One of the highest reader-rated books in the United States.

 

See the new Fifth Edition of Preferred Stock Investing at Amazon!

   
 

“No other service offers the simple and direct approach to preferred investing...I'm dropping other services.” Dennis H., CDx3 Notification Service subscriber   MORE>>

In This Issue...

High Quality Preferred Stocks

Preferred Stock News

Special Announcement

Preferred Stock Facts

FREE Special Offer

   
 

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.

 


Quick Summary

This month's High Quality Preferred Stocks article lists the seven 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 April 2014, our preferred stock search engine found seven 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 five income securities offered by Allstate Insurance Corporation. The return being generated by each of these five investment grade securities is roughly triple that being offered by the two percent yield of the company’s common shares. (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 (upward pressure on rates). 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.

Doug K. Le Du

I am a preferred stock researcher and author of the book titled Preferred Stock Investing. I am also a syndicated writer for the popular investing venues Seeking Alpha and Motley Fool. I write three monthly newsletters that describe my ongoing preferred stock research. One newsletter, titled Preferred Stock List, is published by PortfolioChannel.com while the other two newsletters (CDx3 Newsletter and CDx3 Research Notes) are published by me directly to my readers/subscribers.

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.

 

   
 

7 Investment Grade, 6.5+ Percent Cumulative Preferreds Available Under $25

Preferred stock search engine finds these seven out of 922 alternatives

The seven 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.

I define 'high quality' here as securities that are able to meet all ten of the CDx3 Selection Criteria from my book, Preferred Stock Investing.

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 6.5 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 6.500 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 May 2014 issue of the subscriber's newsletter, CDx3 Research Notes, that you received on April 29 for symbols.

There were a total of 922 preferred stocks and ETDs trading on U.S. stock exchanges as April 2014 came to a close. Of these 922, seven specific high quality issues are trading below their $25 par value (April 28, 2014 prices). This list is sorted by dividend rate (coupon) with the highest payers listed first.

The two 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 five 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 May 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 75 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 (upward pressure on rates).

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 1

Preferred Stock Search Engine

INVESTMENT GRADE, CUMULATIVE DIVIDENDS,

CURRENTLY PRICED BELOW $25 PAR

 

Source: CDx3 Notification Service, www.PreferredStockInvesting.com

 

Click To See Bigger Screen Sample

 

 

 

 


 

Figure 2

The 7 Highest Quality Preferreds

PRICED BELOW $25 PAR (April 28, 2014 prices)

 

Source: Preferred Stock List(TM), PreferredStockInvesting.com

 

Subscribe For Trading Symbols

 

(Already a subscriber? For actual symbols see page 6 of the May 2014 issue of the subscriber's newsletter, CDx3 Research Notes).

 
   
 

Allstate Insurance Corporation Preferred Stocks: Opportunities and Risks

Allstate's five income securities are providing about triple the yield of its common shares

Allstate Insurance Corporation (NYSE: ALL) has a $25.5 billion market capitalization and offers four traditional preferred stocks and one Exchange-Traded Debt (ETD) security for the consideration of preferred stock investors.

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.

Allstate’s ETD carries a Baa1 Moody’s rating (two notches into investment grade territory) while the company’s four traditional preferred stocks are rated Baa3 (bottom of the investment grade scale).

Market strategy and performance

Allstate delineates their market along two customer-focused characteristics, creating the four distinct market segments illustrated in Figure 3 – (1) the preference for full-service versus self-service and (2) those that prefer a specific brand versus those who are less brand-sensitive.

This strategy, while comprehensive, presents challenges as the company continues to adjust their approach to finding the balance between policy growth and profitability. Policy growth is being primarily realized by the self-service (internet) segments, with esurance reporting an impressive 2013 policy in force (PIF) growth of 26.7 percent over 2012. But this same segment realized a 2013 combined ratio of 117.5 (the combined ratio is the amount paid out in policy expenses divided by the amount collected in premiums, a value exceeding 100 indicating a loss).

Conversely, the full-service Encompass and Allstate brand segments reported solid sub-100 combined ratios (profitable policies) for 2013, but more modest, single-digit policy growth (see Figure 4).

In other words, during 2013, Allstate’s four-segment business model saw policy growth in the unprofitable self-service segments and stagnant growth in the two profitable full-service segments.

It’s hard to tell from company filings and investor information if the self-service segment growth is coming at the expense of branded, full-service products. To the extent that this is the case, the company is effectively converting full-service profitable customers into its self-service unprofitable segment.

Investment performance was a bright spot during 2013 for Allstate as it was for just about every other investor. Surging equity markets and fixed-income yields allowed the company to book about $1.4 billion in investment income, a 3.7 percent increase over 2012.

Despite the challenges of its four-segment business model, however, Allstate still posted a 24 percent increase in operating income over 2012. But this impressive result came almost entirely from a fortunate reduction in catastrophe claims rather than improvements in its operations or gains in market share. Pure luck delivered a 46.7 percent reduction in losses attributable to catastrophe claims compared to 2012.

By year end, the company’s 2013 net income declined by $43 million (1.9 percent) on $34.5 billion in consolidated revenue.

Allstate preferred stock

Allstate issued its ETD and four preferred stocks within a thirteen month period, beginning in January 2013. The return being generated by each of these five securities is roughly triple that being offered by the two percent yield of the company’s common shares.

While there are some weaknesses to these securities, they do represent stable, long-term income and a diversification opportunity for preferred stock investors looking to extend their portfolio into the insurance segment.

As listed in Figure 5, all five of Allstate’s income securities use the calendar quarter as their dividend cycle. The June dividend for ALL-B, the ETD, has already been declared. Note that the first dividend for the new ALL-E preferred has yet to be declared but is expected to occur in June as well.

With the exception of their coupon rates, Allstate’s four preferred stocks (ALL-A, -C, -D and –E) are nearly identical in their prospectus provisions. All offer five-year call protection (from IPO), investment grade ratings, $25 par values and pay quarterly dividends on the same schedule.

But the diversification benefit that these securities offer must be considered in light of their primary weaknesses. Allstate’s four preferred stocks have non-cumulative dividends and are offering below-market current yields (the average current yield for high-quality traditional preferred stocks is 6.7 percent) for above-par prices (with the exception of ALL-A).

ALL-A is available for a below-par share price, adding a layer of principal protection and a capital gain in the event of a downstream call. But today’s buyers of ALL-A will likely be holding their shares for a very long time since, with a historically low 5.625 percent coupon, Allstate is unlikely to redeem ALL-A shares any time soon.

Even in the face of a changing marketplace, where its primary product is highly commoditized with shrinking brand loyalty and its method of delivery is changing from highly profitable full-service to marginally profitable (or, as yet, unprofitable) self-service, the risk of default is extremely low.

The primary attraction to Allstate’s income securities is therefore the stability of the income they can provide over a long period of time and the diversification opportunity they may represent for your income portfolio.

 


More Preferred Stock Research

FROM DOUG K. LE DU

Click any headline

 


 

 

 

 

 

 

 

 

 

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Figure 4

 

 

 

Figure 5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   
 

Fifth Edition of Preferred Stock Investing is Now Shipping!

Learn how 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 74 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 (upward pressure on rates).

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).


 

 

 

 

 

 

   
 

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.

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 


 

 

   
   

Learn to screen, buy and sell the highest quality preferred stocks by purchasing the new Fifth 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 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

 

 

 
   
 

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.