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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 the pretenders, 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, 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."
This month's High Quality Preferred Stocks article describes how a new preferred stock search engine was used to search all 985 preferred stocks and exchange-traded debt securities to find the 18 investment grade issues that are currently trading for a market price below their $25 par value. Research that used to take hours was completed in less than 10 seconds using this new engine. (jump to article)
The Preferred Stock News article reminds us of how important the cumulative dividend characteristic can be for preferred stock investors. During the Global Credit Crisis it was this characteristic, more than any other, that saved preferred stock investors with a 100% success record. And now it looks like shareholders of CTZ-A, the only "high quality" preferred stock in history to ever defer a dividend, are about to be made whole due to this same cumulative dividend characteristic. (jump to article)
The Special Announcement article announces the availability of a new preferred stock search engine. The Create Your Own Filter page allows preferred stock investors to instantly search all preferred stocks and exchange-traded debt securities trading on U.S. stock exchange using up to nineteen key parameters. (jump to article)
The Preferred Stock Facts article is presented both here and on the Preferred Stock Investing Reader's Forum. Test your knowledge by clicking on any preferred stock question to see the multiple-choice answers. You will receive an automatic email that provides you with the correct answer and my explanation. (jump to article)
In the Free Special Offer article I offer to provide you with some of the research from my book, Preferred Stock Investing, Fourth Edition. I am making it available to brokers, financial planners and investment groups for free. (jump to article)
Enjoy this month's issue. I look forward to reporting back to you in next month's issue of the CDx3 Newsletter.
18 Investment Grade Preferreds Available for Less Than $25
New Preferred Stock Search Engine Finds Gems on Command
There are currently 985 preferred stocks and exchange-traded debt securities (ETDs) trading on U.S. stock exchanges. That's both the good news and bad news. Good news because 985 securities is plenty for preferred stock investors to pick from; bad news because 985 is a lot to try and pick through to find just the ones that fit your specific criteria.
Common criteria for such a search include investment grade ratings and a current market price that is below the security's par value (usually $25 per share). While such ratings do not have the credibility they once did, the fact is that most investors use them as a proxy for investment risk. And purchasing shares below their par value adds a layer of principal protection to your investment plus positions you for a nice capital gain, on top of the regular dividend income that these securities pay, in the event of a downstream call by the issuing company.
The new preferred stock search engine described in the Special Announcement article below was able to find 18 investment grade preferred stocks that are trading for less than their $25 par value (September 27, 2012 prices). Figure 1 presents the filter screen from the new preferred stock search engine used to find these gems and it found them in less than 10 seconds (including the time to set up the filter parameters).
Notice that the "Moody's" field is set to "Investment Grade" (lower left under the Ratings heading) and the "Currently priced below par" field is set to "Yes" (center right under the Today's Market heading).
There are a total of nineteen preferred stock characteristics that can be set, each of which has multiple values to pick from so you can tighten the search down as specifically as needed (or not). In addition to finding securities with Moody's investment grade ratings and are currently trading below their $25 par value, this filter also limits the list to just issues that are trading on the New York Stock Exchange (NYSE) and have not suspended their dividend payments.
Setting the "Dividend rate at least" parameter (center left under the Dividends heading) to a 1 eliminates securities with variable or adjustable dividend rates. And by setting "Today's price, at least" to $0.01 and "Today's volume, at least" to 1 share the filter will exclude less liquid issues (securities that have not traded today).
This is just one example. Click on the filter image to see another one along with a more detailed explanation.
The Create Your Own Filter page applies the criteria you specify to the Preferred Stock ListTM database available to subscribers to the CDx3 Notification Service (my preferred stock email alert and research newsletter service). Of the 985 preferred stocks and ETDs trading on U.S. stock exchanges, there are 18 specific issues that meet the common criteria used here.
Figure 2 shows the results (please note that to protect the values of subscriptions to the CDx3 Notification Service, trading symbols are obscured here. Already a subscriber? See page 6 of the October 2012 issue of the subscriber's newsletter, CDx3 Research Notes that you received on September 27 for symbols).
The four securities shown in green font are ETDs (bonds that trade on the stock exchange rather than the bond market and are very similar to preferred socks) while the remaining fourteen securities listed are preferred stocks. All have a current market price (seen in the Last Price column) that is below their $25 par value (as shown in the Liquid Price column) and enjoy an investment grade rating from Moody's (the Moody's column).
Please consider becoming a subscriber to the CDx3 Notification Service today.
Already a subscriber? The trading symbols for this example are provided on page 6 of the October 2012 issue of the subscriber's newsletter, CDx3 Research Notes.
Learn To Screen, Buy and Sell The Highest Quality Preferred Stocks
Preferred Stock Investing includes the information, websites and other resources needed for you to be a very successful preferred stock investor. The Fourth Edition is now available at your favorite online retailer. 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 database 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 today.
Cumulative Preferred Stock Dividend Characteristic Saves Citizens Republic Shareholders
Fitch: CTZ-A Shareholders 'expected' to Receive Massive Dividend Backpay
The same preferred stock characteristic that played such a key role in saving preferred stock shareholders during the Global Credit Crisis worked its magic once again a couple of weeks ago. On September 13, 2012, Citizens Republic Bancorp (CRBC) announced a merger agreement with First Merit (FMER). This deal was not only important for the principals, their shareholders and customers, but it serves as a real world reminder to preferred stock investors of how important the cumulative dividend characteristic can be.
The April 10, 2012 Seeking Alpha article titled "Identifying The Lowest Risk Preferred Stocks" uses the Global Credit Crisis (June 2007 through March 2009) as a study period to examine the relationship between the troubled banks that failed during that period and those that survived.
Specifically, the analysis evaluates the characteristics of the 70 preferred stocks issued by these twelve struggling banks during extreme conditions in order to determine if there were signals that would have tipped off investors to the higher risk preferred stocks.
Eight of these twelve Big Banks failed while four survived through acquisition. The eight that failed had 57 preferred stocks trading at the time; the four that survived had 13 preferreds trading.
Interestingly, the 13 preferred stocks issued by the four Big Banks that survived all met the ten "high quality" preferred stock criteria found in chapter 7 of my book, Preferred Stock Investing. Further, the 57 preferred stocks offered by the eight Big Banks that failed were those that were unable to meet the high quality criteria.
The high quality criteria, first published in 2006, got it right in 70 out of 70 cases.
Countrywide and Merrill Lynch were acquired by Bank of America (BAC), National City was acquired by PNC Financial (PNC) and Wells Fargo (WFC) grabbed Wachovia. The preferred stocks issued by these acquired banks continued to pay their dividends uninterrupted.
The April article concludes:
"Using the Global Credit Crisis (June 2007 through March 2009) as a study period allows us to see the relative importance of preferred stock characteristics and their contribution to investing risk. While all characteristics are important and should be considered by preferred stock investors, the cumulative dividend characteristic separated winners and losers more definitively than any other characteristic during those very extreme conditions."
Citizens Republic Bancorp Trust Preferred Stock (CTZ-A)
With one exception, there has never been a case where a preferred stock that was able to meet the ten "high quality" criteria missed a dividend payment (my data goes back to 1926). The exception is the trust preferred stock issued by Citizens Republic Bancorp on September 28, 2006. CTZ-A has a dividend (coupon) rate of 7.50% which computes to a quarterly dividend obligation of $0.4688 per share.
Citizens is headquartered in Flint, Michigan, home of the U.S. auto industry. While Citizens survived the Global Credit Crisis (2007—2009), the auto industry meltdown that followed was a staggering second blow. The bank deferred the dividend on CTZ-A, its only publicly traded preferred stock issue, on January 28, 2010.
Since then, the management team at CRBC has worked diligently to recover. On July 28, 2011 the bank announced that it had returned to profitability.
Cumulative Dividend Characteristic Rescues Shareholders Once Again
But the big news for CTZ-A shareholders came just a couple of weeks ago on September 13, 2012 when the bank announced a merger agreement with Ohio-based First Merit.
While the merger will take several more months to complete, Fitch released a statement saying that Fitch "...expects CRBC's outstanding trust preferred shares to become current..."
Procedurally, the merger deal has to come to fruition and at that time the merged company's board of directors will declare the (massive) dividend for CTZ-A. The New York Stock Exchange will set the ex-dividend date at about two days prior to the record date declared by the board. Those holding shares of CTZ-A on that ex-dividend date will receive the declared dividend.
In anticipation of the big payout, the market price of CTZ-A jumped on the announcement.
It is because CTZ-A has the cumulative dividend requirement that CTZ-A shareholders appear about to be made whole again. Just as it did more than any other single characteristic during the Global Credit Crisis, the cumulative dividend characteristic appears to have once again saved preferred stock investors. Congratulations to CTZ-A shareholders; it looks like your patience is going to pay off.
New Preferred Stock Search Engine Now Available
'Create Your Own Filter' Page Includes Current Market Price Searching
On October 1, 2012 we added a very powerful feature to our Preferred Stock ListTM software application. The Create Your Own Filter page allows subscribers to the CDx3 Notification Service to define their own filter when searching our Preferred Stock ListTM database of preferred stocks and exchange traded debt securities (ETDs). The CDx3 Notification Service is my preferred stock email alert and research newsletter service.
The Create Your Own Filter page includes nineteen characteristics that you can tailor to find just the preferred stocks and ETDs that you are looking for including current market price, today's trading volume and current dividend yield. And you can save your filters for later use, too.
The sample filter seen here generates a list of Moody's investment grade, cumulative REIT preferreds and exchange-traded debt securities that are not yet callable, are trading on the NYSE and are currently priced below their $25 par value. The combinations are endless.
Here's another feature: The new Create Your Own Filter page also includes a very powerful feature called "Stock Check" that you can use to not just see the characteristics of a particular security, but also see a list of upgrade candidates for the security you specified. The upgrading technique allows you to "trade in" a low dividend paying preferred stock for a higher paying one and have cash left over when you're done (not familiar with "upgrading" a preferred stock? See the August 2012 issue of the CDx3 Newsletter for an example).
The CDx3 Notification Service is the most comprehensive resources available for preferred stock investors. And the new Create Your Own Filter page is the most powerful preferred stock search engine available anywhere. Please consider subscribing to the CDx3 Notification Service today.
Test Your Knowledge With These Preferred Stock Facts!
There's a lot to like about preferred stocks. And many aspects of selecting, buying and selling the highest quality issues are misunderstood. Here are a few frequently asked questions that illustrate some of the more subtle points of preferred stock investing.
Clicking on any of the below questions will open a new window on your screen. Each question is presented with multiple-choice answers. Test your knowledge by submitting your best guess and I will automatically email you my analysis with the correct answer (and no spam, ever).
Brokers And Investment Groups: Free 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.
to screen, buy and sell the highest
quality preferred stocks by
the Fourth 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
CDx3 Notification Service
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.
readers also receive free periodic
updates to the preferred stock lists in
chapter 15 as long as the Fourth Edition
of the book is in print.
take a look at
And if you
someone who might be interested in simple
for non-experts please have them send an email
they will automatically
begin receiving this monthly CDx3
next month (plus a
CDx3 Special Report) - all FREE.
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 Fourth 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) 2012 by Doug K. Le Du
Preferred Stock List, 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.