New research shows how to use CDx3 Preferred Stocks to generate double-digit returns during the current "credit crisis."  For the month ending March 2008, the average effective annual return reached 11.84% using the highest-quality, lowest-risk preferred stocks - CDx3 Preferred Stocks.

This new research is very exciting and I am anxious to tell you about it; but a little background is needed first for our new readers.

Highest-Quality, Lowest-Risk: To be considered a "CDx3 Preferred Stock," regular preferred stocks must meet all ten of the CDx3 Selection Criteria (as described throughout Chapter 1 of Preferred Stock Investing).  Here is a sample of just three of the ten CDx3 Selection Criteria; CDx3 Preferred Stocks must:

1.  be rated "investment grade" by Moodys;

2. be issued by a company with a perfect record of never having suspended a dividend on a preferred stock; and

3.  have the "cumulative" dividend requirement, which means that in the unlikely event that the issuing company misses a dividend payment to you (which I have never seen happen with a CDx3 Preferred Stock), they have to make it up to you later; they still owe you the money.

I've written many articles regarding how, during this credit crisis, the dividend rates being paid by CDx3 Preferred Stocks have been steadily increasing.

Rates Up, Prices Down: Preferred Stock Investing explains how, when rates are rising, the market prices of previously issued CDx3 Preferred Stocks will tend to fall; that is, rates and prices tend to move in opposite directions.  This is called the Rule of Rate/Price Opposition, one of the three Rules of Market Price Predictability explained within Chapter 5 of Preferred Stock Investing.

Such conditions create a "buyer's market" where you can purchase relatively high dividend paying CDx3 Preferred Stocks at bargain basement prices.

 Here's an update to the chart that I showed you last month illustrating how the average dividend rate being paid by CDx3 Preferred Stocks has now exceeded 8.1%, while the interest rate being paid by your average bank Certificate of Deposit (CD) has tanked (and is actually now below the annual inflation rate).

New Research Shows Top Candidates: With dividend rates climbing, there must be some real bargains available at low market prices; but, from the vast sea of CDx3 Preferred Stocks, how does a CDx3 Investor identify the strongest candidates?  And when does the market price tend to be at its lowest; that is, when is the best time to buy?

These are questions that the most recent research into the market price behavior of CDx3 Preferred Stocks answers.  This new research, just released to CDx3 Notification Service subscribers on April 1st (no fooling), provides a structured method for identifying the CDx3 Preferred Stocks each month that are most likely to provide the highest returns during a buyer's market (now).

Each month, a CDx3 Investor can apply this method (or just subscribe to the CDx3 Notification Service and let us do it for you) to identify not only the best candidates to consider purchasing, but also the best time to look for the lowest market price.

 Here are the 21 candidate CDx3 Preferred Stocks that were identified on March 28, 2008 (remember, this list is different every month so this is just an example):

When CDx3 Preferred Stocks are first issued, they cost $25.00 per share.

Using the Three Rules of Market Price Predictability from Preferred Stock Investing, March 28, 2008 was a good date to look up the market prices for these CDx3 Preferred Stocks.   The average market price of this list of 21 CDx3 Preferred Stocks was $21.96 per share on that day.

You can clearly see the effect of the Rule of Rate/Price Opposition on the market price of these CDx3 Preferred Stocks.  As dividend rates have increased (see above chart, top line), the market prices have decreased well below $25 - creating a very strong "buyer's market."

Because CDx3 Preferred Stocks pay you a fixed dividend amount every quarter, and the dividend amount is based on $25.00, the return on your investment actually goes up when you purchase CDx3 Preferred Stocks for less than $25.00 (called "yield").

Low Prices Mean High Yields: Here is the dividend yield for each of our 21 ending-March candidates (using the March 28 purchase prices):

But the best part is yet to come.

Those of you who have read Preferred Stock Investing know that the investment method that is described therein - the CDx3 Income Engine - derives its spectacular results from producing a combination of both dividend income plus capital gain income (the profit that you make when you sell your CDx3 Preferred Stock down-stream for a higher price than what you purchased it for).

Let's see what happens when we add the potential capital gain onto these dividend yields.

Rates Down, Prices Up: As rates fall from the current average of 8.1% (the highest that we have enjoyed in years) back down to, say, 6.75%, what do you think that the average market price of today's 8.1%-ers is going to do? 

Companies that issue CDx3 Preferred Stocks are absolutely itching for the slightest excuse to start lowering these relatively high dividend rates that they are having to pay on CDx3 Preferred Stocks. Just as market prices tend to decrease when rates are going up, the opposite is equally true; market prices tend to increase when rates come back down.  This mechanism provides you with the potential for a spectacular downstream capital gain, in addition to the great dividend income that you'll be earning in the mean time.  Dividends plus capital gains - the CDx3 Income Engine at work.

Built-In Buyer:  What if I were to tell you that there was, within a reasonable doubt, an excellent chance that someone was going to buy your CDx3 Preferred Stock downstream for $25 per share, regardless of what you originally paid? And, sitting here today, I can even tell you who it might be.

CDx3 Preferred Stocks, by definition, have a five year lifespan.  Five years after they are first issued, the issuing company of your CDx3 Preferred Stock regains the right to purchase your shares back from you and, if they do so, they are required to pay you $25.00 per share.  CDx3 Preferred Stocks that are issued during a period of relatively high dividend rates are very likely to be "called" (read why).

3.3 Times Bank CDs: Now, if the market price goes above $25.00 before the five years are up (called the "call date"), it is going to be very tempting to sell your CDx3 Preferred Stock shares and collect your profit (capital gain).  But let's see what your return would be if you held onto your shares until the call date and the issuing company "calls" the issue (buys it back from you at $25 per share).  Here are our 21 candidates again, but now I have added a column that shows how adding a capital gain improves the return on your investment (as measure by the effective annual return) above and beyond the dividend yield alone:

In the event that the issuing company calls the issue on the call date, the CDx3 Income Engine would produce an average effective annual return across our 21 candidates of 11.84%.  That's 3.3 times what you would earn by investing in the average bank CD available during March 2008 (see chart at left, bottom line); and now you also know where the CDx3 (CD times 3) Income Engine gets its name.

CDx3 Bargain Table: This table, with a few additional columns, is called the CDx3 Bargain Table.  The candidates change from month to month. During "buyer's market" conditions, subscribers to the CDx3 Notification Service receive the CDx3 Bargain Table in each monthly issue of the subscriber's newsletter - CDx3 Research Notes.  We do all of the work for them.

If you would like to learn how to produce the monthly CDx3 Bargain Table on your own, there is an instructional document that has been posted for readers of Preferred Stock Investing.  Chapter 9 of Preferred Stock Investing tells readers how to obtain periodic updates and the April 2008 update, now available, provides a step-by-step description of how to produce the CDx3 Bargain Table yourself each month.

To purchase Preferred Stock Investing, click here.  If you would like to subscribe to the CDx3 Notification Service, click here.  If you already have a copy of Preferred Stock Investing, check out Chapter 9 and follow the update instructions - the instructional document that you will receive is free to you.

By using the Three Rules of Market Price Predictability from Preferred Stock Investing in a specific way, CDx3 Investors can turn the "credit crisis" to their advantage as the CDx3 Bargain Table shows you where the bargains really are.

Disclaimers and Caveats: In addition to the Disclaimer at the bottom of this CDx3 Newsletter, please remember that the results shown here will vary with changes in market price.  You should obtain current market prices and update the calculations presented here prior to making investment decisions.

The market prices presented here are provided by a third-party service provider that does not warrant or guarantee accuracy; therefore, I offer no such warrant or guarantee.  I reserve the right to update the information seen here at any time without notice.

Also remember that there is no guarantee that the issuing company of a CDx3 Preferred Stock will exercise their right to call the issue in the future.

Please do not take this explanation as a recom-mendation to buy, or not to buy. Deciding whether or not to purchase any of these candidate CDx3 Preferred Stocks is consistent with your personal financial resources, goals and risk tolerance is a decision that only you can make.

Investing with the issuing companies indicated here may not be consistent with your risk tolerance; it is always a good idea to do your homework before you invest.  You can use the Yahoo Finance web site, among others, to research company information, recent headlines and upgrade/downgrade announcements.

Unlike many investment books, Preferred Stock Investing provides the reader with the results of the investment method described throughout the book.  When I wrote Preferred Stock Investing, I did not want to ask the reader to "take my word for it."  Where most investment books present a few carefully chosen examples to illustrate how their investment method works, Chapter 9 of Preferred Stock Investing presents the investment results for every CDx3 Preferred Stock issued between January 2001 and December 2006 - six years; all of them.

And to make sure that the data presented within Preferred Stock Investing does not become obsolete, and to protect the reader's investment in my book, there are instructions within Chapter 9 of Preferred Stock Investing that explain how the reader can obtain periodic updates to the annual preferred stock data tables found there.

Since June 2007, when Preferred Stock Investing was first published in paperback, readers have been signing up to receive the update to the data tables presented within Chapter 9.

On April 2, 2008 their patience was rewarded.  Specifically, the April 2008 update to Preferred Stock Investing was published and includes the following:

1. the data table showing the new CDx3 Preferred Stocks issued during 2007 for page 132;

2. an update to the CDx3 Key Rate Chart from page 53;

3. an update to the appearance of the CDx3 Seller's Calendar example from pages 142, 161 and 198; and

4. an addition to Chapter 7 that provides step-by-step instructions for using the CDx3 Bargain Table to identify longer-term capital gain opportunities during a period of increasing dividend rates (such as those we are currently facing).

If you own Preferred Stock Investing, and would like to receive the April 2008 update, just follow the instructions on page 124.

If you are a subscriber to the CDx3 Notification Service, the April 2008 update is posted in the CDx3 Investor library on the subscriber's web site.

Otherwise, purchase Preferred Stock Investing and/or subscribe to the CDx3 Notification Service to learn how the CDx3 Bargain Table identifies the strongest CDx3 Preferred Stock bargains during the current "buyer's market."