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"I'm about half way through your
book - which I picked up on Amazon - and am finding it really
fascinating. Thanks for the insights...GREAT BOOK"
- Mark R. - Potomac, MD
A record number of readers
signed up for the CDx3 Newsletter during October, so
welcome to all of you and thank you for your interest in
Preferred Stock Investing.
October saw the introduction of
two new CDx3 Preferred Stocks - one paying a 7.75% dividend, the
other paying 7.25%. The Last Month's CDx3 Investor
Results article below provides details.
This month's Special
Announcement article acquaints our new CDx3 Newsletter readers
with some of the resources that are available to them on
the Preferred Stock Investing Reader's Forum. See some of
the topics that readers are posting that you may be interest in.
Some say that disaster brings out
the best in people. The fires in Southern California
led to the evacuation of hundreds of thousands of people,
many of whom lost their homes and/or belongings. In the CDx3 Company Spotlight article
below, read how apartment company BRE Properties, issuer of CDx3
Preferred Stock, has helped the residents of several of its
evacuated San Diego apartment communities.
At the peak of the disaster, the San Diego Humane Society
was housing 1,400
pets displaced by the fires, that needed food, shelter, medical
treatment, medications and other care every day. Damage
estimates are running over $1 billion. While the worst
appears to now be over, this event has made a significant dent
in the coffers of a long list of relief organizations. Please consider donating:
San Diego Red Cross,
San Diego Humane Society.
When beginning to develop your own
CDx3 Portfolio of CDx3 Preferred Stocks, one often wonders "how
many should I buy?" This month's CDx3 Question Of The
Month article provides a formula for determining how many CDx3
Preferred Stocks you should seek to purchase and why.
For those who missed the
announcement back in March, there is a free calculator available
to you for correctly calculating the effective annual return of
preferred stock investments. The Free Special Offer
article below provides you with a download link.
On the last day of October, the
Federal Reserve Board's Open Market Committee lowered the
federal funds interest rate in an effort to try
and thread the needle between helping out the housing and
lending industries while avoiding a spike in inflation (why does
one lead to the other? See the
CDx3 Question Of The Month article in
last month's CDx3 Newsletter). See what it
meant for CDx3 Investors throughout November in next month's CDx3 Newsletter.
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CDx3 Income
Engine Continues To Favor High Dividend Income
New October CDx3 Preferred Stock
Pays 7.75% And Shows Early Capital Gain
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The trend toward
higher dividend paying CDx3 Preferred Stocks
that we have seen for the past few months
continued in October. The dividend rate
paid by the most recently issued CDx3 Preferred
Stock was 7.75%, the second highest dividend
payer to be issued since May 9, 2003.
A second new issue
announced in late October, paying a 7.25% annual
dividend, just began public trading as this
issue of the CDx3 Newsletter was being
finalized.
Here is an update
to the CDx3 Preferred Stock dividend chart that
you first saw in
last month's CDx3 Newsletter.
Each navy blue bar shows the dividend rate being
paid by an individual CDx3 Preferred Stock
introduced this year (the month of introduction
is indicated below each bar).
Notice how the
dividends being offered by the issuing companies
were fairly flat until summer, consistently
paying just under 7%. Then, throughout the
summer, U.S. financial institutions tightened
their lending practices in response to the
mortgage lending mess. This chart clearly
illustrates how issuing companies have had to
sweeten the pot in order to attract cash.
The dividend rates being offered on new CDx3
Preferred Stocks have risen steadily.
Average Rate
Hits 7.5%: Beyond the trend shown above,
CDx3 Investors got some more great news in
October. The average dividend rate paid by
CDx3 Preferred Stocks over the last three months
(August, September and October) has hit a new
milestone at 7.5%.
If you had purchased an average Certificate of
Deposit (CD) at your local bank during that
time, you'd be getting about 5.2% (24-months,
$10,000; source:
bankrate.com). In other words, CDx3
Investors are making about 50% more on their
money by investing in these CDx3 Preferred
Stocks, rather than bank CDs.
Don't Forget
Capital Gain: In addition to the low
interest rate paid by bank CDs, there is no
opportunity for capital gains either. That
is, when your CD matures, the bank gives you
back your principal, and not a penny more. |
As explained in
Preferred Stock Investing, CDx3 Investors have the
opportunity to sell a CDx3 Preferred Stock for a profit
(capital gain), in addition to the locked-in quarterly
dividend income that they receive.
CDx3 Investors usually
purchase CDx3 Preferred Stocks for about $25. Here
is the market price of the same 7.75% CDx3 Preferred
Stock that was issued on October 3:
Subscribers to the CDx3
Notification Service received a CDx3 Buyer's
Notification email message on October 3, making them
aware of this new CDx3 Preferred Stock.
Subscribers who were able to purchase this CDx3
Preferred Stock when they were notified have already
made a respectable capital gain (roughly 1.6% in four
weeks or an annualized capital gain of about 19%) on top of the 7.75%
dividend income.
What's the trading symbol?
Subscribers to the CDx3 Notification Service receive a
CDx3 Buyer's Notification email message whenever a new
CDx3 Preferred Stock is introduced. All of the
research and work is done for them.
The CDx3 Buyer's
Notification email message that subscribers receive
includes a detailed CDx3 Preferred Stock Spec Sheet (see
example) that provides the information used by CDx3
Investors to make a buy/no-buy decision (including the
trading symbol). In addition to detailed
information on the new CDx3 Preferred Stock, the Spec
Sheet also provides the recent market price performance
of other similar, recently issued CDx3 Preferred Stocks
(competitors).
Readers of Preferred
Stock Investing and subscribers to the CDx3
Notification Service know when new CDx3 Preferred Stocks
are being issued and how to get them at a great price -
as October's great example, presented above,
illustrates.
For more information about
the CDx3 Notification Service,
click here. |
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Preferred Stock Investing Reader's Forum Proves To Be
Great Resource
Reader's Help Each Other Master
The CDx3 Income Engine
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The Preferred Stock Investing Reader's Forum, (sponsored by
Google,
click here) was first announced in the
March 2007 CDx3 Newsletter.
The Reader's Forum provides many resources for readers, and
others interested in preferred stock investing. At the
Reader's Forum, you can see examples
of recent CDx3 Preferred Stock investment results, post or
answer questions, see back issues of the CDx3 Newsletter
and download tools helpful to CDx3 Investors.
In recent weeks, there has been several great questions that other readers
and I have posted answers to that you, as a CDx3
Newsletter reader, may be interest in.
Here are a few topics, posted by readers, that you can find on
the Preferred Stock Investing Reader's Forum (edited for brevity
here):
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"In your book, you mention a couple of times how
the 'lifecycle' of a CDx3 preferred stock is five
years (because of the call date), but couldn't the
issuing company choose not to 'call-in' the issue on
the call date?"
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"I'm in the midst of the book, but the
question of taxes has me wondering: do any
of the CDx3 stocks qualify for 15% tax treatment?"
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"Does anyone have experience buying preferreds
over the counter with either E*Trade or Fidelity?
I can call them to ask about the process, but it
would help if I knew how to phrase the question in
'brokerage-compatible' lingo."
For those who are new to the CDx3 Newsletter,
and for our veteran readers, please feel free to
visit the Preferred Stock Investing Reader's Forum.
It is available to you for free. If you join the
group (you can use an anonymous nickname), you can set
it up so that you receive all of the postings
automatically via email. Being a member of
the Preferred Stock Investing Reader's Forum is easy to do,
interesting, educational and free. |
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Who are
these companies that issue CDx3 Preferred
Stocks?
BRE Properties, Inc.
(NYSE: BRE)
Looking for an apartment?
If so, you're about to have
plenty of company.
2.5 million mortgages, issued to
borrowers with weak credit who
got in on low initial interest
rate adjustable loans a couple
of years ago, are scheduled to
reset to substantially higher
rates throughout 2008 (source:
FDIC), the biggest
portion coming due in the first
half of the year.
A number of these borrowers will
be out looking for a place to
live. BRE Properties, Inc. may be
looking at a substantial up-tick
in new customers.
BRE
is a $2.7 billion, San
Francisco-based company founded
in 1970 that develops, acquires
and manages apartment
communities throughout the
Western United States.
BRE owns, either directly or
through joint ventures, about
30,000 units in 81 individual
apartment communities.
As a
Real Estate Investment Trust, the
company is not subject to federal
income tax, if it distributes at
least 90% of its taxable income to
its shareholders.
To see
BRE apartment communities in your
area,
click here (Western U.S. only).
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With
several evacuated properties in the
San Diego area, BRE was quick to set
up a
web site with ongoing fire
information (may not be up much
longer). BRE also had its own relief center for
its residents up and running within
24 hours of the fire's outbreak, as officials required
evacuations throughout the area.
At
7:12 pm on October 25, 2007, the BRE
web site posted the following
dispatch:
"Time
to go Home!
It was announced today that nearly
all of central San Diego may return
home. No BRE communities are any
longer threatened and it is both a
relief and a pleasure to post that
all BRE residents may now return to
their homes. Clean up efforts are
currently underway and we anticipate
the bulk of this process to be
completed next week.
BRE would sincerely like to thank
our residents for their patience and
understanding during this very
traumatic time. While we are pleased
to announce that your home awaits
you, we understand that there are
still many areas in danger. Our
thoughts are with those who may not
have been so fortunate.
Thank you and welcome home!"
BRE is
an issuer of CDx3 Preferred Stock
and is used in several places
throughout Preferred Stock
Investing (see pages 104, 181,
192) to illustrate various aspects
of the CDx3 Income Engine.
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From
John M.: I just started
out building my personal CDx3
Portfolio of CDx3 Preferred
Stocks. How many CDx3
Preferred Stocks should
I buy?
Chapter 3 of Preferred Stock
Investing is titled "The Right Number, Right Ones, Right Price"
and discusses how to determine how many CDx3 Preferred Stock
issues you should have in your CDx3 Portfolio, how many shares
of each issue you should buy and the market price you should buy
them for. There are formulas for each, depending upon your
investment budget.
But new CDx3 Investors frequently ask this
question: how many CDx3 Preferred Stocks should I buy?
For beginning CDx3 Investors, the
answer is 15 CDx3 Preferred Stock issues, and here's why:
No "New" Money From You: CDx3 Preferred Stocks will cost
you about $25 per share when you purchase them. Wouldn't
it be great if your CDx3 Portfolio was generating so much
dividend income, that it became "self-funding?" By that I
mean, generating enough dividend income so that you can purchase
your next CDx3 Preferred Stock without having to use any "new"
money of your own.
I'll show you the simple math in a
minute, but the point is to build up your portfolio of CDx3
Preferred Stocks so that it is pumping out enough dividend
income to purchase the next one completely with those dividend
earnings and no "new" money from you.
As you'll soon see, you will reach
this magic point once you have purchased 15 CDx3 Preferred
Stocks.
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Here's the math:
To buy a share of CDx3 Preferred Stock, you need
about $25. Let's say that the average dividend
rate being paid by your CDx3 Portfolio is 7% per
year. That means that each share of CDx3 Preferred
Stock in your CDx3 Portfolio provides $1.75 in
dividend income to you each year.
Since it takes $25 to
purchase the next share of CDx3 Preferred Stock, you will
need 15 in your portfolio ($25 divided by $1.75) in
order to reach a point where your CDx3 Portfolio is
generating enough dividend income to purchase the
next CDx3 Preferred Stock without "new" money from
you.
How long does it take?
In reality, you, as a CDx3 Investor, will not
purchase each and every CDx3 Preferred Stock that is
introduced; there will be times when you choose to pass.
Given that CDx3 Preferred Stocks are introduced at a
rate of 1-2 per month, new CDx3 Investors usually
reach the "self-funding" point in about
18 months.
It is for this reason
that the CDx3 Notification Service is an 18 month
service.
Thanks to John M. for
the great question. You will receive a
complementary copy of the CDx3 Special Report
Dividend Accounting.
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Free CDx3
Special Report Also Has Free Companion Excel
Calculator
See How To Correctly Calculate Your
Effective Annual Return - FREE
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The Preferred Stock Investing Reader's Forum provides a
free
Excel spreadsheet calculator that you can use to
calculate the effective annual return (EAR) of your
preferred stock investments. The calculator allows
you to just plug in a few parameters from your preferred
stock (such as purchase date, purchase price, sell
price, etc.) and see what your effective annual return
really is, or will be if you sell.
 When
you initially download the EAR calculator, it is set up
using the Series A CDx3 Preferred Stock from Dominion
Re-sources as an ex-ample. This is the same CDx3
Preferred Stock that is used as an example through-out the CDx3
Special Report titled "Calculating Your Rate Of
Return."
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As a
recipient of this monthly CDx3 Newsletter,
you are entitled to a FREE copy of "Calculating Your
Rate Of Return." So, get
them both - FREE - and use them together to
learn how to correctly calculate your rate
of return on this type of investment. To download your free copy
of Calculating Your Rate Of Return, just click on
the following email address:
CDx3MonthlyResults@PreferredStockInvesting.com .
No need to type anything in the body of the
message, just click the Send button.
You will receive an auto-reply email message
with download instructions for your free
CDx3 Special Report.
To see the entire library of useful and
educational CDx3 Special Reports, including
three sample pages from each one,
click here.
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Fed Move Positions CDx3 Investors For Capital Gains
How Will New Fed Policy Affect Preferred Stock Investors?
CDx3 Investors have been enjoying a
"buyer's market" since early June,
buying up CDx3 Preferred Stocks at
bargain basement prices.
In addition to the great dividend
rate paid on these CDx3 Preferred
Stocks (see first chart in the Last
Month's CDx3 Investor Results
article above), the bargain basement
prices have left CDx3 Investors
poised to rake in some terrific
capital gains in the months ahead.
With the Federal Reserve lowering interest rates in
the U.S. economy several times since
August, upward pressure on market
prices is now building, as
illustrated by the market price
chart in the Last Month's CDx3
Investor Results article above.
In next month's CDx3 Newsletter, I
will report back to you on how the
Fed's October 31 move is affecting CDx3
Investors. In the meantime,
please consider picking up a copy of
Preferred Stock Investing
or
subscribing to the
CDx3 Notification
Service. You'll be very glad
that you did.
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I'm not a financial advisor or stock
broker trying to sell preferred stocks
to you. I'm an
investment researcher with an
economics and statistics
background who has developed a
simple way to earn a respectable
return at "CD-like" risk. And I've
written it down in
Preferred Stock Investing.
I'm hopeful that you find these
monthly CDx3
Newsletters interesting, and
will consider learning more by
purchasing my book, Preferred
Stock Investing.
Please
take a look at
http://www.PreferredStockInvesting.com. And don't forget
about my
FREE SPECIAL OFFER.
Know
someone who might be interested in simple,
low-risk investing for non-investment
experts? Have them send an email
message to
CDx3Newsletter@PreferredStockInvesting.com and
they will automatically
begin receiving this monthly CDx3
Newsletter
next month (plus a
CDx3 Special Report) - all FREE.
Then they can make up their own mind.
Many Happy Returns,
Doug K. Le Du
P.S.: If you
no longer want to receive news
regarding
Preferred Stock
Investing, just
send an email message to
OptOut@PreferredStockInvesting.com
and you will be automatically removed
from my address list. Best wishes to
you.
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