Great Resources for Preferred Stock Investors!





APRIL 2016

Issue 109


Subscribe: CDx3 Notification Service

  See Preferred Stock Investor Reviews


Preferred Stock Investing, 5th Edition

  See Reader Reviews


Free Preferred Stock Resources


In This Issue:

High Quality Preferred Stocks

Preferred Stock News

Special Announcement

More Preferred Stock Research

Free Special Offer




"The system works. I have seen nothing else of any use regarding preferred stock investing.”

- from George W., CDx3 Notification Service subscriber. See more preferred stock investor reviews here.














by Doug K. Le Du


Preferred stock researcher

PortfolioChannel contributor

Syndicated writer






88 Reader Reviews


See Reader Reviews

Table of Contents

Free Excerpt


















































Already a subscriber?

See page 1 of this month's issue of the subscriber's newsletter, CDx3 Research Notes, for symbols.








Top Paying Investment Grade, Cumulative Preferreds Available Under $25



The highest quality preferred stocks that are selling for a sub-$25 market price are offering income investors an average 7.0 percent Yield-To-Call in today's preferred stock marketplace.

As rates move up and down over time, prices tend to move in the opposite direction, moving down and up, respectively. This is why preferred stock investing is long-term investing, taking advantage of the known inverse relationship between rates and prices over time.

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, have cumulative dividends (meaning that if the issuing company skips a dividend payment to you, they still owe you the money) 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 twenty 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 offer cumulative dividends and are currently trading below their $25 par value, this filter also limits the list to issues that have not suspended their dividend payments. 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 List
TM database (please note that to protect the values of subscriptions to our CDx3 Notification Service, trading symbols are obscured here). Already a CDx3 Notification Service subscriber? See page 1 of this month's issue of the subscriber's newsletter, CDx3 Research Notes, for symbols.



There were a total of 896 preferred stocks and ETDs trading on U.S. stock exchanges as the month came to a close. Of these 896, these are the top highest quality issues that are trading below their $25 par value. This list is sorted by dividend rate (coupon) with the highest payers listed first.

The 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 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.

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 our CDx3 Notification Service today. We offer monthly and annual subscriptions for individuals and groups. Check out these features:


















New Preferred Stock IPO’s, March 2016


Preferred stock investors were treated to the highest number of new introductions during March 2016 than any other month since September 2014. There were eleven new preferred stocks issued during the month, bringing the total number of these securities trading on U.S. stock exchanges to 898.



Note that I am using IPO date here, rather than the date on which retail trading started. The IPO date is the date that the security’s underwriters purchased the new shares from the issuing company. Anxious to sell the new shares, underwriters will generally sell to broker/dealers who sell them to us within a few days of the IPO date.

In addition to offering a relatively robust field to pick from, the eleven new March issues are from a diverse group of industries including banks: HBANO from Huntington Bancshares (HBAN), BOFIL from BOFI Holding (BOFI) and BBT-H from BB&T Corp. (BBT); property REITs: STAG-C from Stag Industrial (STAG) and SHO-E from Sunstone (SHO); insurers: AFSI-E from AmTrust (AFSI) and WRB-C from W.R. Berkley (WRB); utilities: SCE-K from Southern California Edison (SCE) and ENO from Entergy New Orleans; and asset management: GBQTP from Gabelli and KKR-A from KKR & Company (KKR), a master limited partnership.

Note that Gabelli’s GBQTP, just introduced on March 28, is still trading on the Over-The-Counter exchange. GBQTP is a temporary trading symbol until this security moves to the NYSE as GAB-J (see "Preferred Stock Buyers Change Tactics For Double-Digit Returns" for an explanation of how the OTC can be used to purchase shares for discounted prices during a period of high preferred stock prices).

(Sources: Prospectuses BBT-H, SCE-K, WRB-C, SHO-E, BOFIL, AFSI-E, STAG-C, KKR-A, HBANO, ENO, GBQTP. CDx3 Notification Service database,

About the New Issues

BBT-H, SCE-K, WRB-C and ENO all offer double investment grade ratings but, as is usually the case, are also among the lowest dividend payers. KKR’s KKR-A offers an investment grade rating from S&P and a more generous 6.75 percent coupon, but KKR is structured as an MLP, so shareholders will receive a K1 at tax time rather than a 1099. Huntington’s HBANO splits the difference with its Moody’s investment grade rating and offers a 6.25 percent coupon.

As with almost all new bank-issued preferreds since 2010, the non-cumulative dividends from Huntington, BOFI and BB&T are designated as Qualified Dividend Income (QDI). Insurer AmTrust’s AFSI-E and Gabelli’s GBQTP are also QDI-designated, offering favorable tax treatment to many buyers.

GBQTP and Southern California Edison’s SCE-K are relatively rare cases where cumulative dividends are also QDI-designated. From page 5 of SCE-K’s prospectus:

Distributions constituting dividend income received by a non-corporate U.S. holder in respect of the Trust Preference Securities generally represent “qualified dividend income” for U.S. federal income tax purposes, which is not taxed at ordinary income tax rates, but instead is taxed at more favorable capital gain rates for U.S. federal income tax purposes.

See “Hidden Risks Of Tax-Advantaged Preferred Stocks” for data regarding whether QDI preferreds are really advantageous.

ENO from Entergy New Orleans is interesting in that this security is an Exchange-Traded Debt security (ETD) which is actually a bond, recorded on the company’s books as debt rather than equity. WRB-C and BOFIL are also ETDs (green font seen in the above table). But what makes ENO interesting is that it is a “mortgage bond,” meaning that the physical assets (mainly buildings and other property) that Entergy has in New Orleans serve as collateral against this debt.

SHO-E from Sunstone Hotel Investors is a 4.6 million share issue with a 6.95 percent coupon, costing the company $8 million per year in dividend expense while raising about $111 million. These proceeds were used to redeem the 4.0 million outstanding shares of the company’s 8.0 percent SHO-D on April 6. Interestingly, this move does not save the company any money; the new issue’s 4.6 million shares at 6.95 percent produce the same dividend expense obligation as the old 4.0 million shares at 8.0 percent.

In Context: The U.S. Preferred Stock Marketplace

So how do the eleven new March issues stack up within the context of today’s preferred stock marketplace?

Since the Fed announced a rate increase last December, U.S. preferred stock prices have been generally lower (rates and prices of fixed-return securities tend to move in opposite directions). But that changed during March.



The data being charted here is limited to call-protected issues in order to limit the price distorting effect of an anticipated redemption.

Going into December of last year, the average market price of U.S.-traded, call-protected preferred stocks and ETDs was $24.86 per share and remained below that level until March 18, closing at $24.91 that day.

While the continuing strong demand for U.S. preferred stocks can be attributed to several factors, the next chart makes it pretty clear that the lack of attractive alternatives is certainly among them. U.S.-traded preferred stocks are currently returning an average current yield of 7.2 percent (blue line) while the annual return being offered to income investors by the 10-year treasury is 1.8 percent and that of the 2-year bank CD is a meager 1.5 percent.


It is into this marketplace that March’s new issues were introduced.

For comparison, I have set the Yield column in Figure 3 above to show the current yield of the eleven new March preferreds on March 30.

While we are still in a relatively high-priced preferred stock market, the after-tax/after-inflation returns being offered to income investors by the alternatives are essentially non-existent.










See Reader Reviews

Table of Contents

Free Excerpt









Preferred Stock Investing, Fifth Edition

Learn how 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 88 reviews posted at Amazon.

The Fifth Edition addresses selecting, buying and selling the highest quality preferred stocks during the market conditions that we are currently facing.

See: Reviews | Table of Contents | Free Excerpt | Paperback | eBook

The 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).













Recent Preferred Stock Articles by Doug K. Le Du


Here is a list of some of my recent syndicated articles. To view an article, just click on the headline.

























Preferred Stock Market Research Now Available All Month Long - Free


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.










Book (Preferred Stock Investing)

  - Paperback provided by Amazon

  - eBook PDF provided by BookLocker


Notification Service

  - eMail alert features

  - Spec Sheets

  - Database features

  - Preferred stock search engine features

  - Access to experts

  - CDx3 Research Notes newsletter features

  - Pricing, Individual or Group subscriptions


Free Resources

  - CDx3 Newsletter (published by email the first week of every month)

  - Research article library (hosted by Seeking Alpha)

  - Test your knowledge (online preferred stock quiz)





(c) 2016 Del Mar Research, LLC. All rights reserved.


Trademarks of Del Mar Research, LLC:

  - CDx3 logo

  - Preferred Stock List, CDx3, CD Times 3, CDx3 Income Engine,

     CDx3 Investor, CDx3 Portfolio, CDx3 Preferred Stock


Notification Service

  - Individual Subscription Agreement

  - Group Subscription Agreement



The content of this newsletter, and the materials that it links to that are owned by Del Mar Research, LLC, are to be regarded as educational, rather than advisory. There can always be exceptions to trends and/or generalizations that may be presented herein. Consider your financial resources and goals before investing. You, and not Del Mar Research, LLC, are solely responsible for your own investing decisions.