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Issue 107


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by Doug K. Le Du


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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 6.2 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 886 preferred stocks and ETDs trading on U.S. stock exchanges as last month came to a close. Of these 886, 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.

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New Preferred Stock IPO’s, January 2016


There were five new preferred stocks issued during January 2016, bringing the total number of these securities trading on U.S. stock exchanges to 886.


PSA-B is from Public Storage (PSA), WLGGP is from Wells Fargo (WFC), BKRRP is from Bank of America (BAC), CUBUP is from Customers Bancorp (CUBI) and CTGGP is from Citigroup (C).

(Source: Prospectuses PSA-B, WLGGP, BKRRP, CUBUP, CTGGP. CDx3 Notification Service database,

New Preferreds Initially Trade on the Over-The-Counter Exchange

In most cases, newly issued preferred stocks will initially trade on the Over-The-Counter stock exchange under a temporary trading symbol until the big board exchange to which the new issue is destined (usually the NYSE) assigns the new, permanent symbol. The CUSIP numbers, however, always stay the same so I have provided them in the above table.

PSA-B from Public Storage, for example, initially began trading on the OTC as PBSTP on January 14 but became PSA-B when NYSE trading began on January 21. Any shares that you purchase under the temporary OTC symbol are automatically transferred to the new, permanent symbol by your broker.


Looking at the Exchange column above, the remaining four January issues are still trading on the OTC under temporary symbols (January 29), but should transfer to their respective big board exchanges shortly, their symbols changing at that time. WLGGP will become WFC-W; BKRRP will become BAC-C; CUBUP will become CUBI-D and CTGGP will become C-S.

The OTC is a wholesale trading venue that individual investors can use just like the big guys, which can be especially beneficial during a period of high prices (see “Preferred Stock Buyers Change Tactics For Double-Digit Returns” for an explanation of how the OTC can be used to purchase shares for discounted prices during such a period).

Customers Bancorp preferreds offer an example of how OTC prices can frequently be favorable. CUBI currently has two preferreds and one Exchange-Traded Debt Security trading.



Notice how the new CUBUP, currently trading OTC, is trading for a much lower price ($25.25) than its NYSE peers, even though CUBUP offers a higher Yield-To-Call.

About the New Issues

The power of investment grade ratings is really on display with these new January preferreds. At the end of January 2016, the average current yield of all call-protected, U.S.-traded preferred stocks was 7.892 percent (rated and unrated). For comparison, I have set the Yield column in the first table above to show the current yield of these new preferreds on January 29. While ratings are somewhat controversial, the benefit to the issuer is clear here. Public Storage is the highest rated REIT and is consistently able to issue new preferred stocks with coupons a full percentage point lower than its peers; the new PSA-B is no exception.

Four of the five new preferreds issued during January are from banks – Wells Fargo, Bank of America, Customers Bancorp and Citigroup. As has been the case for several years now, new bank-issued preferred stocks offer non-cumulative dividends. On the upside, these four new issues are all designated as offering Qualified Dividend Income, providing a tax benefit to many buyers (see “Hidden Risks Of Tax-Advantaged Preferred Stocks” for data regarding whether QDI preferreds a really advantageous).

Regarding liquidity, as illustrated below, a preferred stock will generally trade around 41,000 shares per day on average.


When I look at the biggest movers each month, bank-issued preferreds are always high on the liquidity list with around 50,000 shares trading daily, always led by the TBTF banks.

Now take a look back at the Volume column of January’s new IPO’s. WLGGP from Wells Fargo and CTGGP from Citigroup were both about the same size at 35 million shares and 36 million shares, respectively. But look at the volume for Citigroup’s new CTGGP. Last Friday, this new preferred from Citi traded a whopping 3.6 million shares, making it one of the most popular new preferred stock offerings.

January 2016 was a very typical month with its five new preferred stock offerings, but usually there is more industry diversification. While banks are almost always represented, don’t be surprised to see new issues from telecommunications, utilities, insurance companies and/or property REITs during February.










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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 89 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.










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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.