Great Resources for Preferred Stock Investors!






Issue 150


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




"Your service simply provides everything I need to make decisions on PS purchases. Great time saver.

- from Joel N., CDx3 Notification Service subscriber. See more preferred stock investor reviews here.














by Doug K. Le Du


Preferred stock researcher

SeekingAlpha contributor

PortfolioChannel contributor

Syndicated writer






104 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 Investment Grade, Cumulative Preferreds Available Under $25



There are currently 125 high quality preferred stocks selling for an average price of $26.40 per share (investment grade, cumulative dividends). And one of these high quality issues is now selling below its $25 par value, offering an average current yield of 5.0 percent.

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 the highest quality preferred stocks available for less than $25. Of the twenty-five preferred stock characteristics 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, the trading symbol is 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 916 preferred stocks and ETDs trading on U.S. stock exchanges as the month came to a close (including convertible preferred stocks). Of these 916, this is the highest quality issue that is trading below its $25 par value.


This high quality security has a current market price (seen in the Last Price column) that is below its $25 par value (as shown in the Liquid Price column) and enjoys an investment grade rating from Moody's.

Keep an eye out for sub-$25 buying opportunities such as that listed here. The lower your purchase price, the more principal protection you'll have.

Please consider becoming a subscriber to our CDx3 Notification Service today. Check out these features:

















New Preferred Stock IPO’s, August 2019


After holding off during July to see if the Fed was going to reduce interest rates, preferred stock issuers crept back into the market with five new issues introduced throughout August.

In anticipation of a drop in rates, buyers and those seeking to reduce their risk continued to push up the prices of previously issued higher payers. As the month came to a close, the average market price for all U.S.-traded preferred stocks was $25.80, up $0.08 per share over the last month.


August’s new issues

August’s five new preferred stocks are offering an average annual dividend (coupon) of 6.1 percent, an average current yield (which does not consider reinvested dividends or capital gain/loss) of 5.9 percent and an average Yield-To-Call (which does consider reinvested dividends and capital gain/loss) of 5.4 percent (using August 30 prices).

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.

A special note regarding preferred stock trading symbols: Annoyingly, unlike common stock trading symbols, the format used by exchanges, brokers and other online quoting services for preferred stock symbols is not standardized. For example, the Series A preferred stock from Public Storage is “PSA-A” at TDAmeritrade, Google Finance and several others but this same security is “PSA.PR.A” at E*Trade and “PSA.PA” at Seeking Alpha. For a cross-reference table of how preferred stock symbols are denoted by sixteen popular brokers and other online quoting services, see “Preferred Stock Trading Symbol Cross-Reference Table.”

There are currently 125 high quality preferred stocks selling for an average price of $26.40 (August 30), offering an average current yield of 5.3 percent. And one of these high-quality issues is selling below its $25 par value, offering an average current yield of 5.0 percent. By high quality I mean preferreds offering the characteristics that most risk-averse preferred stock investors favor such as investment grade ratings and cumulative dividends.

There is now a total of 916 of these securities trading on U.S. stock exchanges (including convertible preferred stocks).

About the new issue

ALL-H is a 46 million share issue from Allstate Corp. (ALL), the insurer’s eighth preferred stock issue currently trading and the second since March 2018. ALL-H offers double investment grade ratings. The 5.100 percent dividends are non-cumulative and the shares become callable on October 15, 2024. Several of Allstate’s preferreds are trading beyond their call dates, including ALL-A (5.625%), ALL-D (6.625%) and ALL-F (6.625%). These three securities were issued at 10m shares, 26m shares and 10m shares, respectively. A total of 46m shares. While there has been no formal announcement, it would not be surprising for Allstate to announce the redemption of ALL-A, ALL-D and ALL-F shortly.

AHL-E is a double-investment grade preferred stock from Aspen Insurance Holdings Limited, an insurance and reinsurance company. While the company was taken private in February of this year as part of its acquisition by Apollo Global Management, their three preferred stocks, none of which are currently redeemable, remain publicly traded. Based in Bermuda, Aspen may have an opportunity to exercise its claim-paying ability as hurricane Dorian does what hurricanes do to the American southeast. AHL-E pays 5.625 percent non-cumulative dividends.

NRZ-B was introduced by New Residential Investment Corp. (NRZ) on August 8, just six weeks after introducing NRZ-A on June 25. The introduction of NRZ-B is what the company referred to as “an opportunistic introduction,” taking advantage of a dip in interest rates. Specifically, NRZ-A was introduced on June 25 at 7.5 percent followed by NRZ-B, just six weeks later, at 7.125 percent. NRZ-B is an unrated traditional preferred stock offering cumulative dividends. The rate will remain fixed at 7.125 percent until this security’s August 15, 2024 call date. At that time, the coupon will float based on the three-month LIBOR rate plus 5.640 percent. NRZ is a $6.4 billion mortgage REIT founded in 2011.

MBINO from Merchants Bancorp (MBIN) is another case of interest rate opportunism as MBINO is Merchants’ second new preferred stock issued in just over four months. MBINP, introduced in March at 7.000 percent, has now been followed by MBINO at 6.000 percent, a full percentage point lower. MBINO is an unrated traditional preferred stock paying non-cumulative 6.0 percent dividends using the fixed-to-float rate structure. The rate becomes variable on the security’s October 1, 2024 call date, using the three-month LIBOR plus 4.569 percent. Page S-14 of the prospectus explains how the floating rate will be calculated should the 3-month LIBOR become unavailable. Merchants is a $543 million regional bank headquartered in Indiana with 14 offices. The bank was established in 1990.

Not to miss the opportunity, Brookfield Property Partners LP (BPY) introduced BPYPO on August 13 just five months after its introduction of BPYPP last March. Where BPYPP carries a 6.5 percent coupon, the new BPYPO was introduced at 6.375 percent. BPYPO’s 6.375 percent dividends are cumulative and offer a BB+ speculative grade rating from S&P. This issuer is a partnership so holders of their preferred stock units will receive at least one K-1 at tax time (rather than form 1099). In what had to be good news to BPY, Sears announced additional store closures earlier this month including stores in eight high-demand REIT-owned malls, four of which are owned by Brookfield. BPY is a $17 billion commercial real estate company headquartered in Bermuda.

Sources: Preferred stock data - CDx3 Notification Service database,


Preferred Stock Tax treatment

The 2017 Tax Relief Act included a provision aimed at small businesses that also delivers an enormous benefit to those holding shares of preferred stocks issued by REITs (which is pretty much all of us). Most small businesses are incorporated as a Limited Liability Corporation (LLC). Under this structure, the company’s earnings are passed through to the owners who then pay the tax on their personal returns. The Act allows those receiving such income to deduct, right off the top, up to twenty percent of this “pass-through income.”

But remember that REITs do the same thing as LLC’s – at least 90 percent of a REIT’s earnings are passed to the REIT’s shareholders primarily in the form of preferred stock dividends; the shareholders then pay the tax on their personal returns. In other words, preferred stock dividends received from REITs qualify under the Act’s “pass-through income” provision and are therefore up to twenty percent deductible. Such income is reported to you on the 1099 for received from your broker as “Section 199A” income.

The tax treatment of the taxable income you receive from income securities can be a bit confusing, but it really boils down to one question – Has the company already paid tax on the cash that is being used to pay you or not? If not, the IRS is going to collect the full tax from you; if so, you still have to pay tax, but at the special 15 percent rate.

Traditional preferred stock dividends paid by partnerships as pass-through income, or are otherwise paid out of pre-tax profits, are taxable as regular income; you pay the full tax since the company has not (BPYPO).

Companies incorporated as REITs are required to distribute at least 90 percent of their pre-tax profits to shareholders. Doing so in the form of non-voting preferred stock dividends is the most common method of complying and because these dividend payments are made from pre-tax dollars, taxable dividends received from REITs are taxed as regular income (NRZ-B).

Interest that a company pays to those loaning the company money is a business expense to the company (tax deductible), so the company does not pay tax on the interest payments it makes to its lenders. Since Exchange-Traded Debt Securities are debt, ETDS shareholders are on the hook for the taxes. Income received from ETDS’ is taxed as regular income (there were no ETDS' issued during August).

Lastly, if a company pays your preferred stock dividends out of its after-tax profits, the dividend income you receive is taxed at the special 15 percent tax rate. Such dividends are referred to as “Qualified Dividend Income” or QDI. QDI preferred stocks are often seen as favorable for holding in a non-retirement account due to the favorable 15 percent tax treatment (ALL-H, AHL-E, MBINO).

In Context: The U.S. preferred stock marketplace

The following chart illustrates the average market price of U.S.-traded preferred stocks over the last twelve months.

Many things affect the market prices of these securities such as the proximity to their call or maturity date, proximity to their next ex-dividend date, industry and/or overall health of the issuer, perceived direction of interest rates, pending government regulatory or policy changes, cumulative versus non-cumulative dividends and tax treatment of dividend payments. So what we really need to look at is current yield, which calculates the average annual dividend yield per dollar invested (without considering re-invested dividend return or any future capital gain or loss). Current yield is a “bang-for-your-buck” measure of value that normalizes differences in coupon rate and price to give us a single, comparable metric.

Moving down the risk scale, the next chart compares the average current yield realized by today’s preferred stock buyers when compared to the yield earned by those investing in the 10-year Treasury note or 2-year bank Certificates of Deposit.

U.S.-traded preferred stocks are currently returning an average current yield of 6.5 percent (blue line) while the annual return being offered to income investors by the 10-year treasury is 1.5 percent and that of the 2-year bank CD has turned the yield curve upside down at 2.5 percent (shorter term money very rarely offers a higher return than longer term money).

For comparison, I have set the Yield column in the first table above to show the current yield of the new August preferreds on August 30. It is into this marketplace that August’s new issues were introduced.










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 over 100 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) 2019 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.