 One of the highest reader-rated books in the United States.
See the new Fifth Edition of Preferred Stock Investing at Amazon! |
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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 the market for the highest quality preferred stocks now favors buyers. Of the twenty-eight high quality preferred stocks selling for a sub-$25 market price, seven offer a dividend of at least 7 percent. Out of the 928 preferred stocks and exchange-traded debt securities that were trading on U.S. stock exchanges at the end of December 2013, our preferred stock search engine found 28 specific high quality issues selling below their $25 par value. (jump to article) The Preferred Stock News article presents a four-step procedure for identifying high quality preferred stocks. Using that procedure on January 2, 2014 isolated CTW, an exchange-traded debt security from CenturyLink that is offering double-investment grade ratings and a 7.5 percent dividend (coupon) selling below its $25 par value. (jump to article) The Special Announcement article announces the availability of the all new 5th Edition of my book, Preferred Stock Investing. The new Fifth Edition of Preferred Stock Investing started shipping last summer. I update the book every other year with the most recent preferred stock research, focusing on the conditions that preferred stock investors are expected to be facing (upward pressure on rates). Learn to screen, buy and sell the highest quality preferred stocks. (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) The Free Special Offer article explains how you can now have continuing preferred stock research delivered to you for free. 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 my blog and make them available to you 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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28 Investment Grade, 6.5+ Percent Cumulative Preferreds Available Under $25 Preferred stock search engine finds these 28 out of 928 alternatives With a sub-$25 average price, the market for the highest quality preferred stocks now favors buyers. Of the twenty-eight high quality preferred stocks selling for a sub-$25 market price, seven offer a dividend of at least 7 percent. This is the first time in several years that we have seen 7+ percent dividend rates (coupon) offering 8+ percent current yields. As rates and prices move up and down over time, buyers buy when rates increase and prices fall below par ($25 per share in this case). Sellers sell those shares when rates fall again, pushing prices back above their original purchase price, enjoying 7 percent (long-term average) dividends in the meantime. This is why preferred stock investing is long-term investing, taking advantage of the known inverse relationship between rates and prices over time. I define 'high quality' here as securities that are able to meet all ten of the CDx3 Selection Criteria from my book, Preferred Stock Investing. 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, pay a minimum annual dividend of at least 6.5 percent, have cumulative dividends and offer investment grade ratings from Moody's Investors Service. 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 nineteen 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 are currently trading below their $25 par value, this filter also limits the list to issues that have not suspended their dividend payments. Setting the "Dividend rate at least" parameter (center left under the Dividends heading) to 6.500 eliminates securities with very low, 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 January 2014 issue of the subscriber's newsletter, CDx3 Research Notes, that you received on December 31 for symbols. There were a total of 928 preferred stocks and ETDs trading on U.S. stock exchanges as December 2013 came to a close. Of these 928, 28 specific high quality issues are trading below their $25 par value (December 31, 2013 prices). This list is sorted by dividend rate (coupon) with the highest payers listed first. The eleven 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 17 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). 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. 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 January 2014 issue of the subscriber's newsletter, CDx3 Research Notes.
Learn 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 71 reviews posted at Amazon. A new edition of Preferred Stock Investing is published every other year in order to keep up with current market trends and research. The new Fifth Edition addresses selecting, buying and selling the highest quality preferred stocks during the market conditions that we are expected to face throughout 2014 (upward pressure on rates). See: Reviews | Table of Contents | Free Excerpt | Paperback | eBook Preferred Stock Investing includes the information, websites and other resources needed for you to be a very successful preferred stock investor. The Fifth 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 whenever a new preferred stock or exchange-traded debt security is introduced. 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. |
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Preferred Stock Picker finds CenturyLink Preferred Stock Four step method identifies CenturyLink’s CTW As we start 2014, there are currently 928 preferred stocks and Exchange-Traded Debt Securities (ETDs) trading on U.S. stock exchanges. ETDs are very similar to preferred stocks and are frequently labeled as such on your brokerage statement. But they are actually bonds, recorded on the issuing company’s books as debt rather than equity, and are therefore often seen as having less investment risk than the same company’s preferreds. With 928 to pick from, finding the issues that are the most worthy of consideration can be a tedious, time consuming task that few are anxious to launch into. Without having an automated preferred stock database and search engine on hand, it is fair to say that the task is just too hard to do. Fortunately, there are a few such programs available now that make finding what you are looking for pretty simple. For the four-step process described here, the CDx3 Notification Service database and search engine from PreferredStockInvesting.com was used to find a security from CenturyLink trading under the symbol CTW. Risk versus Reward Using the Moody’s rating scale as a proxy for investment risk, and current yield as a measure of reward, Figure 3 illustrates the trade-off that preferred stock investors are currently making (January 2, 2014). Notice how CTW stacks up against its other Baa3-rated peers. CTW is currently providing a current yield of 7.94% to buyers, but yield is far from the only consideration for risk-averse preferred stock investors. Finding bargains Here is an easy-to-follow four step procedure that I favor when looking for high quality preferred stock bargains. Step 1: Moody’s investment grade Many preferred stock investors are only interested in investment grade securities, so let’s start there. Moody’s ratings fall into two categories – investment grade and speculative grade. Their investment grade category has ten sub-categories: Aaa, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2 and Baa3. Filtering out securities that are not rated as investment grade by Moody’s reduces our list of candidates from 928 to 139. While the criteria for any of these sub-categories are stiff, the Baa3 sub-category is the easiest to qualify for and, therefore, offers more choices. Limiting our list to Baa3-rated securities on January 2, 2014 cuts our list of 139 down to 40 U.S.-traded preferred stocks and ETDs. Step 2: Dividend rate of at least 6.5% As preferred stock dividend rates go up, their market prices tend to go down, and vice versa. Preferred stock investing is therefore long-term investing, taking advantage of this known, inverse relationship between rates and prices over time. Preferred stock dividend rates (“coupon” rate) range between 6% and 9%. During a period of upward pressure on rates, it is important to stay off the bottom of the rate scale when considering a preferred stock purchase. Companies have a history of buying your shares back from you (known as a “call” or “redemption”) 91% of the time whenever they can save as little as 0.375% in dividend expense. Higher dividend payers tend to be called more readily than lower payers. Put another way, the next time that rates head down toward 6%, there is a 91% chance of a call for preferred stocks with a dividend rate of 6.375% or higher (source: Preferred Stock Investing, Fifth Edition, page 229). Below that and you may not be able to sell your shares without realizing a capital loss. Using 6.5% as the minimum dividend rate for purchases adds a layer of principal protection to your investment. Of the 40 Baa3-rated preferreds stocks and ETDs, there are 19 that offer a dividend rate of at least 6.5%. Step 3: Currently priced below $25 par In the event of a downstream call, the issuing company will pay you the security’s “par value” per share (usually $25). By purchasing your shares for a market price that is below $25, you position yourself for a downstream capital gain in addition to the 6.5+% dividend income that you are earning in the meantime. Selecting issues that have a $25 par value and are currently (January 2, 2014) trading for a market price below that amount leaves 14 candidates. Step 4: Highest current yield and highest dividend rate So far, this method of identifying purchase candidates has focused on lowering risk. Now let’s look at the income side. By looking at dividend rate (coupon) and current yield side-by-side we can easily see the highest payers. Of the remaining 14 candidates, CenturyLink’s CTW offers a dividend rate of 7.5% (the highest in the group) and, priced at $23.61, has a current yield of 7.94% (second highest). As a bonus, CTW also carries an investment grade rating from S&P and is an ETDs. What's next? CTW, issued by CenturyLink’s Qwest cable-laying subsidiary, is a double-investment grade rated ETDs with a 7.5% dividend rate and selling for a below-par $23.61 per share. Further, CTW’s call date does not arrive until September 15, 2016 so this security cannot be called by CenturyLink until after that date (see prospectus for more details). In the event of such a call, those purchasing shares at today’s $23.61 will receive CTW’s $25.00 per share par value from CenturyLink, adding a $1.39 per share capital gain to the 7.94% dividend yield you will be earning in the meantime. Whether or not CTW is consistent with your personal risk tolerance, resources and goals is, of course, a decision that only you can make. My only intent here is to provide you with a simple way of filtering preferred stocks while looking for purchase candidates. This four-step process allows you to identify high quality preferred stock candidates for consideration at any time.
More Preferred Stock Research FROM DOUG K. LE DU Click any headline
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Fifth Edition of Preferred Stock Investing is Now Shipping! Learn how to screen, buy and sell the highest quality preferred stocks
A new edition of Preferred Stock Investing is published every other year in order to keep up with current market trends and research. The new Fifth Edition addresses selecting, buying and selling the highest quality preferred stocks during the market conditions that we are expected to face throughout 2014 (upward pressure on rates). See: Reviews | Table of Contents | Free Excerpt | Paperback | eBook The preferred stock market is finally starting to return to a market favoring buyers - higher dividend income available for lower prices. The new 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). |
Chapter 17 provides the investing results for every qualifying preferred stock issued since January 2001 |
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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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 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. Please accept my invitation to receive articles by email and visit the Forum. |
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Chapter
17 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.
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
sign up for this free monthly preferred
stock research newsletter
at
www.PreferredStockInvesting.com.
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) 2014 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.
