“First, let me say how happy I was to find your book, your newsletters, your website, and your system for trading preferred stocks. I’m recently retired and am looking for a low-risk approach to generate income and some capital gain, and your system using preferred stocks appears to provide the best risk-reward approach that I’ve seen." Bill C., CDx3 Notification Service subscriber   MORE>>

Quick Summary

In This Issue...

Last Month's CDx3 Investor Results

Special Announcement

CDx3 Company Spotlight

CDx3 Question Of The Month

FREE Special Offer

Next Month's Sneak Peek


2010 Update to Preferred Stock Investing Now Available!

Readers of my book, Preferred Stock Investing, Third Edition, are entitled to free periodic updates to the preferred stock tables presented throughout chapter 15 of the book as long as the Third Edition is in print. Providing free periodic updates helps keep readers of Preferred Stock Investing up to date.

The 2010 update to Preferred Stock Investing is now available!

And I am also happy to announce that as a special service to readers, the 2010 update goes beyond an update to the preferred stock tables found in chapter 15. In this update I also take the opportunity to provide you with the results of the "CDx3 Income Engine" (the preferred stock investing method explained throughout the book) as implemented throughout the Global Credit Crisis (2007 - 2009). The nature of the preferred stock market since June 2007 deserves special attention and the 2010 update to the book would not have been complete without wrapping up the method's performance during these historic (extreme) conditions.

Specifically, the 2010 update to the Third Edition of Preferred Stock Investing includes updates to the following chapters:

  • Chapter 4, "The Global Credit Crisis": how the CDx3 Income Engine performed during the Global Credit Crisis for CDx3 Investors;

  • Chapter 15, "Results - How You Would Have Done": the list of CDx3 Preferred Stocks issued during 2009 and an update to the tables of previously issued CDx3 Preferred Stocks that were sold during March 2010 when the market for CDx3 Preferred Stocks returned to one favoring sellers; and

  • Chapter 18, "The CDx3 Notification Service": five new preferred stock investing resources have been provided to subscribers to the CDx3 Notification Service (my preferred stock email alert and research newsletter service) since the Third Edition was published.

Preferred Stock Investing, Third Edition is one of the most highly reader-rated books of any kind available for sale in the United States (Amazon 4.5 stars). To receive the free 2010 update to Preferred Stock Investing, Third Edition just follow the instructions on the first page of chapter 15 in the book.

If you have yet to pick up your copy of Preferred Stock Investing, Third Edition you can do so at any of your favorite online retailers (see retailers | see reader reviews). Please pick up your copy today then follow the instructions on the first page of chapter 15 to download the free 2010 update.

Just Posted On The Preferred Stock Investing Reader's Forum: Banks commonly issue Trust Preferred Stocks to raise capital. But since small banks are seen as riskier, Trust Preferred Stocks issued by small banks are very costly to the issuing bank. To make things less expensive, Wall Street created securities called Collateralized Debt Obligations (CDO's) that are mix of Trust Preferred Stocks from big and small banks, lowering the risk and therefore the cost for all involved. The investor cash from these CDO's provides funding for 40% of the home mortgages in the United States. But the new Financial Reform Bill prohibits new Trust Preferred Stocks from Big Banks, so where is the money for mortgage loans likely to come from? See my June 21 blog article "Financial Reform May Create New Low-Risk Preferred Stock Type" for one idea. (jump to Forum)

The Mother Lode of investing is to know, in advance, the future market price of an investment, when that price is going to happen and why. It's even better when it happens at the behest of the U.S. government. The Last Month's CDx3 Investor Results article describes just such a constellation of rare conditions for preferred stock investors, courtesy of the Collins Amendment to the new Financial Reform Bill. This is probably the most important legislation for preferred stock investors that has ever been passed. (jump to article)

There are two Special Announcements for preferred stock investors this month. First, subscriber's to the CDx3 Notification Service have their own exclusive website that is the most comprehensive resource available to preferred stock investors. This month, I provide you with a link to take a tour of the exclusive subscriber's website. Secondly, I have summarized some of the research from my book, Preferred Stock  Investing, Third Edition, and am making it available to brokers, financial planners and investment groups for free. (jump to article)

In the CDx3 Company Spotlight article I introduce you to the newly named CommonWealth REIT, formerly known as HRPT. CommonWealth owns, but does not build, commercial real estate, namely office buildings. Standard & Poor's just upgraded CommonWealth to a BUY. Wondering why?   (jump to article)

The CDx3 Question of the Month is presented both here and on the Preferred Stock Investing Reader's Forum. If you visit the Forum you can test your knowledge by clicking on your answer to the question. You will receive an automatic email that provides you with the correct answer and my explanation. Or you can just read the answer in the below CDx3 Question of the Month article. This month's question is at the heart of the opportunity created by the new Financial Reform Bill. Specifically, I ask preferred stock investors "When a preferred stock is 'called' how much do I get paid per share?" Knowing the answer to this question, and investing accordingly, delivers an automatic capital gain to you in the event that the issuing company of your preferred stock calls your shares.  (jump to article)

Why wait until next month's CDx3 Newsletter to find out what is going on in the preferred stock marketplace? Throughout the month I post regular research articles on the Preferred Stock Investing Reader's Forum and make them available to you for free. In the Free Special Offer article below I provide you with a link that allows you to receive my posts via an email message rather than having to visit the Forum to see what's new. Any time a new article is posted, you will receive a message in your email inbox automatically - free. (jump to article)

Coming Up For Preferred Stock Investors: From time to time, everybody needs a hero, even preferred stock investors. Just as the Collins Amendment to the new Financial Reform Bill appears to have created an enormous opportunity for us, the Federal Reserve declared that an increase in interest rates is still a ways off. That means that we face market conditions characterized by stable prices, preferred stock yields in the 7% to 8% range and a huge new opportunity handed to us by the U.S. government. Read about who preferred stock investors may be calling their hero in the Next Month's Sneak Peek article. (jump to article)

I look forward to reporting back to you in next month's issue of the CDx3 Newsletter.

For New Readers...

Welcome to all of the new CDx3 Newsletter readers who signed up over the last month. This is your first issue of the CDx3 Newsletter, a free monthly newsletter devoted to the interests of CDx3 Preferred Stock investors.

To be sure that you continue to receive the CDx3 Newsletter each month, please remember to add the following email address to your email address book safe sender list:


What Is A "CDx3 Preferred Stock?"

CDx3 Preferred Stocks are regular preferred stocks that are able to meet the ten selection criteria described in chapter 7 of my book, Preferred Stock Investing.

Applying the CDx3 Selection Criteria eliminates about 90% of the regular preferred stocks trading on today's stock market leaving just the highest quality issues.

For example, here are three of the ten CDx3 Selection Criteria:

1. be issued by a company with a perfect record of never having suspended a dividend on a preferred stock;

2. have the "cumulative" dividend requirement, which means that in the unlikely event that the issuing company misses a dividend payment to you (which I have never seen happen with a CDx3 Preferred Stock), they have to make it up to you later; they still owe you the money; and

3. be rated "investment grade" by Moody's Investors Service.

Having specific and consistently applied selection criteria takes the emotion out of your investing decisions and leaves you with the highest quality preferred stocks - "CDx3 Preferred Stocks."

Who Am I?

I am a preferred stock researcher and author of the book titled Preferred Stock Investing. I also publish two monthly newsletters that describe my ongoing preferred stock research. My academic background is in economics and statistics. I retired from my position as Managing Director at one of the world's largest management consulting firms in 2002 to focus on preferred stock research. I do not sell preferred stocks nor am I a stock broker or financial adviser. As a researcher, I research the market price behavior of the highest quality preferred stocks and write to you about my observations.



Two Waves Of New Preferred Stocks Appear To Be Heading Our Way

First From Real Estate Investment Companies, Second From Banks

Wonder no longer. The new Financial Reform Bill is positive for preferred stock investors in two specific ways. First, if you own or purchase the right bank-issued preferred stocks over the next two years (starting right now), the Collins Amendment to the bill all but guarantees that you are in for a nice capital gain on top of the above-average dividend income that you will be earning from your shares in the meantime.

Secondly, the bill motivates our Big Banks to not just retire ("call") some of their existing preferred stocks as their respective call dates arrive (a "call" is when the bank buys your shares back from you for $25.00 per share), but also replace them with a large crop of new preferred stock issues.

I'll get to the details in a moment but, for preferred stock investors, the Financial Reform Bill should provide those who own shares of specific bank-issued preferred stocks with (1) above-average dividend income for at least the next two years, (2) a nice capital gain once the call date arrives plus (3) a menu of brand new preferred stocks to pick from.

There's a second piece of news that I wanted to bring to you this month as well. A Wall Street Journal analysis concludes that, for the next two years, Real Estate Investment Trust companies (REITs) are going to be issuing a flood of new, high quality preferred stocks onto the market. This lines up very nicely with the timeframe provisions stated within the new Financial Reform Bill.

If the Wall Street Journal has it right, preferred stock investors are going to be enjoying a wave of new preferred stocks from REITs for the next two years followed immediately by a second wave of new high quality issues from banks courtesy of the Financial Reform Bill.

What a great coincidence for preferred stock investors! Here's how this should play out over the next several years.

First Wave, 2010 - Mid-2012: New Preferred Stocks From REITs

During the last real estate boom (2005/2006), REITs introduced a large volume of corporate bonds (about $27 billion). Many of these bonds carry five year maturities and will start coming due soon.

A May 26, 2010 Wall Street Journal article titled "For Some REITs, Payout Date Looms" makes the case that REITs, very anxious to reduce debt, are likely to be issuing new preferred stocks shortly in order to raise the capital needed to retire these boom-era bonds.

Supporting this point of view is that fact that, while high quality preferred stock dividend rates have now been restored to pre-crisis levels, the federal funds rate, which corporate bond interest rates are more closely tied to, is still artificially low. The theory being that as the Federal Reserve begins to raise the federal funds rate (which we all know they will have to do since the current rate is essentially zero), corporate bond rates are likely to go up while preferred stock dividend rates may stay unchanged, at least for some period of time.

Historically, the spread between the federal funds rate and high quality preferred stock dividend rates runs between 2% and 5%; right now the spread is at 7%, further suggesting that there is room for the federal funds rate and corporate bond rates to rise before we see an increase in preferred stock dividend rates (see Figure 1).

If corporate bond interest rates come up, while high quality preferred stock dividend rates stay flat, the WSJ article could very well prove to be correct. We would see fewer corporate bonds and more new preferred stocks used to generate the capital needed to pay off maturing boom-era REIT debt.

While during the Global Credit Crisis it was banks that were issuing the bulk of the highest quality preferred stocks (all the way up to 9.6%), it could very well be REITs that lead the next wave of new high quality preferred stock issues.

Subscribers to the CDx3 Notification Service (my email alert and preferred stock newsletter research service) receive an automatic email alert whenever a new "CDx3 Preferred Stock" (see sidebar at the top of this newsletter) is about to be introduced. Don't be left out.

Second Wave, Mid-2012 - 2014: New Preferred Stocks From Banks

On the heels of the REIT wave, the new Financial Reform Bill ushers in the second wave of new preferred stock issues, but this second wave will come from banks (with over $15 billion in assets). While there can always be exceptions and changes downstream, here's how this should work.

There are three types of preferred stocks - traditional preferred stock, Trust Preferred Stock (TRUPS) and third-party Trust Preferred Stock (see Preferred Stock Investing, chapter 2). For the reasons explained in my October 1, 2009 blog article titled “Trust Preferred Stocks - Why Not Just Issue A Bond?”, most preferred stocks issued by banks over the last several years are TRUPS. The Collins Amendment should result in many banks replacing their TRUPS with traditional preferred stocks, beginning two years from now.

Banks are required to keep a certain amount of capital in reserve to cover the bank’s risk (such as the likelihood that borrowers will default on their loan payments). Regulators use a variety of metrics, referred to as capital ratios, to measure how much capital a bank has on hand (as a percentage of its total assets).

One such capital ratio is called "Tier 1 Capital" and includes the bank’s equity (common stock as well as preferred stock) but not the bank’s debt (such as bonds issued by the bank). Currently, TRUPS are considered by regulators as a type of preferred stock (equity) so the value of a bank’s TRUPS counts in the Tier 1 Capital calculation. By issuing a TRUPS, a bank is therefore able to boost its Tier 1 Capital. Almost all of our Big Banks have several TRUPS issues currently trading on the stock market.

Here's the trigger: Under the Collins Amendment, however, the value of a bank's TRUPS will no longer be able to be included in the calculation of Tier 1 Capital.

There is a five-year transition period. The disallowance period kicks in two years from now (mid-2012) and gives banks three years to replace their TRUPS. Most banks should do so by calling (buying back from then-current shareholders) their TRUPS shares as they reach their respective call dates.

Remember, if you hold shares of one of these TRUPS when the bank calls it, you are going to receive $25.00 per share that you own, regardless of the then-current market price and regardless of your original purchase price. $25 per share; that's what you are going to get in the event of a call.

Now here's where this gets really interesting for preferred stock investors.

Capital Gain Enter Here: Many of the affected bank-issued TRUPS are currently selling for a market price below $25 per share. When a TRUPS is eventually called by its issuing bank, investors who purchased their shares for less than $25 will receive a nice capital gain, on top of the great dividend income that their shares will earn in the meantime.

And the great thing is that, sitting here today, we can identify the specific bank-issued TRUPS that are going to be affected and see which ones are currently selling for less than $25 per share. Issues that have already exceeded their call dates, but are still trading, should be among the first to be called two years from now.

Using the catalog of the highest quality preferred stocks on the subscriber's website (take tour), I was able to identify the highest quality preferred stocks that (1) are TRUPS, (2) are issued by Big Banks, (3) have already exceeded their respective call dates and (4) are currently selling for a market price less than $25 per share.

The resulting list that you see here (Figure 3, sorted by current price, cheapest first) was provided to subscribers to the CDx3 Notification Service with the July issue of the subscriber's newsletter, CDx3 Research Notes, on Monday, June 28 (to preserve subscription values the trading symbols for these TRUPS has been obscured here). The far right column shows you how adding a capital gain after receiving two years of dividends pushes your Effective Annual Return (EAR) up substantially.

For Big Banks that call their TRUPS under the new Financial Reform Bill, these thirteen specific preferred stocks should be among the first to deliver a capital gain to their owners plus earn an average annual dividend yield of 7.8% in the meantime.

New Traditional Preferred Stocks: As the TRUPS are called, many banks that are currently fully compliant with Tier 1 regulatory requirements will find themselves short and in need of a way to restore their Tier 1 Capital.

To restore their Tier 1 Capital, the bank can either issue more common stock shares or new traditional preferred stock shares. It seems much more likely that banks will replace their called TRUPS with new traditional preferred stock shares since issuing new common stock to replace the TRUPS would not only be dilutive, but common stock shareholders vote whereas preferred stock shareholders do not. And we’re talking about a heck of a lot of shares here. Why convert your current non-voting TRUPS shareholders into a huge group of voting common shareholders?

One of the simplest and most obvious ways for a bank to restore its Tier 1 Capital would be to retire (call) their
TRUPS as their respective call dates arrive in accordance with the transition period requirements of the Collins Amendment and issue a new traditional preferred stock to take their place.

While we cannot say with certainty that these TRUPS will be called (that remains up to the bank), it is not clear why the issuing bank would not seek to do so since the Collins Amendment removes the primary benefit of TRUPS to the bank (boosting Tier 1 Capital) compared to issuing a traditional preferred stock.

Learn To Screen, Buy and Sell The Highest Quality Preferred Stocks

The coincidental timing of the approaching maturity of a massive volume of REIT corporate bonds and the July 2010 enactment of the Financial Reform Bill should deliver two waves of new, high quality preferred stock issues to preferred stock investors not to mention the capital gain opportunity on bank-issued TRUPS courtesy of the U.S. government.

Preferred Stock Investing includes the information, websites and other resources needed for you to be a very successful preferred stock investor. For those who would rather someone else do the research and calculations, I offer the CDx3 Notification Service. Subscribers to the CDx3 Notification Service receive an email alert when there are buying and selling opportunities coming up. Subscribers also receive their own non-promotional preferred stock research newsletter every month, have their own website that hosts the CDx3 Preferred Stock Catalog and have access to the CDx3 Discussion Group, the only online forum just for preferred stock investors.

Invest in the best. Subscribe to the CDx3 Notification Service (see reader comments) today.


























Figure 1:

Preferred Dividend Rates Have Returned To Pre-Crisis Level,

Federal Funds Rate Still Way Down








Figure 2:

New Preferred Stocks Expected In Two Waves























Figure 3:

Thirteen Callable TRUPS Available For Less Than $25

Subscribe For Trading Symbols






Tour The Subscriber's Website: The Most Comprehensive Resource Available

Preferred Stock, Company And 24/7 Marketplace Information In One Place

The subscriber's website provides subscribers with the most comprehensive resource available for preferred stock investors, including the CDx3 Discussion Group - the only online forum just for preferred stock investors. See the testimonial quote at the top of this CDx3 Newsletter and you'll see what I mean!

The design of the subscriber's website is a direct result of specific input from subscribers through our Continuous Improvement Program.

The subscriber's website is the vault within which I keep research information regarding selecting, buying and selling the highest quality preferred stocks ("CDx3 Preferred Stocks"), the companies that issue them and the marketplace that they trade within.

Once a subscriber signs onto the subscriber's website, the CDx3 Preferred Stock Market Dashboard is presented. The Dashboard provides these seven feature boxes, each of which provide their own focused information, both current and historical:


Trend Box: contains charts that illustrate current trends in the marketplace for the highest quality preferred stocks;

Buyer's Box: lists new, currently trading and former CDx3 Preferred Stocks;

Seller's Box: use this feature box to access the current and past CDx3 Seller's Calendars;

CDx3 Income Engine Box: presents key pages from Preferred Stock Investing regarding selecting, buying and selling the highest quality preferred stocks;

Subscriber's Forum Box: the point of entry to the new CDx3 Discussion Group, the only full featured online discussion forum just for preferred stock investors;

Research Box: provides access to the current and past issues of our preferred stock research newsletters - CDx3 Research Notes and the CDx3 Newsletter. Also allows you to access today's real-time preferred stock news feed, document library and the CDx3 Reading List; and

CDx3 Video Channel Box: presents CNBC video interviews with the CEO's and other leaders from the companies that issue CDx3 Preferred Stocks.


Take A Tour: The website's Tutorial has several components to it, including a description of the site's features. I have made a copy of the website's feature tutorial available to you. Click on the below link to take a quick tour of the subscriber's website Dashboard.

Click here to view the subscriber website's feature Tutorial

Preferred stock research is very hard to come by. The CDx3 Notification Service is intended for individual investors as well as groups (investing clubs, brokers, families or groups of friends) and all information is provided in plain English for non-experts. If you want to get serious about your preferred stock investments, maybe it's time for you to subscribe to the CDx3 Notification Service too (see reader comments).

Brokers And Investment Groups: New Meeting Materials Now Available

As the most comprehensive research service available for the highest quality preferred stocks, all of the large, and many smaller, brokerage firms subscribe to the CDx3 Notification Service.

My Preferred Stock Investing Group Materials are intended for brokers with a group of clients or self-directed investment groups that are interested in learning something about preferred stock investing.

The Preferred Stock Investing Group Materials include a slide show (27 slides, PowerPoint Show format) and an accompanying handout that provides my commentary for each slide. The handout is available in color and black and white (PDF format) for easy printing.

The materials include my tips regarding how to select, buy and sell the highest quality preferred stocks and summarize much of the research from my book, Preferred Stock Investing. Specifically, the materials are organized into three parts:

Part 1: Approach and Objectives To Preferred Stock Investing

Part 2: How and When To Buy and Sell Preferred Stocks

Part 3: Preferred Stock Investing Resources

To request the Preferred Stock Investing Group Materials just send an email request to:


You will receive an auto-reply email message with current download instructions.




The CDx3 Preferred Stock Marketplace Dashboard

We Do The Research, You Make The Decisions



Subscribe To The CDx3 Notification Service




Who Are These Companies That Issue CDx3 Preferred Stocks?

CommonWealth REIT, formerly HRPT (NYSE: CWH, formerly HRP)

Effective July 1, 2010 HRPT changed its name to CommonWealth REIT. Along with the name change, the company also changed it trading symbol to CWH from HRP. The symbol change applies to both its common and preferred stock issues. Any common or preferred stock positions you own will be shown with the new symbols in your brokerage account automatically. Standard & Poor's just upgraded their rating on this company to a BUY.

CommonWealth is a $1.8 billion Real Estate Investment Trust (REIT) headquartered in Newton, Massachusetts. Unlike many other REITS, CommonWealth does not develop real estate but prefers to acquire properties that are consistent with its strategy of locations with minimal local competition surrounded by land that is already developed for other purposes. During the first quarter of 2010, new lease rents were 2% higher than other leases already in place, largely due to this strategy. CommonWealth's properties are primarily office buildings.

Office buildings? With our government leaders continuing to totally ignore dealing with our 10% unemployment rate, who needs more office space, right? So why did Standard & Poor's just upgrade their rating on CommonWealth to a BUY (four out of five stars, June 26, 2010)?

Here's a hint: CommonWealth's number one tenant nationwide is the U.S. government; no unemployment problem there. Further, the company owns 32% of another company called Government Properties Income Trust (NYSE: GOV) that focuses on renting just to government tenants. On June 15, 2010 CommonWealth sold $231 million in assets to GOV, the proceeds of which are going to retire a big chunk of CWH's maturing debt.

Over the years, CommonWealth's growth-through-acquisition strategy has allowed them to build many subsidiaries then spin them off as publicly-traded companies earning the company substantial net proceeds. Examples include Senior Housing Properties Trust (SNP, 2005, $150 million); Hospitality Properties Trust (HPT, 2006, $175.3 million); and Government Properties Income Trust (GOV, 2009) mentioned above.

Beginning in April 2009, CommonWealth went on another shopping spree, acquiring two office properties for $85.8 million and agreeing to purchase twelve more for $192.9 million. These acquisitions are unique because they are Australian, revealing a new international expansion strategy for CommonWealth.

In their June 26, 2010 Stock Report on CommonWealth (then HRPT), Standards & Poor's sums up their outlook of the company this way:

"We think HRP's well diversified office portfolio and long-term land holdings provide a high degree of earnings stability relative to peers in a challenging environment. Its financial position is solid, in our view, and the trust effectively managed 2010 debt maturities. We believe HRP will take a more aggressive stance on select acquisition opportunities this year, focusing on attractive valuations in its second tier markets. We also think the 2009 spinoff of government leased properties was a positive step toward unlocking underlying asset value that could be repeated with HRP's industrial holdings. With its recent dividend yield of 6.2%, we would buy HRP for its total return potential."

Learn more about CommonWealth REIT: Company website | Profile | Upgrades/Downgrades | Recent News.

NOTE: Because of the name and symbol change on July 1, 2010, the above information links may take several days to become populated with the indicated information. If the indication information is not available, please check back later.

Reader Note: The purpose of the CDx3 Company Spotlight article is to give you a sense of the types of companies that issue CDx3 Preferred Stocks. Companies that appear in the CDx3 Company Spotlight either currently, or in the past, have issued CDx3 Preferred Stocks. Since I am not familiar with your financial goals, resources or risk tolerance, my mention of these companies here should not be taken as a recommendation by me for you to buy, or not buy, securities issued by these companies. Companies can issue multiple series of preferred stocks, some of which may meet the CDx3 Selection Criteria while others do not.



CommonWealth REIT (formerly HRPT)

Revenue, 2005 - 2009

(in $millions)




CommonWealth REIT (formerly HRPT)

Funds From Operations, 2005 - 2009

(in $ Per Share)





When a preferred stock is 'called' how much do I get paid per share?

This question is particularly important this month since it is at the heart of the opportunity that the Collins Amendment to the new Financial Reform Bill appears to create for preferred stock investors.

When a new preferred stock is introduced to the marketplace it typically has a five year "call date." The call date is when the issuing company of a preferred stock regains the right to buy your shares back from you. Until the call date, the issuing company is obligated to pay dividends to you every quarter.

The call date introduces several benefits for preferred stock investors. You know in advance what your dividend income is going to be at least until the call date arrives. Plus, for fixed-rate preferred stocks, if rates go down the issuing company is stuck with paying you the higher rate that the preferred stock carries (called the "coupon rate"). But this cuts both ways of course; if rates go up, the dividend income that you receive from a fixed-rate preferred stock does not change.

If rates go down, the issuing company will generally be anxious to issue a new preferred stock at the lower rate and use the proceeds to call (buy back from you) the shares of the older, higher-paying issue. Why continue paying out the higher dividend expense when you can issue a new, lower-rate preferred stock and save? In fact, research presented in chapter 14 of Preferred Stock Investing concludes that if the issuing company can save a mere .375% by issuing a new, lower-rate preferred stock and using the proceeds to call an older, higher-rate issue, they will do so 91% of the time.

Another advantage to preferred stock investors is that when a company calls (buys back from you) a preferred stock issue, they pay all of the then-current shareholders a fixed price per share that is known in advance. That means that if you can purchase your shares for less than this amount, you also stand to make a capital gain on top of the dividend income that you've been earning in the meantime in the event of a call.

The question this month for preferred stock investors: When a preferred stock is called, how much does the issuing company pay you per share? 

Your choices:

(A) The then-current market price of the preferred stock shares.
(B) $25.00 per share.

(C) Your original purchase price (i.e. you get your principal back).

The correct answer to this question is (B), $25.00 per share. It is for this reason that those following the preferred stock investing method described throughout my book, Preferred Stock Investing, always make their purchases for less than $25 per share. Preferred Stock Investing explains how and when to do so regardless of market conditions.

By always purchasing your preferred stock shares for less than $25 each, you set yourself up for a capital gain in the event of a call by the issuing company on top of the great dividend income that you'll be earning in the meantime.

Since the Collins Amendment to the new Financial Reform Bill is going to disallow Trust Preferred Stocks (one of the three types of preferred stocks, see Preferred Stock Investing chapter 2) from being included in the capital reserves that Big Banks have to keep on hand (as measure by the Tier 1 Capital calculation), it is extremely likely that these banks are going to be calling their Trust Preferred Stocks as their respective call dates arrive (paying all holders $25 per share). The Collins Amendment specifies this disallowance to begin two years from now, so Big Bank Trust Preferred Stocks that are callable at that time, plus those that become callable thereafter, are highly likely to be called.

Knowing that (1) you are going to receive $25.00 per share in the event of a call, (2) a call is now extremely likely, (3) which specific preferred stocks are going to be involved and (4) the exact date that those preferred stocks will become callable, provides a very unique opportunity that preferred stock investors should consider, especially since many of these targeted Trust Preferred Stocks are currently selling for a market price of less than $25 per share with annual dividend yields of about 8%.

For a list of the targeted Trust Preferred Stocks that are currently selling for less than $25 per share, please consider subscribing to the CDx3 Notification Service today.

 You can submit your own preferred stock question: Submit your question.




Preferred Stock Market Research Now Available All Month Long - Free

Automatic Email Delivery Of Preferred Stock Market Research Now Available

Readers do not have to wait until next month's issue of the CDx3 Newsletter to stay plugged into the market for high quality preferred stocks. Preferred stock research articles, marketplace observations and preferred stock news from the financial press and other information are posted to the Preferred Stock Investing Reader's Forum (my "blog") throughout the month.

To receive articles by email automatically without having to visit the Forum, click here

 A separate window from FeedBurner (a Google service) will open on your screen. Enter and verify the email address that you want articles from the Forum to be emailed to as instructed. And don't worry - you'll never receive any spam from me and your email address will not be shared.

By receiving the articles as I post them via email, you do not have to visit the Forum in order to stay plugged into my research regarding the marketplace for the highest quality preferred stocks.

You are also invited to visit the Forum and comment on my articles.

Please accept my invitation to receive articles by email and visit the Forum 




Yields 7% To 8%, Prices Stable, Capital Gains Delivered By U.S. Government

It's A Great Time To Be A Preferred Stock Investor

Never before have preferred stock investors known so much about a specific opportunity, and known it so far in advance and with so much certainly.

It is really important that you understand this. This is the most important legislation to come along for preferred stock investors in quite some time.

While there are never any guarantees (we are, after all, talking about tasks performed by politicians during an election year), the Collins Amendment to the Financial Reform Bill should lead directly to our Big Banks replacing their currently-trading Trust Preferred Stocks with, in many cases, traditional preferred stocks, while paying you at least two year's worth of great dividend income in the meantime. See the Last Month's CDx3 Investor Results article above for full details.

Also important was the Federal Reserve's June 23, 2010 confirmation that they have no intention of raising the federal funds rate for "an extended period." This is good news for preferred stock investors who are holding large but unrealized capital gains as a result of bargain basement purchases made during the Global Credit Crisis.

As preferred stock prices have largely returned to their pre-crisis levels, many preferred stock investors are now sitting on huge gains. Since preferred stock prices tend to move inversely to interest rates, those sitting on these gains will continue to see great selling opportunities as long as the Fed delays raising rates.

Analysts are now saying that it will likely be well into 2011 before the Fed begins increasing the federal funds rate. Great news for preferred stock sellers sitting on big crisis-era gains.

The highest quality preferred stocks are currently yielding in the 7% to 8% range; prices are stable with many great issues selling for less than $25 per share and the Financial Reform Bill should be signed into law during early July. It's a great time to be an investor in the highest quality preferred stocks - "CDx3 Preferred Stocks."

I look forward to reporting back to you in next month's issue of the CDx3 Newsletter.






Senator Susan Collins (R-Maine)

Preferred Stock Investor Hero?














Learn to screen, buy and sell the highest quality preferred stocks by purchasing the third edition of my  book, Preferred Stock Investing (see retailers). The book identifies the resources that you need to be a very successful CDx3 Investor completely on your own. If you would rather we do the research and calculations for you I offer the CDx3 Notification Service (see reader comments).

Chapter 15 of Preferred Stock Investing includes a list of all of the CDx3 Preferred Stocks issued since January 2001 and the investing results you would have achieved had you invested in them using the CDx3 Income Engine.

And readers also receive free periodic updates to the preferred stock lists in chapter 15 as long as the Third Edition of the book is in print.

Please take a look at www.PreferredStockInvesting.com. And if you know someone who might be interested in simple investing for non-experts please have them send an email message to:


and they will automatically begin receiving this monthly CDx3 Newsletter next month (plus a CDx3 Special Report) - all FREE. 

Many Happy Returns,

Doug K. Le Du




Copyright (c) 2010 by Doug K. Le Du

CD Times 3, CDx3, CDx3 Income Engine, CDx3 Investor, CDx3 Portfolio, CDx3 Preferred Stock, CDx3 Perfect Market Index, CDx3 Bargain Table are trademarks of Doug K. Le Du.  All rights reserved.

Company logos are trademarks of the indicated companies. Service Marks (SM) are service marks of the indicated companies.

DISCLAIMER: The content of this CDx3 Newsletter is to be regarded as educational, rather than advisory. There can always be exceptions to trends and/or generalizations that may be discussed herein. Consider your financial resources, goals and risk tolerance before investing. You, and not Doug K. Le Du, are solely responsible for your own investment decisions.