“The CDX3 method of screening, buying and selling preferred stocks has been a winner since I started following Doug's book in 2007." Dennis M., CDx3 Notification Service subscriber MORE>> |
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New Fourth Edition of Preferred Stock Investing! Amazon.com has Preferred Stock Investing ON SALE for $17.94 Readers of Preferred Stock Investing learn how to screen, buy and sell the highest quality preferred stocks. The Fourth Edition is now available at your favorite online retailers (see retailers). Just published in June, the Fourth Edition of Preferred Stock Investing includes the latest research and updated charts and examples using real preferred stocks. And Part III "Buying When The Market Favors Buyers" has been completely re-written to focus on the buying conditions that we will be facing throughout 2011 and 2012. Check out the new Fourth Edition Table of Contents. The preferred stock investing method explained throughout the book - the "CDx3 Income Engine" - uses three rules and ten selection criteria to accomplish its three objectives: maximize revenue while minimizing risk and minimizing work. The results are itemized in chapter 15 for every qualifying preferred stock issued since January 2001 - ten years worth of the highest quality issues. A new chapter has also been added (chapter 11, "The Crisis That Keeps On Giving") that describes two specific opportunities for preferred stock buyers. Both of these opportunities were created by the 2007 - 2009 Global Credit Crisis and are expected to remaining available well into 2012. Preferred Stock Investing is one of the highest reader-rated books available at Amazon and sells within the top 2% of all book titles in the United States. Look for your copy of Preferred Stock Investing, Fourth Edition at your favorite online retailer.
Just Posted On The Preferred Stock Investing Reader's Forum: On September 30, 2011 I posted an article to the Preferred Stock Investing Reader's Forum titled "Citi Trust Preferred Stocks: Can Your Shares Be Prematurely Called". Citi's TRUPS are very widely held and there have been three cases lately where Big Banks have been able to prematurely call the shares prior to the published call date. The article itemizes Citi's TRUPS and shows you which ones can be prematurely called and when. (jump to Forum) The Last Month's CDx3 Investor Results article provides a group of charts that show how common stock investors and savers have both been dealt a tough hand. Common stocks, as measured by the Dow Jones Industrial Average index, have left common stock investors empty handed for over 11 years while savers have been decimated by the Federal Reserve's low interest monetary policy. High quality preferred stock, however, are currently yielding over 7%, six times the income as the highest yielding bank CDs. (jump to article) The Special Announcement article provides you with an updated list of trust preferred stocks (TRUPS) that will be among the first to be affected by Section 171 of the Wall Street Reform and Consumer Protection Act. Remember that subscribers to the CDx3 Notification Service, my preferred stock email alert and research newsletter service, receive this same list with all of the trading symbols. This month's list itemizes 5 of the highest rated, highest quality trust preferred stocks. Secondly, I have summarized some of the research from my book, Preferred Stock Investing, Fourth Edition, and am making it available to brokers, financial planners and investment groups for free. (jump to article) In the CDx3 Company Spotlight article I introduce you to BRE Properties, Inc. (BRE), a apartment building Real Estate Investment Trust (REIT) founded in 1970 and headquartered in San Francisco. The article describes BRE's strategy for locating its properties in areas of short supply and key "echo generation" population growth. The results are impressive. (jump to article) The CDx3 Question of the Month is presented both here and on the Preferred Stock Investing Reader's Forum. If you visit the Forum you can test your knowledge by clicking on your answer to the question. You will receive an automatic email that provides you with the correct answer and my explanation. Or you can just read the answer in the below CDx3 Question of the Month article. This month's question - "When a preferred stock is 'called' how much do I get paid per share?" (jump to article) 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 the Preferred Stock Investing Reader's Forum and make them available to you for free. In the Free Special Offer article below I provide you with a link that allows you to receive my posts via an email message rather than having to visit the Forum to see what's new. Any time a new article is posted, you will receive a message in your email inbox automatically - free. (jump to article) Coming Up For Preferred Stock Investors: Bank of America. What a mess. Conflicting SEC filings, company statements and press reports have left preferred stock investors and many others in the dark as to the future intentions of this troubled bank. To add to the confusion, because of BofA's numerous acquisitions over the years, the trading symbols of their preferred stocks do not all start with the letters "BAC." The five trading symbol designations for BofA's preferred stocks are itemized in this article. (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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Fed Policy Decimates Savers Highest Quality Preferred Stocks Now Generating 6 Times More Income Than Bank CDs Common stock investors, savers and preferred stock investors all pursue what they feel is a reasonable return, but how they go about it and the risks involved varies substantially. The Federal Reserve's unprecedented announcement that the current interest rate environment will be with us for at least another two years has not only exaggerated those differences but, in doing so, has highlighted the appeal of high quality preferred stocks. Common Stock Investors Common stock investors make their money by investing in a common stock that appreciates in value - buy low, sell high. Figure 1 shows the results over the last 11 years and 9 months. The DJIA index of common stock values at the beginning of 2000 was 11,522. 11 years and 9 months later, on October 3, 2011 the DJIA closed at 10,861. Dividend paying common stocks returned about two percent annually over this period. With the exception of the 2003 and 2009 recoveries, common stock investors (as represented by the DJIA) have very little to show in the way of returns despite having taken considerable risks along the way. And the volatility over the last couple of months has added insult to injury to common stock investors. 200 point daily DJIA fluctuations have become the norm since early August. For the time being, the common stock market has lost equilibrium between buyers and sellers. Savers Many have sought refuge in cash accounts, primarily bank Certificates of Deposit (CDs). But Figure 2 makes the minimal returns available to savers pretty clear. The Federal Reserve's monetary policy of keeping interest rates low has set a trap for savers. The average annual yield being offered by U.S. banks on 24-month CDs ended September 2011 at a dismal 1.29%. More bad news for savers: The short line on Figure 2 shows you the annual inflation rate (CPI) as published by the U.S. Bureau of Labor Statistics (ending August is the most recent available) over the last two years. U.S. domestic inflation is now at 3.77%. The dismal 1.29% annual gain from that bank CD is being eaten, in its entirety, three times over by inflation right now. Ouch. Preferred Stock Investors The highest quality preferred stocks trading on U.S. stock exchanges today are offering an average annual yield of 7.35% (ending September) at what is arguably much lower risk than many alternatives. Highest Quality Today's U.S. preferred stock market includes about 1,100 securities but most risk-adverse preferred stock investors stick to just the highest quality issues. The highest quality issues have specific risk-lowering characteristics such as those that (1) are rated investment grade, (2) have the "cumulative" dividend provision (meaning that if the issuing company misses a dividend payment to you their obligation to you accumulates; they still owe you the money) and (3) are issued by a company that has a perfect track record of never having suspended a preferred stock dividend. These high quality preferred stocks are listed in chapter 15 of my book, Preferred Stock Investing, and on the CDx3 Notification Service website (my preferred stock email alert and research newsletter service - take tour). Less Price Volatility Because the dividend return is known in advance, there is much less price speculation with preferred stocks. Everyone knows what the return is going to be and the exact date on which it is going to be paid to shareholders. Preferred stock market prices are more closely tied to the direction of interest rates, now declared by the Federal Reserve to remain stable until at least the middle of 2013. Consequently, high quality preferred stock market prices are less volatile than their common stock counterparts due to less speculation and are likely to stay that way for at least the next two years. Less Risk When dividend pay day arrives preferred stock investors are always paid before common stock shareholders receive a dime (hence the name "preferred"). So preferred stock investors have less investment risk than their common stock counterparts. In return, preferred stock investors give up their right to vote in corporate elections. It is also important for preferred stock investors to avoid paying more than the redemption value ("par") for their shares. In the event that the issuing company retires the shares, shareholders will receive the redemption value in cash (usually $25 per share). Purchasing your shares for less than the redemption value turns this risk into an opportunity since by doing so you position yourself for a nice capital gain in the event of a call. Higher Return Figure 1 illustrates the difficult 11+ years that common stock investors have faced in the stock market. And Figure 2 shows what has happened to savers over the last several years as well. Now look at Figure 3. The bottom line on Figure 3 is the same bank CD yield line that we saw on Figure 2. The top line on this chart shows the average dividend yield being paid to shareholders by the highest quality preferred stocks over the same period. Currently the highest quality preferred stock issues are paying an average yield of 7.35% with less price volatility and lower risk than the common stocks issued by the same companies. At 7.35%, high quality preferred stocks are delivering almost 6 times the income as bank CDs right now. Notice how the Fed's two year old low-to-no interest rate policy stabilized preferred stock returns while decimating savers. This is the policy that the Fed has committed to continuing until at least the middle of 2013. Diversification - Plenty To Pick From There are currently 89 high quality preferred stocks trading on U.S. stock exchanges. All have investment grade ratings, offer cumulative dividends and a perfect tract record of no missed dividends by their issuing companies. The CDx3 Notification Service website provides the list (see sample screen). These high quality preferred stocks are offered by companies from various industry segments: big investment banks, regional banks, insurance companies, real estate outfits (such as apartments, shipping facilities, hotels, self-storage, hospitals and shopping centers) and utilities. There are also many preferred stocks from additional industries (high tech, manufacturing, airlines, communications, etc.) but issues from these industries tend to offer riskier speculative grade ratings and "non-cumulative" dividends (if the company misses a dividend payment they have no obligation to pay you back downstream). As described in the September 2011 issue of the CDx3 Newsletter, the August Federal Reserve announcement of low-to-no interest rates for at least another two years was a real gift to real estate investment trusts (REITs). A low rate environment favors REITs more directly than most other types of businesses and, by law, REITs are required to distribute at least 90% of those profits to their shareholders - that's us.
Learn To Screen, Buy and Sell The Highest Quality Preferred Stocks Preferred Stock Investing includes the information, websites and other resources needed for you to be a very successful preferred stock investor. The new Fourth Edition is 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 when there are buying and selling opportunities coming up. Subscribers also receive their own non-promotional preferred stock research newsletter every month, have their own website that hosts the CDx3 Preferred Stock Catalog 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 (see reader comments) today. |
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UPDATED: This Month's Under $25 Trust Preferred Stock List 5 Big Bank TRUPS Available For Less Than $25 Per Share, 7.4% Average Yield Since the Big Bank Trust Preferred Stock (TRUPS) opportunity was created by the Wall Street Reform Act on July 21, 2010, every issue of the CDx3 Newsletter has allowed readers to watch the opportunity unfold in this article. On October 3, Wells Fargo retired WCO and WB-D in response to the Act, becoming the latest Big Bank to deliver on the Big Bank TRUPS opportunity first described to you here fifteen months ago. Depending on your purchase price, WCO and WB-D delivered annual returns to those of you who took advantage of this opportunity of at least 8.625% and 7.850%, respectively. While the list of choices will generally become shorter as we get closer to January 1, 2013, those interested in getting in on the Big Bank TRUPS opportunity still have time to do so. But please note that this list, while usually having about 15 Big Bank TRUPS listed, has only five for this month (very nice yields though!). For new readers, here is a summary of what this opportunity is all about. Section 171 of the Act disallows Big Bank TRUPS from being counted toward the bank's reserves ("Tier 1 Capital") beginning January 1, 2013. Since this is the primary reason these banks issued these preferred stocks to begin with, Big Banks are highly likely to retire these preferred stock issues as the implementation date approaches. Investors purchasing shares for a price less than $25 position themselves for a nice capital gain (on top of the dividends these pay) since shareholders will receive $25 per share in cash in the event of a call. Each month the list of high quality Big Bank TRUPS that are available to be purchased for less than $25 per share is published here (with trading symbols and descriptions obscured). Since market prices change every day, the list of affected TRUPS selling for less than $25 per share changes as well. These are the highest rated, highest quality issues that are going to be among the first affected by section 171 of the Act that are also selling for less than $25 per share right now. Subscriber's to the CDx3 Notification Service (my preferred stock email alert and research newsletter service) are provided with this same TRUPS list, including the trading symbols, on page 7 of each monthly issue of the subscribers' newsletter, CDx3 Research Notes. Please consider becoming a subscriber to the CDx3 Notification Service today.
Brokers And Investment Groups: Free Meeting Materials Now Available As the most comprehensive research service available for the highest quality preferred stocks, all of the large, and many smaller, brokerage firms subscribe to the CDx3 Notification Service. My Preferred Stock Investing Group Materials are intended for brokers with a group of clients or self-directed investment groups that are interested in learning something about preferred stock investing. The Preferred Stock Investing Group Materials include a slide show (27 slides, PowerPoint Show format) and an accompanying handout that provides my commentary for each slide. The handout is available in color and black and white (PDF format) for easy printing. The materials include my tips regarding how to select, buy and sell the highest quality preferred stocks and summarize much of the research from my book, Preferred Stock Investing. Specifically, the materials are organized into three parts: Part 1: Approach and Objectives To Preferred Stock Investing Part 2: How and When To Buy and Sell Preferred Stocks Part 3: Preferred Stock Investing Resources To request the Preferred Stock Investing Group Materials just send an email request to: InvestmentGroupMaterials@PreferredStockInvesting.com You will receive an auto-reply email message with current download instructions. |
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Who Are These Companies That Issue CDx3 Preferred Stocks? BRE Properties, Inc. (NYSE: BRE)
BRE Properties, based in San Francisco, California, focuses on the development, acquisition and management of apartment communities located primarily in the major metropolitan markets of Southern and Northern California and Seattle. BRE directly owns 77 multifamily communities (totaling 21,820 units) and has joint venture interests in an additional 13 apartment communities (totaling 4,080 units). BRE Properties was founded in 1970 and is a real estate investment trust (REIT) listed in the S&P MidCap 400 Index. BRE has perfected jumping in front of someone else's parade and riding the resulting financial performance. They watch population demographic data very closely and either acquire or build apartment buildings in areas that (a) have a shortage of supply and (b) are about to realize a significant up tick in renters. While the recession has presented its challenges, slow economic times have benefited BRE since both of these strategic dimensions have landed new tenants at BRE's properties. Rental income and occupancy rates are up in all of BRE's core markets. From their August 3, 2011 2nd quarter conference call with analysts: "During the quarter, overall occupancies in the same-store properties were strong and availability tight, with the exception of LA and Inland Empire. For the quarter, portfolio occupancy averaged 95.7%, with availability at 6.2%. Currently, the portfolio occupancy has strengthened to 96% and 5.9% available, with Southern California at 95.8% and 5.8% available." In May the company executed a $440 million equity offering to provide new capital. And BRE closed $415 million in new acquisitions over the last 18 months. BRE is also selectively pursuing the development of new properties: "This development activity represents total starts in 2011 of $450 million. We expect another $325 million to $350 million in starts in 2012. We expect development advances to total $75 million to $100 million for the balance of 2011. And beginning in 2012, advances should average $225 million to $275 million per year. Our pipeline represents 4 to 5 years of development activity, and most of our sites are nearly fully entitled today, removing the risk of discretionary approvals as we finalize construction plans. From a liquidity standpoint, except for our line renewal in September of 2012, we have no material debt maturities until 2017, providing us with significant financial flexibility." BRE's new Misson Bay, San Francisco development is an example of how the company executes its strategy. Land available for new apartment construction is in short supply. But the new Mission Bay project puts 360 new units within walking distance of the extremely popular and vital AT&T ballpark area, a major draw for young, active fans. The "Echo generation" is expected to grow 9.6% in California, compared to 4% for the nation as a whole. "The Bay Area and Seattle markets are strong and getting stronger. New leases and renewals were signed during the quarter at an increase of 7.2%, or $100 per lease. We expect that the pace of increase should continue to accelerate in the back half of the year." REITs make the bulk of their profit from the spread between the cost of capital for properties and the return generated by the rents paid by the property's tenants. REITs in general, and BRE in particular, should therefore benefit from the commitment to low interest rates made by the Federal Reserve in August. Learn more about BRE: Company website | Profile | Upgrades/Downgrades | Recent News. Reader Note: The purpose of the CDx3 Company Spotlight article is to give you a sense of the types of companies that issue CDx3 Preferred Stocks. Companies that appear in the CDx3 Company Spotlight either currently, or in the past, have issued CDx3 Preferred Stocks. Since I am not familiar with your financial goals, resources or risk tolerance, my mention of these companies here should not be taken as a recommendation by me for you to buy, or not buy, securities issued by these companies. Companies can issue multiple series of preferred stocks, some of which may meet the CDx3 Selection Criteria while others do not. |
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When a preferred stock is 'called' how much do I get paid per share? This question is particularly important this month since it is at the heart of the opportunity that section 151 of the Wall Street Reform Act creates for preferred stock investors. When a new preferred stock is introduced to the marketplace it typically has a five year "call date." The call date is when the issuing company of a preferred stock regains the right to buy your shares back from you (although there are a small number of exceptions that allow a premature call). Until the security is called, the issuing company is obligated to pay dividends to you every quarter. The call date introduces several benefits for preferred stock investors. You know in advance what your dividend income is going to be at least until the security is called. Plus, for fixed-rate preferred stocks, if rates go down the issuing company is stuck with paying you the higher rate that your preferred stock carries (called the "coupon rate"). But this cuts both ways of course; if rates go up, the dividend income that you receive from a fixed-rate preferred stock does not change. Another advantage to preferred stock investors is that when a company calls (buys back from you) a preferred stock issue, they pay all of the then-current shareholders a fixed price per share that is known in advance. That means that if you can purchase your shares for less than this amount, you stand to make a capital gain on top of the dividend income that you've been earning in the meantime in the event of a call. The question this month for preferred stock investors: When a preferred stock is called, how much does the issuing company pay you per share?Your choices:
(A)
The then-current market price of the preferred stock shares. (C) Your original purchase price (i.e. you get your principal back) .The correct answer to this question is (B), $25.00 per share. It is for this reason that those following the preferred stock investing method described throughout my book, Preferred Stock Investing, always make their purchases for less than $25 per share. Preferred Stock Investing explains how and when to do so regardless of market conditions. By always purchasing your preferred stock shares for less than $25 each, you set yourself up for a capital gain in the event of a call by the issuing company on top of the great dividend income that you'll be earning in the meantime. Since section 171 of the Wall Street Reform Act (by reference) disallows Trust Preferred Stocks (one of the three types of preferred stocks, see Preferred Stock Investing chapter 2) from being included in the capital reserves that Big Banks have to keep on hand (as measured by the Tier 1 Capital calculation), it is extremely likely that these banks are going to be calling their Trust Preferred Stocks as soon as possible (paying all holders $25 per share). Comerica, Fifth Third, KeyCorp and Wells Fargo have already done so. Knowing that (1) you are going to receive $25.00 per share in the event of a call, (2) a call is extremely likely, (3) which specific preferred stocks are going to be involved and (4) the exact date that those preferred stocks will become callable, provides a very unique opportunity that preferred stock investors should consider, especially since many of these targeted Trust Preferred Stocks are currently providing annual dividend yields of about 7%. For a list of the targeted Trust Preferred Stocks that are currently selling for less than $25 per share, please consider subscribing to the CDx3 Notification Service today. You can submit your own preferred stock question: Submit your question. |
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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. You are also invited to visit the Forum and comment on my articles. Please accept my invitation to receive articles by email and visit the Forum. |
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Bank Of America Preferreds Trade Under Non-BAC Trading Symbols You May Own BofA Preferreds Without Knowing It; Here's The List Is there anyone left who is not suing Bank of America over the activities of its Countrywide group? What a mess. No one knows what action, if any, BofA is going to take to ease the pain but if the troubled bank is going to make a move it is likely to happen sooner rather than later. There are so many conflicting SEC filings, company statements and press reports regarding Bank of America that it has become impossible for preferred stock investors (or anyone else) to evaluate their risk with respect to the mishmash of its securities. Prior to the Global Credit Crisis, BofA's former CEO, Ken Lewis pursued an aggressive growth through acquisition strategy, buying anything with the word "bank" on its letterhead. For preferred stock investors, that led to a confusing constellation of preferred stocks, owned by BofA but without BofA trading symbols. While the common stock of the acquired company folds under the common stock trading symbol of those doing the acquiring (BAC), that is generally not the case with outstanding preferred stock issues (AMB's acquisition of ProLogis earlier this year was an exception where the merged firm has continued business under the ProLogis name and changed all outstanding AMB preferred trading symbols to start with PLD). Preferred stock investors should be aware that preferred stocks trading under symbols that start with the following three letters are actually Bank of America preferred stocks: BAC, KRB, FBF, MER and CFC. If you own, or are considering owning, shares of preferred stocks that have trading symbols beginning with any of the above three letters, you are looking at a BofA preferred stock. Here's another tip: There are three types of preferred stocks - traditional, trust and third-party trust (see Preferred Stock Investing, chapter 2 "Creating A New Preferred Stock"). While rare, there are third-party trust preferred stocks that, while not issued by Bank of America, are secured using Bank of America securities. What that means is that even though you may own shares of a third-party trust preferred stock issued by, say, Morgan Stanley, your risk is actually tied directly to the greatness, or lack thereof, of Bank of America. One such third-party trust preferred stock is identified and discussed in the current (October 2011) issue of the CDx3 Notification Service newsletter, CDx3 Research Notes. For readers of my book, Preferred Stock Investing, this security also appears in the preferred stock list on page 229 as item number 8. Thank you very much for your interest in my research. As always, I look forward to reporting back to you in next month's issue of the CDx3 Newsletter. |
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Learn
to screen, buy and sell the highest
quality preferred stocks by
purchasing
the Fourth 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
15 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.
And
readers also receive free periodic
updates to the preferred stock lists in
chapter 15 as long as the Fourth Edition
of the book is in print.
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 send an email
message to:
CDx3Newsletter@PreferredStockInvesting.com
and
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) 2011 by Doug K. Le Du 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 Doug K. Le Du. All rights reserved. Company logos are trademarks of the indicated companies. Service Marks (SM) are service marks of the indicated companies. 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 Doug K. Le Du, are solely responsible for your own investment decisions.
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