 One of the highest reader-rated books in the United States.
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“CDx3 is a unique service for preferred stock investors...The presentation and organization in CDx3 sets it apart from others...A valued resource that I use daily.” Ray E., 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 lists the six highest quality preferred stocks that are selling for a sub-$25 market price and offering income investors just under seven percent yields in today's preferred stock marketplace. Out of the 924 preferred stocks and exchange-traded debt securities that were trading on U.S. stock exchanges at the end of May 2014, our preferred stock search engine found six specific high quality issues selling below their $25 par value. (jump to article) The Preferred Stock News article examines the opportunities and risks of the four income securities offered by Dutch insurer AEGON, N.V. The company just redeemed two preferred stocks using $1.5 billion and they did so using cash on hand. Doing so may have created an opportunity for those considering buying the company's remaining four preferreds. (jump to article) The Special Announcement article announces the availability of the 5th Edition of my book, Preferred Stock Investing. 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. 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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6 Investment Grade, 6.5+ Percent Cumulative Preferreds Available Under $25 Preferred stock search engine finds these seven out of 924 alternatives The six highest quality preferred stocks that are selling for a sub-$25 market price are offering income investors just under seven percent yields in today's preferred stock marketplace. 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 seven 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. Currently priced below par 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. Results 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 June 2014 issue of the subscriber's newsletter, CDx3 Research Notes, that you received on May 29 for symbols. There were a total of 924 preferred stocks and ETDs trading on U.S. stock exchanges as May 2014 came to a close. Of these 924, six specific high quality issues are trading below their $25 par value (May 29, 2014 prices). This list is sorted by dividend rate (coupon) with the highest payers listed first. The two securities shown in green font are ETDs (ETDs are bonds that trade on the stock exchange rather than the bond market and are very similar to preferred socks) while the remaining four 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 May 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 75 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. 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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AEGON, N.V. Preferred Stocks $1.5B Redemptions May Create Opportunity for Remaining Issues AEGON, N.V. (NYSE: AEG), a Dutch insurance company with a $21.7 billion market cap, has four preferred stocks currently trading including one exchange-traded debt security (ETDS). These four securities, three of which are fixed-rate with one floating rate preferred, have cumulative dividends with double investment grade ratings (Baa1/BBB). The fixed-rate securities are offering an average current yield of 6.54 percent. The floater is a LIBOR-based floating-rate traditional preferred stock and is offering a 4.28 percent current yield. (Sources: market capitalization, The Motley Fool; preferred stock data, PreferredStockInvesting.com) Description and History While AEGON is a Dutch insurance company, the majority of its revenue is derived from its U.S. business where it operates under the Transamerica brand acquired in 1999 (Figure 3). The company, headquartered in The Hague, Netherlands, traces its roots back more than 160 years when it first provided Dutch citizens with funds for family burials. Now, AEGON’s 23,000 employees staff its global operations, providing a wide range of life insurance, pension, savings and investment products in the U.S., the U.K., the Netherlands and other countries. With U.S. equities surging during late-2013, employees of companies that have pension plans offering AEGON funds moved cash into those funds in a big way during the first quarter of 2014. U.S. pension cash inflows to AEG increased by 43 percent over Q1 2013 (Figure 4). AEGON just reported their first quarter results on May 15. During their quarterly conference call with analysts, CEO Alexander Rijn Wynaendts stressed the company’s progress toward lowering its debt saying that “We will achieve our objective to reach a leverage ratio of 26% to 30% and a fixed charge coverage of 6x to 8x by the end of this year. And as a result, our funding costs will further decrease in 2014, which improves our cash flows and has a positive impact on our return on equity.” Integral to this effort was the recent redemption of two of AEG’s capital securities. Redeeming AEV on March 15 (6.875 percent on 20 million shares) and AEF coming up on June 15 (7.25 percent on 40 million shares) saves the company $106,875,000 in annual dividend expense. (Sources: AEGON website | 2013 Annual Report | Q1 2014 Results presentation | AEGON N.V. Q1 2014 Conference Call, May 15, 2014) AEGON’s Preferred Stocks Figure 5 itemizes AEGON’s three preferred stocks and its single ETDS (AEK, shown in green font), all of which pay cumulative quarterly dividends. The preferred stocks reach their next quarterly ex-dividend date on August 27 while AEK’s next ex-dividend date occurs a month earlier on July 30. AEH is a traditional preferred stock issued by AEGON in 2005. Due to this security’s relatively low 6.375 percent dividend rate, this security is particularly exposed to the “perpetual ownership trap” (Preferred Stock Investing, Fifth Edition, page 141). Traditional preferreds with a dividend rate of at least 6.5 percent are generally able to be sold for a capital gain either on the open market or to the issuing company as the result of a redemption; there have only been two exceptions since January 2001 (Preferred Stock Investing, Fifth Edition, page 260). Those holding shares that offer a dividend rate below 6.5 percent, however, have not been as fortunate. Today’s buyers wishing to avoid a downstream capital loss are likely to hold these shares for a very long time. AEB is a LIBOR-based variable rate preferred stock. Even though AEB’s December 15, 2010 call date has long-since come and gone, it is unlikely that AEGON will be redeeming these shares anytime soon. AEB’s dividend rate is calculated by “…the greater of (a) three-month LIBOR plus 0.875%, and (b) 4.00%.” The current LIBOR is at 0.2273 percent so AEB is only costing AEGON 4 percent, well below the average 6.8 percent current yield being offered by the highest quality preferred stocks in today’s market. AED was introduced at the same time in November 2005 as AEB but with a fixed 6.5 percent dividend rate. Uncertain as to which direction rates were going to go, AEGON hedged their bet in 2005 by separating this issuance into the LIBOR-based AEB and the fixed-rate AED, a strategy that ended up producing a substantial benefit to the company as AEB has been paying its minimum rate of 4 percent since early-2008. AEK is an ETDS. ETDS, while very similar to preferred stocks, are actually bonds that trade on the stock exchange (recorded as debt rather than equity on the company’s books). AEK was issued in January 2012 at 8.0 percent. Its 20 million shares produced gross proceeds of $500 million to AEGON. At a well above-par $28.88, shares of AEK expose today’s buyers to a $3.88 per share capital loss in the event of a downstream call. Buyers are betting that rates will increase substantially by this security’s August 2017 call date, eliminating the company’s ability to redeem AEK by issuing a new security at a lower rate at that time. (Sources: LIBOR rate | SEC Prospectuses AEK, AEB, AED, AEH) What’s Next? If you feel that AEGON’s preferred stocks are consistent with your personal financial resources, goals and risk tolerance, taking a closer look at AED would be a good place to start your due diligence. The question with AED is the likelihood of a call in the short-term. AED became callable on December 15, 2010 so AEGON can redeem AED at any time. Those paying more than this security’s $25 par value will realize a capital loss in the event of such a redemption. On the other hand, AED offers a 6.5 percent dividend and is trading close to its $25 par value, its market price having come down about $0.30 per share since May 27. And even though AED is redeemable, the company’s redemption of AEV on March 15 and AEF on June 15 reduces the company’s cash by $1.5 billion. It seems like if AEGON had the cash on hand to redeem AED it would have. In other words, the $1.5 billion payout to redeem AEV and AEF may have created an opportunity for AED buyers. While it is not possible to know when, or even if, the company will redeem AED, today’s buyers will realize a current yield of 6.44 percent from a double-investment grade preferred stock with cumulative dividends issued by a company with very low default risk as long as the shares remain trading.
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. See: Reviews | Table of Contents | Free Excerpt | Paperback | eBook The preferred stock market has returned 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). |
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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.
