Great Resources for Preferred Stock Investors!





JULY 2020

Issue 160


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




"I have made good profits since joining CDx3. Its a moneymaker with small amount of work on my part.

- from Gary H., 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






109 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



Since mid-March, the COVID-19 panic has delivered the best prices for the highest quality preferred stocks that we have seen since the 2008 Global Credit Crisis. Of the 126 high-quality preferred stocks currently trading on U.S. stock exchanges, 27 are now trading for a market price below their $25 par value, selling for an average price of $23.79 per share (June 30).

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 27 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.


The above search finds a total of 27 high quality preferred stocks that are curently trading on U.S. stock exchanges for a market price below these security's $25 par value.

Figure 2 shows the top 10 results (out of the 27 high quality securities found) 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 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 928 preferred stocks and ETDS' trading on U.S. stock exchanges as the month came to a close (including convertible preferred stocks). Of these 928, there are currently 126 high quality preferred stocks selling for an average price of $25.44.


And of these 126 high quality securities, 27 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 top 10 of which are listed above.

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.

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

















New Preferred Stock IPO’s, June 2020


June’s thirteen new preferred stocks are offering an average annual dividend (coupon) of 6.8 percent, an average current yield (which does not consider reinvested dividends or capital gain/loss) of 6.8 percent and an average Yield-To-Call (which does consider reinvested dividends and capital gain/loss) of 7.0 percent (using June 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 K preferred stock from Public Storage is “PSA-A” at TDAmeritrade, Google Finance and several others but this same security is “PSA.PR.K” at E*Trade and “PSA.PK” 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 126 high quality preferred stocks selling for an average price of $25.44 (June 30), offering an average current yield of 5.5 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 928 of these securities trading on U.S. stock exchanges (including convertible preferred stocks).

About the new issues

AUBAP is an unrated traditional preferred stock from Atlantic Union Bancshares Corporation (AUB) offering fixed 6.875 percent annual dividends. The dividends of this security are non-cumulative, meaning that if the issuer misses a payment to you they are not obligated to make it up to you downstream (common stock dividends are another example of dividends that are non-cumulative). AUBAP is the bank’s first, and only, preferred stock offering. AUB has relatively little exposure to the effects of COVID-19 on its business or that of its borrowers as only seventeen percent of the bank’s loan volume is held by businesses in the retail trade, restaurant, senior living, hotels or health care segments (and none in the energy, cruise or aviation sectors). AUB is a $1.7 billion (market cap) regional bank serving Virginia, North Carolina, and Maryland. The bank was founded in 1902 and is headquartered in Richmond, Virginia.

HWCPZ is a double-investment grade Exchange Traded Debt Security paying 6.25 percent interest from Hancock Whitney Corporation (HWC). HWCPZ is the first income security issued since March 2019 that is able to meet all ten of the selection criteria in my book, Preferred Stock Investing, Fifth Edition (Preferred Stock Investing, Fifth Edition page 132). ETDS’ are also referred to as baby bonds and are recorded on the company’s books as debt (rather than as equity, as in the case of preferred stock). As bonds, ETDS’ are often seen as having lower risk than the same company’s preferred stock shares. ETDS’ are very similar to preferred stocks and are often listed on brokerage statements as such. The interest paid by ETDS’, with very few exceptions, is cumulative, meaning that in the event the issuer skips a payment to you they still owe you the money (their obligation to pay you accumulates). In the case of HWCPZ, any unpaid interest also, itself, earns interest (prospectus page S-16: “Interest not paid on any payment date will accrue and compound quarterly at a rate per year equal to the rate of interest on the Notes until paid.”). Hancock Whitney is a $1.8 billion regional bank headquartered in Gulfport, Mississippi and founded in 1883.

UCBIO is an unrated, traditional preferred stock from United Community Banks, Inc. (UCBI) offering 6.875 percent annual non-cumulative dividends. UCBIO is the bank’s only preferred stock currently trading. As bank-issued preferred stocks go, UCBIO is a relatively small issue, raising a net of just under $100 million. As with all bank-issued preferred stocks introduced since July 2010, dividends must be non-cumulative in order for the bank to count the value of these shares toward their Tier 1 Capital reserves. On March 9, 2020 UCBI announced their acquisition of Three Shores Bancorporation, Inc. (TSHR) and its Seaside subsidiary. The acquisition expands UCBI’s southeastern footprint into Florida plus additional client offerings. UCBI is a $1.5 billion regional bank founded in 1950 and headquartered in Blairsville, Georgia.

ATH-C is a traditional preferred stock from Athene Holding, Ltd. (ATH). ATH-C is the third preferred stock issued by Athene in the last twelve months. ATH-C offers an investment grade rating from S&P and uses the somewhat unusual fixed-to-float reset rate structure, currently paying 6.375 percent fixed-rate dividends. While the fixed-to-float rate structure indicates that the security’s dividend rate will be fixed until a specific future date, then becomes variable based on some formula, the “reset” specification used by this security’s rate structure indicates that there are multiple future dates upon which the rate will be recalculated. The first rate reset date occurs on September 30, 2025, then resets repetitively every five years after that until ATH redeems the outstanding shares (which they are allowed to do at any time on, or after, June 30, 2025). The formula used to calculate the dividend rate each time it resets is the then-current five-year U.S. treasury rate plus 5.97 percent. Also unusual is the lack of consistency in the rate structure of ATH’s three preferred stocks. ATH-A, issued on June 5, 2019 uses the fixed-to-float structure without the reset provision; ATH-B, issued on September 16, 2019, is a fixed-rate security with no variable rate provision at all while ATH-C uses the fixed-to-float with reset as described above. Athene is a $6 billion diversified insurance provider headquartered in Bermuda and founded in 2008.”

SBBA is an unrated ETDS from Scorpio Tankers, Inc. (STNG) paying 7.0 percent interest. Typically, ETDS’ have a maturity date that is well into the future, decades in many cases. SBBA, on the other hand, matures on June 30, 2025. The introduction of SBBA comes on the heals of the maturation of its previous ETDS, SBNA, which matured on May 15, 2020. An interesting and rare redemption provision was added to the prospectus of SBBA. Typically, when/if the issuer redeems the shares they buy the shares back from shareholders at the security’s par value (usually $25 per share). But the following provision was added to the prospectus of the new SBBA: “We may redeem the Notes for cash, in whole or in part, at any time at our option (i) on or after June 30, 2022 and prior to June 30, 2023, at a redemption price equal to 102% of the principal amount to be redeemed, (ii) on or after June 30, 2023 and prior to June 30, 2024, at a redemption price equal to 101% of the principal amount to be redeemed, and (iii) on or after June 30, 2024 and prior to maturity, at a redemption price equal to 100% of the principal amount to be redeemed.” In other words, if the company redeems the shares sooner than expected (between June 30, 2022 and June 30, 2023), shareholders will receive the security’s par value ($25) plus an additional $0.25 per share. This provision is intended to motivate investors in the short-term to purchase these shares when they otherwise might not. Scorpio transports refined petroleum products worldwide. The company was founded in 2009 and is based in Monaco.

Public Storage, Inc. (PSA) has been very busy taking advantage of the current low-rate environment. Over the last 18 months, the company has issued five new preferred stocks. In most cases, and in the case of their new PSA-L, the proceeds from the new issues have gone to redeem the outstanding shares of older, higher payers saving the company millions in dividend expense. The new PSA-L is a 20 million share issue with a coupon of 4.625 percent, raising just under $500 million for the company. $450 million of these PSA-L proceeds are being used to redeem all 18 million outstanding shares of PSA-V, a 5.375 percent preferred stock that became callable on September 20, 2017. This maneuver will save PSA about $3.4 million per year in dividend expense. PSA, the highest rated U.S. property REIT (A3/BBB+), is a $33 billion self-storage company operating through the U.S. and Europe.

AEL-B is a traditional preferred stock from American Equity Investment Life Holding Company (AEL), a company that should seriously consider shortening its ridiculously long name. AEL-B is the company’s second new preferred stock issued within the last eight months, paying a 6.625 percent non-cumulative dividend. AEL-A, issued just last November, was introduced at that time with a 5.95 percent coupon. AEL-B’s 6.625 percent coupon illustrates the impact of uncertainty related to the COVID-19 mortality rate and the corresponding impact to life insurers. AEL is a $2 billion insurer founded in 1995 and headquartered in West Des Moines, Iowa.

ASB-F from Associated Bancorp (ASB) offers a Moody’s investment grade rating and 5.625 percent non-cumulative dividends. The company has four preferred stocks currently trading. Of these four income securities, ASB-C, issued in June 2015 with a 6.125 percent coupon, became callable on June 15, 2020. While the prospectus for the new ASB-F does not say as much, ASB could use the proceeds from the 4 million share ASB-F to redeem all 2.6 million outstanding shares of ASB-C. Doing so would save ASB $325,000 per year in dividend expense and leave them with about $35 million in left over ASB-F cash. ASB is a $2.1 billion regional bank offering banking services through 248 banking locations throughout Wisconsin, Illinois and Minnesota. The company was founded in 1861 and is headquartered in Green Bay.

OPINL is a double-investment grade (Baa3/BBB-) ETDS from Office Properties Income Trust (OPI) offering 6.375 percent annual interest. Together with Hancock Whitney’s HWCPZ discussed above, OPINL is the second income security since March 2019 that is able to meet all ten of the selection criteria found in my book, Preferred Stock Investing, Fifth Edition. OPI is a property REIT, owning 184 office buildings throughout the United States. Their 31 buildings in the Washington, D.C. area generate 38 percent of OPI’s rental income (as of March 30, 2020). OPINL raises about $150 million for the company, the bulk of which will be used to pay down debt. The debt on one of OPI’s properties comes due in August, 2020 at which time the company will need to cough up $39.9 million. Using some of the proceeds from OPINL is likely, although doing so converts the property’s 3.6 percent debt into OPINL’s 6.375 percent rate. Proceeds from OPINL are also earmarked to repay debt under the company’s revolving credit facility, $345 million of which matures in January 2023. OPI is a $1.2 billion office REIT, the result of the 2018 merger of Government Properties Income Trust and Select Income REIT.

TBKCP is an unrated traditional preferred stock from Triumph Bancorp, Inc. (TBK) offering 7.125 percent annual dividends. Triumph is a small regional bank headquartered in Dallas, Texas although the bank does very little of its business in the state. The COVID mess has been particularly hard on small banks, and TBK is no exception, losing about half of its market cap value since mid-February ($42/sh then, $23/sh now). TBKCP raised about $45 million for this $550 million bank. TBKCP is the bank’s first and only preferred stock offering.

FMDWL/FMBIO is a traditional preferred stock from First Midwest Bancorp, Inc. offering speculative grade (Ba1/BB-) non-cumulative 7.0 percent annual dividends. Like many regional banks, FMBI’s common stock has lost about half of its value since the COVID mess kicked in, falling from about $23 to a $12.22 close on June 26. FMBI has two preferred stocks trading, introduced 30 days apart and are essentially identical, offering the same 7.0 percent coupon and both becoming callable on August 20, 2025. Each new issue raised about $100 million for the company. FMBI is a $1.4 billion bank holding company operating branch bank office location throughout metropolitan Chicago, southeast Wisconsin and across the Midwest. The bank was founded in 1982 and is headquartered in Chicago.

HTLFP is an unrated traditional preferred stock from Heartland Financial USA, Inc. (HTLF) offering 7.0 percent dividends until its First Reset Date, July 15, 2025. The dividend rate paid by this security resets on that date, and every fifth annual anniversary thereafter, based on the then-current five-year Treasury rate plus 6.675 percent. Heartland has never been shy about acquisitions, even throughout our COVID-tainted market. As of March 31, 2020, HTLF has eleven separate, but wholly-owned, subsidiary banking operations throughout the United States. On February 11, Heartland’s Texas-based subsidiary acquired Levelland, Texas-based AIM Bancshares which will then be rebranded as First Bank & Trust. Then on June 9, Heartland’s Arizona Bank & Trust subsidiary acquired the operations of Johnson Bank and its four Arizona banking centers. Heartland is a $1.1 billion bank holding company originally founded in 1981 and headquartered in Dubuque, Iowa.

WCC-A is the first and only preferred stock issued by WESCO International, Inc. (WCC). WCC-A was issued specifically as a result of the company’s acquisition of Anixter International, Incorporated. This was actually a three-party transaction whereby Warrior Merger Sub, Inc., a wholly owned subsidiary of WESCO, was merged with Anixter, with Anixter surviving the merger, then Anixter continuing business as a wholly owned subsidiary of WESCO. As you might guess, the SEC filings related to this transaction, and the WCC-A preferred stock shares created thereof, are a bit complex but were required to sweeten the deal for Anixter shareholders. Without knowing more about it (which, after reading the filings I hope to never have a need for), it is unclear why WCC-A was not created as a private placement security to Anixter shareholders. But WCC-A is publicly-traded and, if you can stand the pain of understanding the particulars of this security, is now available for purchase on the NYSE.

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.

Unless specified otherwise, traditional preferred stock dividends, including those 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 (WCC-A).

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 (PSA-L).

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 (OPINL, SBBA, HWCPZ).

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 (HTLFP, FMDWL/FMBIO, TBKCP, AEL-B, ASB-F, ATH-C, UCBIO, AUBAP). See the Status column in the first table in this article.

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 2-year bank Certificates of Deposit or the 10-year Treasury note.

U.S.-traded preferred stocks are currently returning an average current yield of 7.3 percent (blue line) while that of the 2-year bank CD is at 1.1 percent and the annual return being offered to income investors by the 10-year treasury is 0.6 percent.

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











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


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) 2020 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



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.