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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:
This month's High Quality Preferred Stocks article describes how there are still plenty of investment grade preferred stocks available below their $25 par value to pick from. Out of the 959 preferred stocks and exchange-traded debt securities that were trading on U.S. stock exchanges at the end of March 2013, our preferred stock search engine found 17 specific issues. (jump to article)
The Preferred Stock News article presents the latest quarterly update to the Preferred Stock Market SnapshotTM chart. The article quantifies the effect of the Cyprus "bail-in" proposal on the U.S. preferred stock market during the first quarter and identifies three key trends for preferred stock investors to watch over the coming months. (jump to article)
The Special Announcement article announces a new and very powerful subscription program for preferred stock investors. Our Preferred Stock ListTM database and search engine, long enjoyed by subscribers to our comprehensive CDx3 Notification Service, is now available as a separate subscription for do-it-yourself investors. The database includes last trade price, today's trading volume, current yield, ex-dividend dates and much more, all of which can be sorted, downloaded and printed at any time. You can create and save your own filters and watchlists of trading symbols, too. (jump to article)
The Preferred Stock Facts article is presented both here and on the PreferredStockInvesting.com website. 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)
The Free Special Offer article explains how you can now have continuing preferred stock research delivered to you for free. 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. (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.
17 Investment Grade Preferreds Available for Less Than $25
New Preferred Stock Search Engine Finds These 17 Out of 959 Alternatives
There were thirteen new preferred stocks plus three new exchange-traded debt securities (ETDs) introduced during March. Of the 959 such securities trading on U.S. exchanges, 17 specific issues with Moody's investment grade ratings are trading below their $25 par value (March 29, 2013 prices).
Purchasing shares below $25 is an important consideration for many preferred stock investors. In the event that your shares are redeemed (bought back from you) by the issuing company, shareholders will receive the security's par value in cash in exchange for their shares. By purchasing shares below their par value ($25 in most cases and in all of the 17 cases shown here), preferred stock investors are able to add a layer of principal protection to their investment while also positioning themselves for a downstream capital gain in the event of a future call.
Figure 1 shows the complete filter used to find these gems. Of the nineteen parameters that can be set, the two arrows highlight the keys for this search. Setting the "Currently priced below par" parameter to "Yes" does the magic here.
In addition to finding securities with Moody's investment grade ratings that 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.
Figure 2 shows the results when this search is applied to our Preferred Stock ListTM database (please note that to protect the values of subscriptions to the CDx3 Notification Service, trading symbols are obscured here). Already a CDx3 Notification Service subscriber? See page 6 of the April 2013 issue of the subscriber's newsletter, CDx3 Research Notes, that you received on March 29 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 thirteen 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).
Many, including the Federal Reserve, think that rate increases are likely to still be a ways off (2015?) and that any such future increase is likely to be extremely gradual. If you feel that they are probably right, then the preferred stocks and ETDs listed in Figure 2 are offering some of the best choices available to you as an income investor.
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 April 2013 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 whenever a new preferred stock or exchange-traded debt security is introduced. Subscribers also receive their own non-promotional preferred stock research newsletter every month, have their own website that hosts the Preferred Stock ListTM 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.
Investment Grade Preferred Stocks Still Available For Less Than $25
Three Key Trends for Preferred Stock Investors
The idea that European banking officials might adopt a new bailout model, where the central banks of struggling countries are required to seize portions of citizen's savings accounts, pushed preferred stock market prices up in the U.S. right along with their common stock cousins.
Over the first quarter of 2013, the average market price of U.S.-traded preferred stocks increased by $0.23 per share to $25.67, up from $25.44 at the end of 2012 .
The new bailout ("bail-in") model saw its first test in Cyprus. Predictably, those lined up at ATM machines on the tiny island quickly sucked the machines dry and the run on banks promptly resulted in outright closures.
Officials there taught us what we already knew - If you're going to try to steal somebody's money, telling them in advance that you intend on doing so is not a way to secure their cooperation.
This Preferred Stock Market SnapshotTM chart depicts the preferred stock marketplace at the end of Q1 2013 (March 27, 2013) along with two characteristics that are usually high on the list of considerations for risk-averse preferred stock investors - current market price (above and below these securities' $25 par value) and investment risk (as reflected by investment grade versus speculative grade Moody's ratings).
Each diamond represents a qualifying preferred stock. An example is highlighted within each of the four quadrants. Given the events in Cyprus and the resulting effect on the U.S. equity market, it seems appropriate to use examples from financial institutions: JPM-K from JPMorgan (JPM), WFC-O from Wells Fargo (WFC), BAC-I from Bank of America (BAC) and RBS-T from the Royal Bank of Scotland (RBS) are shown with a blue diamond.
Preferred stock market trends can be identified by comparing the above ending-Q1 2013 chart with earlier quarterly iterations of this analysis.
Trend: Investment Grade Available For Less Than $25 Par
Preferred stocks that carry investment grade ratings and are trading for a market price below their $25 par value represent the sweet-spot for many preferred stock investors (green, lower left). During Q1, the number of investment grade preferred stocks selling for a market price under $25 fell to 22 issues (7% of the total), down from 36 issues three months ago (12% of Q4/2012's total).
While not nearly as robust as what we are used to, 22 issues is still plenty for most preferred stock investors to pick from (note that the data for the 22 securities tallied on this Snapshot chart was gathered on March 27 while the data for 17 preferreds seen in Figure 2 in the above article was gathered on March 29).
The average market price of these 22 investment grade preferreds was $24.75, up $0.36 from the ending-Q4 value.
These 22 sub-$25 investment grade preferred stocks are providing an average dividend yield of 5.46%; not what we'd like, but certainly much better than the alternatives being offered to today's income investors (compared to the miserly 1.1% and 3.9% being offered by bank CDs and investment grade corporate bonds, respectively ).
Trend: More Alternatives to Pick From
There were a total of 48 new preferred stocks issued during the first quarter of 2013 (through March 27), an average of 16 new issues per month; that's about double last year's pace.
For the issues that qualify for the Preferred Stock Market SnapshotTM chart, the U.S. preferred stock market offered 335 alternatives to pick from as the first quarter wrapped up. That's a net increase of 23 issues from three months earlier after subtracting redemptions (which are slowing down; see "Redemption Gap: Dividends From Redeemable REIT Preferred Stocks Likely To Continue").
Trend: Prices Moved Up Despite Lower Volume
Comparing this quarter's chart to that of last quarter, what I first noticed was that all of the diamonds had moved up; the entire data set is higher on the Y-axis (price) regardless of rating. The higher prices resulted in an overall average dividend yield of 6.46%, down from 6.55%.
But even though market prices increased during the quarter, note that the average daily trading volume fell off substantially at the end of Q1 2013 compared to the end of last quarter. One explanation could be that those purchasing U.S.-traded preferred stock shares during the first quarter, while more highly motivated (pushing up prices), were typically placing smaller orders (perhaps reflecting more individual investors than institutional buyers).
Concerns are voiced every day in the financial media, warning common stock investors about the likelihood of a downward correction. While the recent run-up in common stock prices has delivered gains, the warnings are grounded in the short-term nature of the cause. The Cyprus event, and reaction to it, will subside as a more acceptable equilibrium evolves.
In that event, look for preferred stock market prices to return to something closer to Q4/2012 levels as well. We'll see how it looks when I provide you with an update to this Preferred Stock Market SnapshotTM at the end of June.
- have a par value of $25.00;
- are currently trading on U.S. stock exchanges (excluding the Over-The-Counter exchange);
- are rated by Moody's Investors Service;
- do not have an announced redemption that is pending;
- are paying dividends (issues with deferred or suspended dividends were excluded);
- have a fixed dividend rate (preferreds with variable or adjustable dividend rates were excluded);
- had a non-zero trading volume on the day that the data was collected (March 27, 2013); and
- are not convertible to another type of security.
 Bank CD interest rate is the
average APY of the top ten 24-month certificates being offered by
U.S. banks on March 11, 2013; source: bankrate.com. Corporate bond
yield is the average daily yield offered by investment grade
corporate bonds during March 2013; source: federalreserve.gov.
More Preferred Stock Research
FROM DOUG K. LE DU
Click any headline
New Preferred Stock Database and Search Engine Now Available
Preferred Stock ListTM System Designed for Do-It-Yourself Investors
On January 1, 2013 our all new PreferredStockInvesting.com website introduced a new and very powerful subscription program for preferred stock investors.
Our Preferred Stock ListTM database and search engine, long enjoyed by subscribers to our comprehensive CDx3 Notification Service, is now available as a separate subscription for do-it-yourselfers. The database includes all preferred stocks and exchange-traded debt securities trading on U.S. exchanges while the Create Your Own Filter search engine feature allows you to define your own filters when looking for specific issues. You can even save your filters for later use.
Our database includes last trade price, today's trading volume, current yield, ex-dividend dates and much more, all of which can be sorted, downloaded and printed at any time. You can create and save your own watchlists of trading symbols, too.
And the Preferred Stock ListTM system, now available as a separate subscription, runs completely within your web browser which means there is no software to install onto your computer whatsoever (Windows or Mac).
The Create Your Own Filter search engine is extremely powerful. The sample 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.
Our two subscription programs as described in detail at PreferredStockInvesting.com now include:
(1) our comprehensive CDx3 Notification Service - includes the Preferred Stock ListTM system, email alerts of new preferred stocks and exchange-traded debt securities, one-click Hotlists of the highest quality preferred stocks, monthly subscriber's newsletter, access to experts through our online discussion group and much more; and
(2) the Preferred Stock ListTM system itself - includes our Preferred Stock ListTM database and search engine. This new subscription program is great for do-it-yourselfers!
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).
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.
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.
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) 2013 by Del Mar Research, LLC.
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 Del Mar Research, LLC. All rights reserved.
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 Del Mar Research, LLC, are solely responsible for your own investment decisions.