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|In This Issue...|
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:
This month's High Quality Preferred Stocks article describes how a new preferred stock search engine was used to search all 990 preferred stocks and exchange-traded debt securities to find the 19 investment grade issues that are currently trading for a market price below their $25 par value. Research that used to take hours was completed in less than 10 seconds using this new engine. (jump to article)
The Preferred Stock News article illustrates how the high number of redemptions of REIT-issued preferred stocks that we have seen this year is about to subside. The five year call period of these securities has combined with the timing of the Global Credit Crisis to provide relief for preferred stock investors holding such shares. If you are currently enjoying the 7.5% dividends that pre-crisis REIT-issued preferred stocks have been paying you, this article explains why you are likely to continue doing so at least through 2015. (jump to article)
The Special Announcement article announces the availability of a new preferred stock search engine. The Create Your Own Filter page allows preferred stock investors to instantly search all preferred stocks and exchange-traded debt securities trading on U.S. stock exchange using up to nineteen key parameters. (jump to article)
The Preferred Stock Facts article is presented both here and on the Preferred Stock Investing Reader's Forum. 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)
In the Free Special Offer article I offer to provide you with some of the research from my book, Preferred Stock Investing, Fourth Edition. I am making it available to brokers, financial planners and investment groups 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.
19 Investment Grade Preferreds Available for Less Than $25
Falling Preferred Stock Prices Push November Count to 19
Even in this high-priced market, there are still investment grade choices priced below their $25 par value. Out of the 990 preferred stocks and exchange-traded debt securities that were trading on U.S. stock exchanges at the end of October 2012, nineteen specific issues with Moody's investment grade ratings were trading below their $25 par value (October 26, 2012 prices). That's up by one security from the previous month, a hopeful sign that the record-high prices that we have seen for U.S. preferred stocks over the last few months may be returning to something closer to normal.
Figure 1 shows the complete filter used to find these gems. Of the nineteen parameters that can be set, the two arrows highlight the keys for this search. Setting the "Currently priced below par" parameter to "Yes" does the magic here.
This is a very powerful tool used by those subscribing to the CDx3 Notification Service (my preferred stock email alert and research newsletter service). In addition to finding securities with Moody's investment grade ratings that are currently trading below their $25 par value, this filter also limits the list to just issues that are trading on the New York Stock Exchange (NYSE) and have not suspended their dividend payments.
Setting the "Dividend rate at least" parameter (center left under the Dividends heading) to a 1 eliminates securities with 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.
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 subscriber? See page 6 of the November 2012 issue of the subscriber's newsletter, CDx3 Research Notes, that you received on November 3 for symbols.
The five securities shown in green font are ETDs (bonds that trade on the stock exchange rather than the bond market and are very similar to preferred socks) while the remaining fourteen 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).
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 nineteen 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.
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 November 2012 issue of the subscriber's newsletter, CDx3 Research Notes.
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 Fourth 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 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 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.
Redemption Gap: Dividends From Redeemable REIT Preferred Stocks Likely To Continue
Global Credit Crisis Timing Aligns with 5-year Call Period to Benefit Preferred Stock Investors
Preferred stock investors have endured
a massive number of redemptions of REIT-issued preferreds and
exchange-traded debt securities (ETDs) throughout 2012, but the
abundance of calls is likely to now subside through 2015.
Almost all REIT-issued preferred stocks and ETDs have a five year redemption period. Five years after their introduction to the marketplace, the issuing company regains the right to redeem the security (buy your shares back from you).
That means that for the rest of 2012,
2013 and 2014 the REIT-issued preferred stocks and ETDs issued
during late-2007 through 2009 are about to become redeemable. In
other words, the five-year call window is now opening for
REIT-issued preferred stocks and ETDs that were issued during the
Global Credit Crisis.
But it is the timing of the crisis years, overlaid with the five year redemption period of most REIT-issued preferred stocks, that is about to bring relief from the constant redemptions we have seen this year. Because of the economic dynamics during the crisis years, REITs all but stopped issuing preferred stocks.
Between March 2007 and December 2009, cash-starved banks started issuing preferred stocks (primarily trust preferred stocks) offering higher and higher dividend rates, all the way up to 9.6% (BBT-B from BB&T Corporation, since redeemed), in order to attract wary investors.
At the same time, vacancies of existing commercial properties soared and 60% of the licensed architects in the United States were estimated by the American Institute of Architects to be idled. The need for expansion capital by REITs went to nearly zero.
Historically, REITs issue about two new preferred stocks and ETDs per month. As Figure 3 illustrates, during the 34 month crisis period (March 2007 through 2009) there were a total of only twelve new preferred stocks and ETDs introduced by REITs. This chart also shows how that compares to the bumper crop of 51 new issues that today's lower rates triggered throughout the first ten months of 2012.
Since so few REIT preferreds were
issued during the crisis years, five years later we have now entered
the corresponding redemption gap for these securities. In fact,
since only six REIT preferreds were introduced during 2010 it is
likely that the redemption gap for REIT-issued preferred stocks and
ETDs will continue through 2015.
It can also be argued that most of the REIT preferreds issued prior to 2007 that are going to be called already have been since preferred stock dividend rates, having hit new lows during the summer, appear to have leveled off. Currently, rates offered by new issues are relatively stable.
Of the 163 dividend-paying, REIT-issued preferreds and ETDs currently trading, Figure 3 shows the 67 that were issued prior to 2007 and have higher dividend rates (coupon) than today's going rate of about 6% for such securities. And note that about one-third of these issues carry Moody's investment grade ratings, too.
All of these 67 securities have been redeemable for one to five years now. Given their average 7.5% dividend rates, there is substantial cost savings to be had (1.5%+) by redeeming these issues in favor of new, lower payers. And yet, all have continued trading.
The implication here is that dividend cost savings is apparently not the primary motivation for the issuing companies of these long-redeemable securities.
Given the alignment of the Global Credit Crisis and the five-year redemption period of REIT-issued preferred stocks, very few of which were issued during the crisis years, the breakneck rate of REIT preferred stock redemptions that preferred stock investors have endured this year should now subside.
While there are certain to be exceptions, if you hold redeemable REIT-issued preferred stocks and/or exchange-traded debt securities in your portfolio, there is every indication that you are likely to be enjoying the great 7.5% dividend income that they provide for the next several years.
More Preferred Stock Research
FROM DOUG K. LE DU
Click any headline
New Preferred Stock Search Engine Now Available
'Create Your Own Filter' Page Includes Current Market Price Searching
We recently added a very powerful feature to our Preferred Stock ListTM software application. The Create Your Own Filter page allows subscribers to the CDx3 Notification Service to define their own filter when searching our Preferred Stock ListTM database of preferred stocks and exchange traded debt securities (ETDs). The CDx3 Notification Service is my preferred stock email alert and research newsletter service.
The Create Your Own Filter page includes nineteen characteristics that you can tailor to find just the preferred stocks and ETDs that you are looking for including current market price, today's trading volume and current dividend yield. And you can save your filters for later use, too.
The sample filter seen here generates a list of Moody's investment grade, cumulative REIT preferreds and exchange-traded debt securities that are not yet callable, are trading on the NYSE and are currently priced below their $25 par value. The combinations are endless.
Here's another feature: The new Create Your Own Filter page also includes a very powerful feature called "Stock Check" that you can use to not just see the characteristics of a particular security, but also see a list of upgrade candidates for the security you specified. The upgrading technique allows you to "trade in" a low dividend paying preferred stock for a higher paying one and have cash left over when you're done (not familiar with "upgrading" a preferred stock? See the August 2012 issue of the CDx3 Newsletter for an example).
The CDx3 Notification Service is the most comprehensive resources available for preferred stock investors. And the new Create Your Own Filter page is the most powerful preferred stock search engine available anywhere. Please consider subscribing to the CDx3 Notification Service today.
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).
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:
You will receive an auto-reply email message with current download instructions.
to screen, buy and sell the highest
quality preferred stocks by
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
CDx3 Notification Service
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.
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.
take a look at
And if you
someone who might be interested in simple
for non-experts please have them send an email
they will automatically
begin receiving this monthly CDx3
next month (plus a
CDx3 Special Report) - all FREE.
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:
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
Copyright (c) 2012 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.