PREFERRED
STOCK NEWS
Quick Money
for the New Year: Twelve High Quality
Preferred Stocks Paying December Dividends
Most preferred stocks pay
dividends each quarter. And whoever owns the
shares on the security’s ex-dividend date is
going to receive the entire quarter’s worth
of dividend income, regardless of how many
days during the quarter you actually owned
the shares. Obviously, knowing which
preferreds are about to reach their next
ex-dividend date becomes important to buyers
looking for a quick dividend.
Distribution
of quarterly payers
While most preferred stocks pay
dividends on a quarterly schedule, the schedule
varies; some pay in January, April, July and
October while others pay in February, May,
August and November. But most (56%) pay their
dividends using the calendar quarter - March,
June, September and December.
This chart shows the current
dividend distribution used by U.S.-traded
quarterly payers.
Since the payment
schedule of quarterly payers varies, a robust
preferred stock portfolio generates income every
month.
(Source: Preferred Stock Investing, Fifth
Edition,
PreferredStockInvesting.com)
High quality December
2015 payers
There are
currently 888 preferred stocks and
Exchange-Traded Debt Securities trading on U.S.
stock exchanges. ETDS are very similar to, and
are often listed as, preferred stocks but are
actually bonds that trade on the stock exchange
(rather than the bond market).
Before the availability of online preferred
stock databases and search engines, finding out
which ones were (a) of high quality and (b)
about to reach their ex-dividend date took so
long that the opportunity would come and go
before the specific candidates could be nailed
down.
Fortunately for
today’s preferred stock investors, that is no
longer the case. Using an online database and
preferred stock search engine (the
CDx3 Notification
Service database is used here), finding
high quality issues that are within days of
providing their shareholders with 90 days’ worth
of dividend income now takes just a few seconds.
High quality is
defined here as those securities having an
investment grade rating from Moody’s, cumulative
dividends (meaning that if the issuing company
missed a dividend payment they have to make it
up to you; their obligation accumulates) and are
currently call-protected.
I also limited
this list to those securities that are trading
within one quarter’s worth of dividend income of
these securities’ $25 par value (i.e. up to
$25.50), the thinking being that paying slightly
above par may be acceptable since today’s buyers
will receive a full quarter’s worth of dividend
income after having owned the shares for only a
few days.
Here are the
twelve U.S.-traded high quality preferred stocks
and ETDS (shown in green font) that have (or are
expected to have) an ex-dividend date during
December 2015.
Those who own
shares of any of these twelve securities on the
indicated ex-dividend date will receive the
upcoming quarterly dividend payment from the
issuing company.
(Source: CDx3 Notification Service database,
PreferredStockInvesting.com)
Quarterly payment
amount
How much is the
payment going to be? Here’s the formula:
($25 times [dividend rate]) divided by 4.
The [dividend
rate] value is the percentage that you see in
the “Div Rate” column in the above table. For
example, DLR-G is issued by Digital Realty
Trust, Inc. (DLR) and pays a 5.875 percent
annual dividend. The dividend that preferred
stock shareholders receive is always based on
the security’s “par” value, not your purchase
price and not the current market price.
The par value for
each of the twelve securities shown above is $25
per share so DLR-G pays an annual dividend of
$1.47 per share ($25 times 5.875 percent).
Dividing this annual amount by four gives us the
quarterly dividend payment of $0.37 per share to
those holding shares when the market opens on
the morning of DLR-E’s December 11, 2015
ex-dividend date.
What’s next?
These twelve “high
quality” December payers not only have several
risk-lowering characteristics that are pretty
easy to warm up to, but are also from a diverse
array of companies and industry segments.
Ten of the eleven
preferred stocks (black font) listed in the
table are issued by seven REITs - DDR
Corporation (DDR), Kimco Realty (KIM), Regency
Centers (REG), and Vornado Realty (VNO), retail
centers; Digital Realty (DLR), data centers;
Public Storage (PSA), self-storage and PS
Business Parks (PSB), office buildings. SCE-G is
issued by Edison International’s Southern
California Edison (EIX), a $19 billion utility.
The remaining
security, CTZ, is an ETDS (green font) from
Qwest Corporation, which is CenturyLink’s (CTL)
cable-laying subsidiary.
I have set the
Yield column in the above table to show
Yield-To-Call since these twelve securities are
currently call-protected. The YTC calculation
assumes that you reinvest your dividends and
also accounts for any capital gain or loss you
realize when the shares are redeemed, on the
indicated call date, by the issuing company (in
that event, you receive the security’s $25 par
value in cash in exchange for your shares).
But remember that
preferred stocks with coupon rates below six
percent are rarely called by their issuer so
many of these securities may represent long-term
holdings for today’s buyers. Also, note that
preferred stock market prices tend to rise as
their ex-dividend date approaches so better
prices may become available for these issues
after the indicated ex-dividend date (but you
will miss the upcoming dividend).
If the
characteristics of these securities are
consistent with your goals, resources and risk
tolerance, you can make 90 days’ worth of
dividend income after having invested for only a
few days during December. Just remember that you
must own the shares prior to the security’s
December ex-dividend date and you’ll be in the
chips going into the new year.
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