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“Excellent information is provided by preferred stock lists, spec sheets and email notifications...Good information for preferred stock investors." Bruce G., CDx3 Notification Service subscriber MORE>>
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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: CDx3NotificationService@us.emaildirect.com.
This month's High Quality Preferred Stocks article describes how there are still bargains to be had. Out of the 979 preferred stocks and exchange-traded debt securities that were trading on U.S. stock exchanges at the end of February 2013, 14 specific issues with Moody's investment grade ratings were trading below their $25 par value. (jump to article) The Preferred Stock News article presents an analysis of the relationship between three key government money rates - the federal funds rate, the annual yield offered by the five year Treasury and the ten year Treasury - and preferred stock dividend rates. Preferred stock investors are often advised to keep an eye on these government money rates as a way of predicting what is about to happen to preferred stock rates, but does that long-held advice really hold up? (jump to article) The Special Announcement article announces a new and very powerful subscription program for preferred stock investors. Our Preferred Stock ListTM database and search engine, long enjoyed by subscribers to our comprehensive CDx3 Notification Service, is now available as a separate subscription for do-it-yourself investors. The database includes last trade price, today's trading volume, current yield, ex-dividend dates and much more, all of which can be sorted, downloaded and printed at any time. You can create and save your own filters and watchlists of trading symbols, too. (jump to article) The Preferred Stock Facts article is presented both here and on the PreferredStockInvesting.com website. 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. |
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14 Investment Grade Preferreds Available for Less Than $25 New Preferred Stock Search Engine Finds These 14 Out of 979 Alternatives The bumper crop of 29 new preferred stocks and exchange traded debt securities (ETDs) introduced so far this year have brought the total number of such securities now trading on U.S. stock exchanges to 979. Of the 979, 14 specific issues with Moody's investment grade ratings are trading below their $25 par value (February 27, 2013 prices). 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 14 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 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. 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 CDx3 Notification Service subscriber? See page 6 of the March 2013 issue of the subscriber's newsletter, CDx3 Research Notes, that you received on February 27 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 nine 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). Many, including the Federal Reserve, think that rate increases are likely to still be a ways off (2015?) and that any such future increase is likely to be extremely gradual. If you feel that they are probably right, then 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 the CDx3 Notification Service today. Already a subscriber? The trading symbols for this example are provided on page 6 of the March 2013 issue of the subscriber's newsletter, CDx3 Research Notes.
Learn To Screen, Buy and Sell The Highest Quality Preferred Stocks
Invest in the best. Subscribe to the CDx3 Notification Service today. |
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How Well do Government Money Rates Predict Preferred Stock Dividend Trends? Twelve Year Analysis Sheds Bright Light on Long-Held Assumptions Preferred stock investors are frequently advised to keep a sharp eye on the interest rates of various government instruments as a sort of indicator of what they can expect for the dividend rates to be offered by new preferred stocks. But the actual data show little or no relationship between the direction of U.S. government money rates and the direction of preferred stock dividend rates. This article [1] examines the relationship between three government money rates and the dividends being offered by newly issued high quality [2] preferred stocks. This chart includes four lines. The top (blue) line shows the average monthly dividend rate being offered by new high quality preferred stocks over the last twelve years (2001 through 2012). The bottom three lines (in various shades of grey) are average monthly U.S. government money rates that are frequently referred to as being predictors of preferred stock dividend rates (to one degree or another). The bottom line (darkest grey) is the Federal Funds rate; the next line up (lighter) is the average monthly yield of the five year Treasury note and the lightest grey line is for the ten year Treasury. Preferred Stock Rate Trends The macro direction of preferred stock dividend rates over the last twelve years is indicated across the top of the chart just above the preferred stock dividend rate line (blue). The dividend rates being offered by newly issued high quality preferred stocks, at a macro level, were decreasing between January 2001 and March 2004 (terrorist attacks followed by war and recession). This period started with D-A from Dominion Resources (D) at 8.4% issued in January 2001 and ended with HE-U from Hawaiian Electric (HE) at 6.5% in March 2004. Investors then enjoyed an overall rate increase between April 2004 and March 2009 as a housing boom was followed by the Global Credit Crisis during which cash-starved banks bid up preferred stock dividend rates to record levels. During this period high quality preferred stock dividend rates increased continually for five years, all the way up to 9.6% from BB&T Corporation's (BBT) BBT-B. Since April 2009, high quality preferred stock dividend rates have been decreasing once again. The first high quality preferred stock for 2010, for example, came in March from JP Morgan's (JPM) JPM-C at 6.7%, quite a drop from BBT-B's 9.6% just a few months earlier. Similar high quality preferreds are now being introduced at dividend rates closer to 6%. While the relationship between the three government money rates is pretty easy to spot, the notion that high quality preferred stock dividend rates follow along is less obvious. There are periods where preferred stock rates and government money rates seem to be somewhat related, moving in the same direction, but there are just as many occasions where they seem to move in entirely opposite directions. Measuring the Relationship The most common method for determining the extent to which two sets of numbers are related is to calculate the "correlation coefficient," the result of which is a number between zero and one. A correlation value of 0.0 indicates no correlation between the two sets of numbers (such as the number of craters on Mars and the average weight of newborn elephants) while a correlation value of 1.0 indicates a perfect correlation (such as the number of Hollywood marriages and the following year's divorce rate). For government money rates to be a good predictor of what upcoming preferred stock dividend rates are likely to be doing (as we are often told), we are looking for correlation coefficient values that are close to 1.0. After all, we're talking about our investing strategy here; we need a solid and consistent indicator. Also, we are looking for a strong positive correlation (when one rate goes up so does the other). A negative correlation value indicates that when one rate goes up the other tends to go down, which would be even further from the advice that many preferred stock investors are routinely given. Macro Period Relationship The first table directly under the chart shows the correlation coefficient values that quantify the strength of the relationship between preferred stock dividend rates and government money rates for our three macro periods. Looking over the results, it would be hard to argue that preferred stock dividend rates were being driven by any of the three government money rates included here. The correlation values indicate a weak correlation (if any), certainly not enough to base an investment strategy on. The strongest relationship is a negative correlation during the April 2004 through March 2009 time frame (the five year long second macro period). Investors following the traditional advice and seeing government rates start to fall in late 2007 would have concluded that preferred stock dividend rates were likely to take a corresponding nose dive. As we now know, and as the chart illustrates, exactly the opposite happened; when government money rates went down, preferred stock dividend rates increased at a breakneck pace (producing the negative correlation values seen in the first table under the chart). Annual Period Relationship Hoping that a more granular analysis would reveal the often-cited relationship between government money rates and preferred stock dividend rates, the second table under the chart presents the correlation values for each of the past twelve years. 2007 shows the strongest single-year correlation but, as mentioned earlier, the relationship is going the wrong way; as government rates were falling, more often than not preferred stock dividend rates were on the rise during 2007. The only instance where government money rates have had a strong relationship to preferred stock dividend rates over the last twelve years was with the 10 year Treasury in 2004 (+0.77). Even if you slide the data back and forth in time and watch the numbers the story is pretty much the same. The advice often given to preferred stock investors regarding the relationship of government money rates to preferred stock dividend returns is not supported by these data, certainly not to the extent needed to provide the basis for a preferred stock investing strategy.
Footnotes:
[2] High quality preferred stocks
are those that meet the ten risk-lowering selection criteria from
chapter 7 of my book, Preferred Stock Investing. For example,
high quality preferred stocks (a) offer "cumulative" dividends (if
the issuing company skips a dividend payment to you they still owe
you the money; their obligation to you accumulates), (b) are rated
as investment grade and (c) are issued by a company that has a
perfect track record of never having suspended a preferred stock
dividend. More Preferred Stock Research FROM DOUG K. LE DU Click any headline
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New Preferred Stock Database and Search Engine Now Available Preferred Stock ListTM System Designed for Do-It-Yourself Investors On January 1, 2013 our all new PreferredStockInvesting.com website introduced a new and very powerful subscription program for preferred stock investors. Our Preferred Stock ListTM database and search engine, long enjoyed by subscribers to our comprehensive CDx3 Notification Service, is now available as a separate subscription for do-it-yourselfers. The database includes all preferred stocks and exchange-traded debt securities trading on U.S. exchanges while the Create Your Own Filter search engine feature allows you to define your own filters when looking for specific issues. You can even save your filters for later use. Our database includes last trade price, today's trading volume, current yield, ex-dividend dates and much more, all of which can be sorted, downloaded and printed at any time. You can create and save your own watchlists of trading symbols, too. And the Preferred Stock ListTM system, now available as a separate subscription, runs completely within your web browser which means there is no software to install onto your computer whatsoever (Windows or Mac). The Create Your Own Filter search engine is extremely powerful. The sample 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. Our two subscription programs as described in detail at PreferredStockInvesting.com now include: (1) our comprehensive CDx3 Notification Service - includes the Preferred Stock ListTM system, email alerts of new preferred stocks and exchange-traded debt securities, one-click Hotlists of the highest quality preferred stocks, monthly subscriber's newsletter, access to experts through our online discussion group and much more; and (2) the Preferred Stock ListTM system itself - includes our Preferred Stock ListTM database and search engine. This new subscription program is great for do-it-yourselfers! Please consider subscribing to the comprehensive CDx3 Notification Service or to our Preferred Stock ListTM system, now available separately, today. |
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Test Your Knowledge With These Preferred Stock Facts!
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).
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 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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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) 2013 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.
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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.
Learn
to screen, buy and sell the highest
quality preferred stocks by