below, though they are generally trading over the $25.00 call price.

Investors reluctant to purchase individual securities are encouraged to look at the SPDR Barclay's Capital Convertible Bond ETF (CWB), trading at $36.26 and yielding 6.30%, or the IShares' US Preferred Stock ETF (PFF), trading at $37.03 and yielding 7.45%.

The following individual issues illustrate what the investor can harvest from the preferred security roster using my standard:

Barclays Bank Preferred C (BCSpC): $23.92, yielding 8.05%.

Comcast 6.625% Notes (CCS): $24.13, yielding 6.90%.

CBS (CPV): $21.85, yielding 7.71%.

J P Morgan Chase Preferred P (JPMpP): $23.65, yielding 6.61%

Deutsche Bank Capital Trust II (DXB): $21.98, yielding 7.39%.

National City Preferred A (NCCpA): $22.70,yielding 7.26%

HRPT Property Trust Preferred (HRPN): $19.00. yielding 6.98%

General Electric Credit (GEJ): $24.28, yielding 6.20%

Bank of America Preferred J (BACpJ): $22.70, yielding 7.98%

Zions Bancorporation Preferred C (ZBpC): $24.15, yielding 9.96%
This is my recent favorite, with ZB appartently on the road to a solid recovery.

Archer Daniels Midland Preferred A (ADMpA): $42.90, yielding 7.27%
Another favorite, this security has an interesting convertible feature.

Investors should be aware that some preferreds do not qualify for 15% tax treatment, and that companies may suspend quarterly payments if compelled which may induce adverse tax consequences. No security is without risk. Use due diligence.

That stated, I believe that trust preferred and preferred securities represent an excellent vehicle to obtain solid income with the potential for modest capital appreciation if the %25.00 call provision is exercised (on those with that feature).

For your initial research, use the resources of Seeking Alpha. Quantumonline also presents a very commendable starting point to inventory a list of preferred securities.

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