Great Resources for Preferred Stock Investors!






Issue 103


Subscribe: CDx3 Notification Service

  See Preferred Stock Investor Reviews


Preferred Stock Investing, 5th Edition

  See Reader Reviews


Free Preferred Stock Resources


In This Issue:

High Quality Preferred Stocks

Preferred Stock News

Special Announcement

More Preferred Stock Research

Free Special Offer




"The metrics that you provide are very valuable to me and put the preferred market into perspective at any given point in time, which allows me to be a better preferred stock investor.”

- from Ken W, CDx3 Notification Service subscriber, September 5, 2015. See more preferred stock investor reviews here.














by Doug K. Le Du


Preferred stock researcher

PortfolioChannel contributor

Syndicated writer






85 Reader Reviews


See Reader Reviews

Table of Contents

Free Excerpt


















































Already a subscriber?

See page 1 of this month's issue of the subscriber's newsletter, CDx3 Research Notes, for symbols.








Top 10 Investment Grade, Cumulative Preferreds Available Under $25



The ten highest quality preferred stocks that are selling for a sub-$25 market price are offering income investors an average 6.9 percent Yield-To-Call in today's preferred stock marketplace.

As rates move up and down over time, prices tend to move in the opposite direction, moving down and up, respectively. 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, have cumulative dividends (meaning that if the issuing company skips a dividend payment to you, they still owe you the money) 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 twenty 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 offer cumulative dividends and are currently trading below their $25 par value, this filter also limits the list to issues that have not suspended their dividend payments. 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 List
TM database (please note that to protect the values of subscriptions to our CDx3 Notification Service, trading symbols are obscured here). Already a CDx3 Notification Service subscriber? See page 1 of this month's issue of the subscriber's newsletter, CDx3 Research Notes, that you received at the end of last month for symbols.



There were a total of 896 preferred stocks and ETDs trading on U.S. stock exchanges as last month came to a close. Of these 896, these are the top ten highest quality issues that are trading below their $25 par value. This list is sorted by dividend rate (coupon) with the highest payers listed first.

The 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 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.

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 our CDx3 Notification Service today. We offer monthly and annual subscriptions for individuals and groups. Check out these features:


















Preferred Stock Market Q3/2015: Investment Grade Preferred Stocks Available Below $25


Income investors are focused like a laser on the Fed and its interest rate deliberations with those holding unrated shares (i.e. those that offer no Moody’s rating) being much quicker to bail out as the threat of a rate hike approached on September 17.

Preferred stock buyers view a period of falling prices as a time to buy more dividend-paying shares while price speculators applying value investing strategies to an income investment generally view such a period as a time to sell.

Call-Protected U.S.-traded Preferred Stocks

As we approached the Fed’s September 17 FOMC rate announcement, the average market price of call-protected U.S.-traded preferred stocks (rated and unrated) started to fall, bottoming out at $24.73 per share on September 15.



Buyers jumped back in throughout the third week of the month once it became known that there would be no increase in the federal funds rate just yet.

Not to be deterred, those fearing a September rate hike turned their gaze toward the next Fed meeting, coming up on October 27-28 and started selling again at month-end. The average market price of rated plus unrated, call-protected preferred stocks ended Q3 at $24.56 per share, down $0.18 for September and down $0.43 throughout the quarter.

The Preferred Stock Market, Q3/2015

As controversial as creditworthiness ratings have been, preferred stock investors who hold rated shares tend to hold them with a tighter grip than those who hold unrated shares.

This Preferred Stock Market Snapshot™ chart depicts the preferred stock marketplace at the end of Q3/2015 using 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 Moody's-rated preferred stock. The sweet spot of the preferred stock marketplace is depicted in the green lower-left quadrant - investment grade preferreds selling for a market price below their $25 par value.

While there are currently 896 preferred stocks trading on U.S. stock exchanges, 304 meet the criteria listed under the chart. The arrow in the table below the chart points to the migration that we have seen over the last three months. As prices of Moody’s-rated preferreds, as a group, have increased since the end of Q2, the percentage of the market occupied by investment grade securities that are priced below $25 has fallen to 18 percent, down from 25 percent.

Holding all of the other criteria listed under the chart constant, the average ending-Q3 market price of securities without a Moody’s rating ended the quarter at $23.56 (not shown) compared to $25.35 for the Moody’s-rated shares depicted in the chart. Those holding unrated shares were willing to accept $1.79 per share less in order to exit their positions at the end of Q3.

(Source: CDx3 Notification Service database,

What Does $25 Buy?

The purple diamonds on the above chart identify one preferred stock from each quadrant that is selling for about $25 (not to be taken as recommendations): JPM-G, THGA, VNO-I and NSS. These four securities provide a sense for what $25 buys in today’s preferred stock marketplace.


Note that for comparison purposes, I have selected Current Yield (CY) for the Yield column rather than Yield-To-Call (YTC) or Effective Annual Return (EAR) since VNO-I has exceeded its call date (YTC and EAR are not able to be calculated in such cases). Securities shown in green font (THGA and NSS) are exchange-traded debt securities.

JPM-G is a traditional preferred stock and was introduced by JP Morgan (JPM) in May of this year at 6.1 percent. It pays non-cumulative dividends, rather than interest, so those dividends are designated as Qualified Dividend Income, taxed more favorably (see “Are Lower Tax Preferred Stock Dividends Really A Better Deal?”, December 2, 2014). Not callable until September 2020, at $24.96 JPM-G offers a Yield-To-Call (now shown) of 6.2 percent.

THGA is an exchange-traded debt security from Hanover Insurance Group (THG). ETDs are actually bonds that trade on the stock exchange and are very similar to preferred stocks (and may actually be listed as such on your brokerage statement). As a bond, your quarterly proceeds are interest, rather than dividends, and therefore are taxed as regular income. At $25.20, THGA offers a YTC of 6.02 percent (not shown).

VNO-I is a traditional preferred stock from Vornado Realty (VNO), a retail and office property REIT. Issued in August 2005 with a five-year call period, this security became callable on August 31, 2010. VNO-I pays cumulative dividends that are not QDI designated. Market participants have started pricing VNO-I as if the likelihood of a call is very high; the saw tooth price pattern typical of such cases kicked in last spring for this security. VNO-I now trades close to its Positive Return Line throughout each quarter (see “Another Principal Protection Strategy For Today's Preferred Stock Investors”, February 19, 2014).

NSS is an ETDs introduced by NuStar Logistics LP (a master limited partnership in the oil pipeline business) in January 2013, becoming callable on January 15, 2018. As a bond, NSS pays interest that is taxed as regular income. At $24.79 per share, NSS provides a YTC of 8.03 percent. The coupon structure of NSS is “fixed-to-floating”, meaning that it has a fixed coupon of 7.625 percent until its January 15, 2018 call date. At that point, the coupon rate changes each quarter to the sum of the three-month LIBOR rate plus 673.4 basis points (see “Variable-Rate Preferred Stocks Underperform Their Fixed-Rate Cousins”, November 12, 2013).

These four securities, one from each of the four key quadrants depicted by the Preferred Stock Market Snapshot™ chart, are from four vastly different companies but are being very similarly priced by today’s preferred stock investors.

(Sources: VNO-I price chart, SEC prospectus filings for JPM-G | THGA | VNO-I | NSS)

What’s next?

Falling prices is great news for preferred stock buyers, but not so much for those who have treated an income investment using value investing strategies. For the last several years, as prices have been artificially propped up by the Fed’s monetary policy, I have issued frequent reminders to use the wholesale Over-The-Counter stock exchange for new purchases (see “Preferred Stock Buyers: Time To Change Tactics For Sub-$25 Purchases”, July 14, 2014). Doing so has allowed preferred stock buyers to purchase newly introduced preferred stock shares for sub-$25 wholesale prices; these are the same shares that those who waited to use the retail NYSE paid a much higher price for.

But the advantage of using the OTC will erode as retail prices continue to fall and sub-$25 shares become more widely available; the difference between wholesale OTC prices and retail NYSE prices will continue to diminish just as they did during the third quarter of 2015.










See Reader Reviews

Table of Contents

Free Excerpt









Preferred Stock Investing, Fifth Edition

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 85 reviews posted at Amazon.

The Fifth Edition addresses selecting, buying and selling the highest quality preferred stocks during the market conditions that we are currently facing.

See: Reviews | Table of Contents | Free Excerpt | Paperback | eBook

The 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).













Recent Preferred Stock Articles by Doug K. Le Du


Here is a list of some of my recent syndicated articles. To view an article, just click on the headline.

























Preferred Stock Market Research Now Available All Month Long - Free


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.










Book (Preferred Stock Investing)

  - Paperback provided by Amazon

  - eBook PDF provided by BookLocker


Notification Service

  - eMail alert features

  - Spec Sheets

  - Database features

  - Preferred stock search engine features

  - Access to experts

  - CDx3 Research Notes newsletter features

  - Pricing, Individual or Group subscriptions


Free Resources

  - CDx3 Newsletter (published by email the first week of every month)

  - Research article library (hosted by Seeking Alpha)

  - Test your knowledge (online preferred stock quiz)





(c) 2015 Del Mar Research, LLC. All rights reserved.


Trademarks of Del Mar Research, LLC:

  - CDx3 logo

  - Preferred Stock List, CDx3, CD Times 3, CDx3 Income Engine,

     CDx3 Investor, CDx3 Portfolio, CDx3 Preferred Stock


Notification Service

  - Individual Subscription Agreement

  - Group Subscription Agreement



The content of this newsletter, and the materials that it links to that are owned by Del Mar Research, LLC, are to be regarded as educational, rather than advisory. There can always be exceptions to trends and/or generalizations that may be presented herein. Consider your financial resources and goals before investing. You, and not Del Mar Research, LLC, are solely responsible for your own investing decisions.