PREFERRED
STOCK NEWS
New
Preferred Stock IPO’s, January 2016
There were five new preferred
stocks issued during January 2016, bringing
the total number of these securities trading
on U.S. stock exchanges to 886.

PSA-B is from Public Storage
(PSA), WLGGP is from Wells Fargo (WFC),
BKRRP is from Bank of America (BAC), CUBUP
is from Customers Bancorp (CUBI) and CTGGP
is from Citigroup (C).
(Source: Prospectuses
PSA-B,
WLGGP,
BKRRP,
CUBUP,
CTGGP. CDx3 Notification Service
database,
PreferredStockInvesting.com)
New Preferreds
Initially Trade on the Over-The-Counter
Exchange
In most cases, newly issued preferred stocks
will initially trade on the Over-The-Counter
stock exchange under a temporary trading
symbol until the big board exchange to which
the new issue is destined (usually the NYSE)
assigns the new, permanent symbol. The CUSIP
numbers, however, always stay the same so I
have provided them in the above table.
PSA-B from Public Storage,
for example, initially began trading on the
OTC as PBSTP on January 14 but became PSA-B
when NYSE trading began on January 21. Any
shares that you purchase under the temporary
OTC symbol are automatically transferred to
the new, permanent symbol by your broker.
Looking at the Exchange
column above, the remaining four January
issues are still trading on the OTC under
temporary symbols (January 29), but should
transfer to their respective big board
exchanges shortly, their symbols changing at
that time. WLGGP will become WFC-W; BKRRP
will become BAC-C; CUBUP will become CUBI-D
and CTGGP will become C-S.
The OTC is a wholesale trading venue that
individual investors can use just like the
big guys, which can be especially beneficial
during a period of high prices (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 such a period).
Customers Bancorp preferreds offer an
example of how OTC prices can frequently be
favorable. CUBI currently has two preferreds
and one Exchange-Traded Debt Security
trading.

Notice how the new CUBUP,
currently trading OTC, is trading for a much
lower price ($25.25) than its NYSE peers,
even though CUBUP offers a higher
Yield-To-Call.
About the New
Issues
The power of investment grade
ratings is really on display with these new
January preferreds. At the end of January
2016, the average current yield of all
call-protected, U.S.-traded preferred stocks
was 7.892 percent (rated and unrated). For
comparison, I have set the Yield column in
the first table above to show the current
yield of these new preferreds on January 29.
While ratings are somewhat controversial,
the benefit to the issuer is clear here.
Public Storage is the highest rated REIT and
is consistently able to issue new preferred
stocks with coupons a full percentage point
lower than its peers; the new PSA-B is no
exception.
Four of the five new preferreds issued
during January are from banks – Wells Fargo,
Bank of America, Customers Bancorp and
Citigroup. As has been the case for several
years now, new bank-issued preferred stocks
offer non-cumulative dividends. On the
upside, these four new issues are all
designated as offering Qualified Dividend
Income, providing a tax benefit to many
buyers (see “Hidden
Risks Of Tax-Advantaged Preferred Stocks”
for data regarding whether QDI preferreds a
really advantageous).
Regarding liquidity, as
illustrated below, a preferred stock will
generally trade around 41,000 shares per day
on average.

When I look at the biggest movers each
month, bank-issued preferreds are always
high on the liquidity list with around
50,000 shares trading daily, always led by
the TBTF banks.
Now take a look back at the Volume column of
January’s new IPO’s. WLGGP from Wells Fargo
and CTGGP from Citigroup were both about the
same size at 35 million shares and 36
million shares, respectively. But look at
the volume for Citigroup’s new CTGGP. Last
Friday, this new preferred from Citi traded
a whopping 3.6 million shares, making it one
of the most popular new preferred stock
offerings.
January 2016 was a very typical month with
its five new preferred stock offerings, but
usually there is more industry
diversification. While banks are almost
always represented, don’t be surprised to
see new issues from telecommunications,
utilities, insurance companies and/or
property REITs during February.
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