 One of the highest reader-rated books in the United States.
See the new Fifth Edition of Preferred Stock Investing at Amazon! |
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“The 10 point analysis of preferreds make this very simple for the average investor...this is the best way to evaluate dividend stocks.” Donald B., CDx3 Notification Service subscriber MORE>> |
In This Issue... | ||||||
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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: CDx3NotificationService@us.emaildirect.com.
This month's High Quality Preferred Stocks article lists the eleven highest quality preferred stocks that are selling for a sub-$25 market price and offering income investors just under seven percent yields in today's preferred stock marketplace. Out of the 922 preferred stocks and exchange-traded debt securities that were trading on U.S. stock exchanges at the end of June 2014, our preferred stock search engine found eleven specific high quality issues selling below their $25 par value. (jump to article) The Preferred Stock News article examines the opportunities and risks of the single income security offered by AFLAC, Inc. AFLAC's preferred stock, trading under the symbol AFSD, offers double-investment grade ratings, cumulative dividends and provides over double the current yield as the company's common stock. (jump to article) The Special Announcement article announces the availability of the 5th Edition of my book, Preferred Stock Investing. I update the book every other year with the most recent preferred stock research, focusing on the conditions that preferred stock investors are expected to be facing. Learn to screen, buy and sell the highest quality preferred stocks. (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 my blog 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. |
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11 Investment Grade, 6+ Percent Cumulative Preferreds Available Under $25 Preferred stock search engine finds these eleven out of 922 alternatives The eleven highest quality preferred stocks that are selling for a sub-$25 market price are offering income investors just under seven percent yields in today's preferred stock marketplace. As rates and prices move up and down over time, buyers buy when rates increase and prices fall below par ($25 per share in this case). Sellers sell those shares when rates fall again, pushing prices back above their original purchase price, enjoying seven percent (long-term average) dividends in the meantime. This is why preferred stock investing is long-term investing, taking advantage of the known inverse relationship between rates and prices over time. The search engine parameters seen in Figure 1 look for preferred stocks and exchange-traded debt securities (ETDs) that are currently trading below their $25 par value, pay a minimum annual dividend of at least 6.0 percent, have cumulative dividends and offer investment grade ratings from Moody's Investors Service. Currently priced below par 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 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 four arrows highlight the keys for this search. Setting the "Currently priced below par" parameter to "Yes" does the magic here. In addition to finding the highest quality issues that are currently trading below their $25 par value, this filter also limits the list to issues that have not suspended their dividend payments. Setting the "Dividend rate at least" parameter (center left under the Dividends heading) to 6.000 eliminates securities with very low, 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. Results 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 July 2014 issue of the subscriber's newsletter, CDx3 Research Notes, that you received on June 26 for symbols. There were a total of 922 preferred stocks and ETDs trading on U.S. stock exchanges as June 2014 came to a close. Of these 922, eleven specific high quality issues are trading below their $25 par value (June 25, 2014 prices). This list is sorted by dividend rate (coupon) with the highest payers listed first. The three securities shown in green font are ETDs (ETDs are bonds that trade on the stock exchange rather than the bond market and are very similar to preferred socks) while the remaining eight 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). Keep an eye out for sub-$25 buying opportunities such as those listed here. The lower your purchase price, the more principal protection you'll have. 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 June 2014 issue of the subscriber's newsletter, CDx3 Research Notes.
Learn To Screen, Buy and Sell The Highest Quality Preferred Stocks
Preferred Stock Investing is one of the highest reader-rated books in the United States with 76 reviews posted at Amazon. A new edition of Preferred Stock Investing is published every other year in order to keep up with current market trends and research. The new Fifth Edition addresses selecting, buying and selling the highest quality preferred stocks during the market conditions that we are expected to face throughout 2014. See: Reviews | Table of Contents | Free Excerpt | Paperback | eBook Preferred Stock Investing includes the information, websites and other resources needed for you to be a very successful preferred stock investor. The Fifth 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. |
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AFLAC Preferred Stock Remains Popular Despite Japan-Centric Risk Preferred offering provides over double the current yield as the company's common stock AFLAC, Inc. (NYSE: AFL), a U.S. supplemental insurance company with a $30 billion market capitalization, is well known for its very clever duck commercials. AFLAC’s common stock is providing a current dividend yield of 2.3 percent while the current yield of its single exchange-traded debt security (ETDS) is offering 5.6 percent to today’s buyers (June 27, 2014). ETDS are very similar to preferred stocks and are often labeled as such on brokerage statements. But ETDS are recorded on the company’s books as debt, rather than equity, and are actually bonds that trade on the stock exchange (rather than the bond market). As debt, ETDS are often considered to represent lower investment risk than the same company’s preferred stocks and distributions are classified as interest income. Trading under the symbol AFSD, the security boasts double investment grade ratings (Baa1/BBB) and offers a 5.5 annual percent dividend (coupon). (Source for preferred stock data: CDx3 Notification Service database, PreferredStockInvesting.com) Description and History AFLAC was established in 1955 as a family insurance business, its current CEO, Dan Amos, being the son of one of the original brothers that founded the company. AFLAC has a very interesting business model in several ways. Rather than offer primary insurance policies, AFLAC offers health and life supplemental policies as additional coverage to a policyholder’s existing insurance. That strategy has served the company very well in recent years. In the U.S., it has allowed them to, at least for now, sidestep much of the teeth-gnashing that has consumed primary health insurance providers over the Affordable Care Act. And in Japan, being a supplementary coverage provider has allowed them to do a mega-deal with Japan Post. Because of that deal, AFLAC now insures one out of every four households in Japan. (Sources: AFLAC website | Yahoo Finance) As illustrated in Figure 3, the percentage of AFLAC’s revenue that comes from its Japan operations has grown to 74 percent, dwarfing its U.S. business. Obviously, the stability of Japan’s economy, monetary policies and currency have a lot to say about AFLAC’s wellbeing. But AFLAC’s investment portfolio also raises eyebrows. Like most insurance companies, premium revenues are invested primarily in AAA-rated government bonds and AFLAC is no exception. However, a closer look at their portfolio reveals that their holdings are primarily in Japan Government Bonds (JGBs). While the company has sought to move away from this “double-down” of their Japan-centric risk, 74 percent of new cash flow during Q1 2014 was investing in JGBs with the remaining 26 percent going to U.S. securities. Lastly, in addition to the risks associated with 74 percent of their revenue coming from its Japan Post deal and the majority of the proceeds being invested back into JGBs, Japan Post is owned by the Japanese government (despite enormous and very controversial efforts to privatize the agency over the last few years). (Sources: AFLAC's CEO Discusses Q1 2014 Results - Earnings Call Transcript, April 30, 2014 | Wikipedia) AFLAC’s Preferred Stock The U.S. preferred stock market is currently a 6.8 percent market and prices have returned to pre-QE2 levels. Further, there are currently 39 high-quality preferred stocks, most with double investment grade ratings and cumulative dividends, offering dividend rates of at least 6.5 percent (June 27, 2014). Figure 4 shows that AFSD, AFLAC’s sole offering to preferred stock investors, was issued in September 2012 at 5.5 percent with a September 2017 call date and a September 2052 maturity. Trading recently at $24.54 per share, a $.46 discount to par, AFSD is offering buyers a below-market current yield of 5.6 percent. Given the alternatives currently available, a compelling case for AFSD seems like it would be hard to make. But AFLAC’s AFSD trades over 30,000 shares on most days. That’s relatively high for this type of security, especially one that is almost two years old. (Sources: CDx3 Notification Service database, June 27, 2014 | SEC: AFSD Prospectus) What’s Next? Due to AFSD’s relatively low 5.5 percent dividend rate, this security is particularly exposed to the “perpetual ownership trap.” Such securities with a dividend rate of at least 6.5 percent are generally able to ultimately be sold for a capital gain either on the open market or to the issuing company as the result of a redemption (there have only been two exceptions since January 2001). Those holding shares that offer a dividend rate below 6.5 percent, however, are often held much longer (Preferred Stock Investing, Fifth Edition, page 141).
Investing in AFLAC’s AFSD is
attractive to very long-term investors who are looking for the
stability implied by a decades-old company with very solid financial
performance and management offering a fixed-return ETDS with double
investment grade ratings. AFSD’s 2052 maturity date re-defines
long-term preferred stock investing, but with over 30,000 shares
trading every day, stability more than income is the attraction
here. More Preferred Stock Research FROM DOUG K. LE DU Click any headline
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Fifth Edition of Preferred Stock Investing is Now Shipping! Learn how to screen, buy and sell the highest quality preferred stocks
A new edition of Preferred Stock Investing is published every other year in order to keep up with current market trends and research. The new Fifth Edition addresses selecting, buying and selling the highest quality preferred stocks during the market conditions that we are expected to face throughout 2014. See: Reviews | Table of Contents | Free Excerpt | Paperback | eBook The preferred stock market has returned to a market favoring buyers - higher dividend income available for lower prices. The new Fifth Edition has 21 chapters organized into six Parts over 334 pages. Here are some highlights: - Part I, "The Preferred Stock Market," introduces a new suite of charts and metrics specifically designed to measure and track the preferred stock marketplace. - Part III, "Buying the Highest Quality Preferred Stocks," includes several new chapters such as "Buying 'Fed-Free' Preferred Stocks," "Keeping Up with Increasing Interest Rates" and "Buying Less-Than-Perfect Preferred Stocks." - And chapter 8, "Managing the Risks," has been completely rewritten and expanded to include risks that are unique to preferred stocks during the increasing rate environment that awaits us. You can pick up a copy of the new Fifth Edition of Preferred Stock Investing at your favorite online retailer such as Amazon (paperback) or directly from BookLocker, the book's publisher (BookLocker provides paperback and PDF eBook formats). |
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Test Your Knowledge With These Preferred Stock Facts!
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).
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 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. Please accept my invitation to receive articles by email and visit the Forum. |
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Chapter
17 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.
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
sign up for this free monthly preferred
stock research newsletter
at
www.PreferredStockInvesting.com.
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 |
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Copyright (c) 2014 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.
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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.
