Hot & Spicy Preferred Stocks

Summary

  • Average dividend yields available in the market place.
  • I am an income investor and a yield chaser.
  • I have built my investment portfolio on a foundation of preferred stocks & ETD securities
  • Introducing the Hot & Spicy Preferred Stock Portfolio with 15 issues that offer yields of 7.9% to 9.6%


I consider myself to be an “income investor”.  I focus 99.9% of my efforts into investing in securities that provide at least a 6% yield.  This focus has come about from realizing that I have not been a successful investor who invests for appreciation.  I slowly began to see the value in investing in securities that offered regular income.  As this change took place, I began to recognize the different ways to invest for income and in the many classes of companies and securities that paid dividends or interest.   Here is a breakdown of the average yields that are currently available in the marketplace from various classes of investments. Much of the information is obtained from the stocks that I track.

CLASS Description Ave Yield
Champions Dividend Champions.  135 public companies that have increased dividend 25+ years in a row 2.4%
Contenders Dividend Contenders.  222 public companies that have increased dividend 11-24 years in a row 2.8%
Challengers Dividend Challengers.  517 public companies that have increased dividend 5 – 10 years in a row   3.0%
VNQ Real Estate ETF.  Broad holdings of REITS, mortgage REITS, financials, diversified financials, real estate sectors 3.9%
IG Pref Investment Grade preferred cumulative stocks. 74 issues 5.5%
ETD Exchange Traded Debt Securities (Baby Bonds). 170 issues. 6.4%
Preferred Traditional preferred cumulative stocks.  283 issues. 7.2%
cREITS Commercial REITS. 16 public commercial REITS. 7.7%
BDC Business Development Companies.  40 public companies. 9.3%
Midstream Midstream / MLP. 40 public companies that are involved with midstream energy and pipelines 9.5%
mREITS Mortgage REITS.  22 public mortgage REITS. 11.3%


Yield and Risk

In general, as the yield increases, the risk also increases.  The lowest yield class are from companies designated as Dividend Champions. These are companies that have a history of increasing their dividends for 25 and more years in a row.  That is quite a record.  They deserve to be classified as low risk.  At the other end of the table are the companies that have the highest yield, the mortgage REIT companies.  That top spot does not come easily.  Investors have voted with their dollars.  Investors have said that the only way they will invest in them is if the yield is high enough to compensate for the risk.

Each of these classes provide benefits to investors; however, as an income investor that invests on higher yielding securities, I have built my investment portfolio on a foundation of securities that yield more than 6%.  As an admitted “Yield Chaser”, I have learned the hard way that risk must be taken into account.  Yield and Risk are the 2 sides of my investment scale.    

Preferred Stocks & ETD Securities

Over the last 10 years, I gravitated to companies with high yields that provided reasonable risks for safety and the ability to pay their distributions on a sustainable basis. Higher yields generally meant lower or no dividend growth, but I was happy with generating a higher immediate return rather than waiting for the income to grow over time.  The good news for me is that there are many choices especially when I focused my search on Preferred Stocks and ETD securities.  From viewing the above table, there are several asset classes with yields higher than preferred stocks & ETD securities, but the risks are generally higher.   It is interesting that many of the stocks in the higher yield classes have issued preferred stocks where risks are lower.  There are currently 8 cREITS, 14 mREITS and 29 BDC that have issued preferred stocks or ETD securities.

I am currently tracking over 600 preferred stocks & ETD securities with a par value of $25 (I do not count convertibles).  These include 283 preferred cumulative stocks, 143 preferred non-cum stocks, 18 trust preferreds and 170 ETD Securities.  I now consider Preferred stocks and ETD securities as the foundation of my Income Portfolio.

There are several reasons why I feel comfortable owning a large number of preferred stocks & ETD securities.  First, I consider myself to be a long-term investor.  I do not trade.  I buy for the long haul.  Preferred stocks are safer than the common stock of their parent company and ETD securities are safer than the preferred stocks.  Next, preferred stocks cannot stop paying the dividend unless they are in real trouble and not before they stop paying the dividend on their common stock.  That is very important as it provides a buffer or hurdle that must be crossed before the parent company can stop paying the preferred dividend.  Then, most preferred stocks have the benefit of being “cumulative”.  This means that if they are forced to stop or delay paying the dividend, they must accumulate those missed payments and pay them back to the investor within a certain period of time. 

These are not all the benefits, but it gives you an idea of some of the beneficial features of owning a traditional preferred stock.  Yes, there are preferred non-cum stocks, but those are issued by companies that are generally considered stronger than the traditional cumulative preferreds. There are also ETD securities, which are even safer than preferreds as they are a debt and debts are higher on the list if it comes to the company being liquidated. 

Interest Rates & Preferred & ETD Securities

One of the issues that many investors point to for not investing in preferred stocks & ETD securities is that they are sensitive to interest rate fluctuations.  If interest rates rise, then market prices have a tendency to drop.  I recognize that this relationship is true, but many have missed out on this great class of investments for many years only to find that most preferreds & ETDs are currently at or above par.  If you are a long-term investor, the key is income, not the price.  Interest rates fluctuate just like the economy does.  If interest rates increase today and into the future, they will eventually change direction and fall once the economy falters.  Learn to take advantage of those changes. 

Yes, interest rates have increased, but many analysts feel that interest rates have peaked or stabilized.  We can see this trend in the 10-year treasury rate.  During 2018, it increased to over 3%, but has now dropped to around 2.5%.   These are sweet words for the preferred stock investor as stable rates means a stable market for interest sensitive securities. 

Hot & Spicy Portfolio of Higher Yielding Preferreds Stocks

Besides being an income investor, I admit that I am a “Yield Chaser”.  However, that doesn’t mean I throw caution to the wind.  I do my best to limit the risk while still reaching for higher yields.  While tracking over 600 Preferred stocks & ETD securities, I have created several portfolios of issues that help to narrow the list of acceptable securities.  One of the portfolios is the Hot & Spicy portfolio of 15 preferred issues with yields from 7.9% to 9.6%.  We all know that yields this high usually mean higher risks, but after doing research using some of the metrics shown below, I have found the rewards just may be worth the risk.  I think that many investors may also feel comfortable adding a few of these Hot & Spicy issues to their portfolio.  

Hot & Spicy Preferred Stocks

Summary Information. 

Here is more information about each preferred stock listed in the Hot & Spicy portfolio.

AHT-G.  Parent is AHT.  Ashford Hospitality Trust is a real estate investment trust (REIT) focused on investing opportunistically in the hospitality industry in upper upscale, full-service hotels. The current price is $22.96 with a yield of 8%. Even though the GAAP earning is poor, the Non-GAAP AFFO earnings shows a much better record of earnings.   The parent has a dividend payout ratio of .41 and a preferred stock dividend payout ratio of .40.  Achilles Research wrote an article on 3/26/19 with a positive takeaway. 

CAI-A.  Parent is CAI.  CAI International, Inc. operates as transportation finance and logistics company in the United States and internationally. The company operates through three segments: Container Leasing, Rail Leasing, and Logistics. It leases, re-leases, and disposes equipment; and contracts for the repair, repositioning, and storage of equipment.  The current price is $25.10 with a yield of 8.5%.  CAI reports the last 5 years as being profitable and 4 out of 5 quarters being positive.  The parent does not pay a stock dividend, but the preferred stock dividend has a very respectable payout ratio of .07.  There have been several recent positive articles from SA authors.

CHMI-A.  Parent is CHMI.  Cherry Hill Mortgage Investment Corporation, a residential real estate finance company, acquires, invests in, and manages residential mortgage assets in the United States. The company manages a portfolio of servicing related assets, residential mortgage-backed securities (RMBS), and prime residential mortgage loans, as well as other residential mortgage assets. The current price of CHMI-A is $25.25 with a yield of 8.1%.  CHMI has reported 5 consecutive years of profits and 4 out of 5 quarters of profits.  It reports a stock dividend payout ratio of .71 and a preferred stock dividend payout ratio of .14. 

CMRE-D.  Parent is CMRE.  Costamare Inc. owns and charters containerships to liner companies worldwide. As of February 27, 2019, it had a fleet of 78 containerships. The company was founded in 1974 and is based in Monaco.  The current price of the preferred is $24.98 with a yield of 8.8%.  The company has reported 5 consecutive years of GAAP profits and 4 out of 5 quarters of profits.  However, on a Non-GAAP basis, the record increases to 5 out of 5 profitable years and 5 out of 5 profitable quarters.  The stock dividend payout ratio is .93 and the preferred dividend payout ratio is .39.  In addition, the debt to equity is 1.2 with price to book of .44.  Two SA authors, Rida Morwa and J Mintzmyer, have recently written positive articles.

CODI-B.  Parent is CODI.  Compass Diversified Holdings LLC is a private equity firm specializing in acquisitions, buyouts, industry consolidation, recapitalization, and middle market investments. It seeks to invest in niche industrial or branded consumer companies, manufacturing, distribution, consumer products, business services sector, safety & security, electronic components, food, foodservice.  The current price of the preferred is $23.10 with a yield of 8.5%.  Based on CAD, the last 5 years and 5 quarters have been positive with the stock dividend payout ratio of .93 and the preferred stock dividend payout ratio of .07.  One SA author recently wrote a positive article on CODI and the preferred stock. 

CSSEP.  Parent is CSSE.  Chicken Soup for the Soul Entertainment, Inc., a media company, produces, distributes, and licenses video content in the United States and internationally. It distributes and exhibits video on-demand (VOD) content directly to consumers through digital platforms, such as smartphones, tablets, gaming consoles, and the Web through Popcornflix and A Plus networks, as well as operates a series of direct-to consumer advertising supported channels.  Current price is $25.35 with a yield of 9.6%. This is a young company that appears to have a good future in the entertainment business.  The have a limited earnings history and do not pay a common stock.  But within the last 2 weeks, their common stock jumped to all time highs after reporting excellent news.  On 4/1/19, SA wrote:  “Shares rose 36% Friday after news of the deal and the company’s earnings, which sported a revenue gain (full year) of more than 150% and EBITDA gains of 180%. Benchmark responded to the company news by boosting its price target on “one of the hottest small properties in the media landscape.” It’s set its new target at $18, up from $16 and currently implying 65% upside.” 

DCP-B.  Parent is DCP.  DCP Midstream, LP, together with its subsidiaries, owns, operates, acquires, and develops a portfolio of midstream energy assets in the United States. The company operates in two segments, Logistics and Marketing, and Gathering and Processing.  Current price is $24.42 with a yield of 8.1%.  DCP has been profitable 5 out of 5 years and 5 out of the last 5 quarters. Based on Distributable Cash Flow (DCF), its stock dividend payout ratio is .90 and the preferred dividend payout ratio is .24.  Double Dividend Stocks recently wrote a positive article and mentioned that DCP has increased guidance for EBITDA, DCF and dividend coverage.  I personally feel that many MLP and midstream companies are undervalued with a positive outlook for energy.

GLOP-A.  Parent is GLOP.  GasLog Partners LP owns, operates, and acquires liquefied natural gas (LNG) carriers under multi-year charters. As of February 26, 2019, its fleet consists of 14 LNG carriers.  Current price for the preferred is $25.19 with a yield of 8.6%.  Shipping stocks are a challenge, but many analysts feel that LNG is one of the bright spots.  GLOP reports 5 profitable years of GAAP earnings and 5 out of 5 profitable quarters.  It also reports DCF with a dividend payout ratio of .96 and preferred stock dividend payout ratio of .17.  Dividends paid by these preferred shares are eligible for the preferential income tax rate of 15% to a maximum of 20% depending on the holder’s tax bracket.  There have been several recent positive articles from Seeking Alpha authors.

LMRKO.  Parent is LMRK.  Landmark Infrastructure Partners LP acquires, develops, owns, and manages a portfolio of real property interests and infrastructure assets in the United States. The company leases its real property interests and infrastructure assets to companies operating in the wireless communication, outdoor advertising, and renewable power generation industries.  Current price is $25.13 with a yield of 7.9%.  LMRK has a good history of GAAP earnings with 4 out of 5 years of profits and 4 out of 5 quarters of profits.  The company has struggled to cover its stock dividend but its preferred stock has a dividend payout ratio of .25.  There is much written about LMRK as many analysts feel that the company is improving and should be in great shape over the coming quarters.   Brad Thomas (SA Author) has written the latest positive article. 

NGL-B.  Parent is NGL.  NGL Energy Partners LP, together with its subsidiaries, engages in the crude oil logistics, water solutions, liquids, retail propane, and refined products and renewables businesses.  Current price is $23.94 with a yield of 9.4%.  Like many midstream companies, the last few years have been a challenge, but their fortunes appear to be turning for the positive.  Their distributable cash flow gives them a dividend payout ratio of .84 and a preferred dividend ratio of .27.   There have been 3 recent positive articles written about NGL.  

NS-C.  Parent is NS.  NuStar Energy L.P. engages in the terminalling, storage, and marketing of petroleum products. The company also engages in the transportation of petroleum products and anhydrous ammonia. It operates through three segments: Pipeline, Storage, and Fuels Marketing.  Current preferred stock price is $24.77 with a yield of 9.1%.  Another midstream company that has faced challenges over the last few years, but with rising oil prices and renewed energy sector, the future looks much improved.   The stock distributable payout ratio is .68 and the preferred dividend payout ratio is .15.  Besides the preferred shares, they also have an ETD with yield at approx. 9%.

NYMTN.  Parent is NYMT.  New York Mortgage Trust, Inc. acquires, invests in, finances, and manages mortgage-related and residential housing-related assets in the United States. The current price of this preferred is $24.06 with a yield of 8.3.  Their GAAP earnings has been good with 5 out of the last 5 years being profitable and 4 out of 5 quarters being profitable.  Even thought the earnings are not sufficient to pay the stock dividend, the preferred dividend has a payout ratio of .23.  Rida Morwa has written a recent article with positive comments about the industry and NYMTN.  

PMT-B.  Parent is PMT.  PennyMac Mortgage Investment Trust, a specialty finance company, invests primarily in residential mortgage loans and mortgage-related assets in the United States.  The current price is $25.23 with a yield of 7.9%.  The company has perfect record of earnings with 5 profitable years and 5 profitable quarters in a row.  The stock dividend payout ratio is .94 and the preferred stock payout ratio is .17.  Debt to equity is .6 and Price to book is 1.  With interest rates falling, mortgage REITS appear to be very good shape.

SOHOB.  Parent is SOHO.  Sotherly Hotels Inc. is a self-managed and self-administered lodging REIT focused on the acquisition, renovation, up branding and repositioning of upscale to upper-upscale full-service hotels in the Southern United States.  Current price is $25.15 with yield of 8.0%.  REITS cannot use GAAP earnings as a measurement for earnings because of high depreciation amounts.  Therefore, AFFO is used to determine earnings available for dividends.  Using AFFO, their stock payout ratio is .48 and their preferred stock dividend payout ratio is .24.  Parent has recently increased the common stock dividend and is classified as a dividend diamond with 8 consecutive years of increasing their dividend. 

SSW-I.  Parent is SSW.  Seaspan Corporation operates as an independent charter owner and manager of containerships in Hong Kong. The company charters its containerships under long-term and fixed-rate time charters to various container liner companies. As of March 1, 2019, it operated a fleet of 112 containerships. Current price is $24.85 with a yield of 8%.  Seaspan is the world’s largest containership company.  They recently announced that it had partially prepaid two credit facilities and expanded its pool of unencumbered vessels to 37 from 32.  Their CFO stated that “We continue to execute on our near-term capital strategy to strengthen our balance sheet by deleveraging, increasing our unencumbered fleet, and consolidating our secured credit facilities”.  SSW has a stock dividend payout ratio of .17 and a preferred stock dividend payout ratio of .13. 

In Summary

During the last 3 months of 2018, the market dropped into bear territory.  With the scare of rising interest rates, preferreds stocks and other interest sensitive securities fell along with the market.  However, 2019 has been a very positive story with many preferreds returning to their previous highs after the fed made it clear that interest rates would stabilize.  But even with new highs, there are still many relatively safe and reliable preferred stocks that are available with high yields.  The Hot and Spicy portfolio lists 15 preferreds stocks that offer high yields from companies that offer a good risk/reward ratio, with most handily able to cover both their common stock and their preferred stock dividends.    All 15 are well off their 52 week lows and fast approaching 52 week highs.  With the economy doing well and interest rates low and dropping, preferred stocks offer some great values and appealing yields.   Take a close look at the list.  You may find one or more gems that can be added to your portfolios.   

Thanks for reading,

Rich Hill
I Prefer Income


I Prefer Income Blog 3-12-19

I started investing when I was around 18.  The father of one of my good friends was a broker at Dean Witter Reynolds.  One day I went with my friend to visit his dad at his office in downtown, Portland, Oregon.  I was a little star struck as so much was going on around me.  People sat or stood around watching the prices roll across the big electronic ticker tape screen on the wall and making notes and talking to each other.  It was exciting, but the best part came once I talked do my friend’s dad.  He talked a bit about the market and some of the companies he was excited about. He didn’t realize it, but his enthusiasm convinced me to dip my toe in the water.  I ended up buying GAF (General Aniline and Film) before I left his office.  Do you remember the little View Master that displayed pictures of Disney and other characters into view one after another?  That little gadget is long gone, but during this period, it was a big deal.  I eventually doubled my small investment after a relatively short period of time.  This was my initiation into the wonderful world of investing.

Like many new investors, I have made a lot of mistakes.  After years of trying to hit home runs from buying stocks at low prices and riding them to the mountaintop, I was lucky to hit a single or double.  I say I was lucky because all too often, I struck out or hit foul balls.  This became very expensive; not only because I was rarely successful on a consistent basis, but the cost of every transaction was high.  Most trades came about by phoning my broker.  That took time and cost a percentage of the total amount invested.    

Investing has never been quite as rewarding as that first investment, but through “trial and error investing”, I have found a way to invest that I am comfortable with and enjoy.  Knock on wood, as it now provides a nice income that is relatively safe, reliable and continues to grow.   I consider myself an “income investor”.  I focus 99.9% of my efforts into investing in securities that provide a minimum of 6% yield.  This focus has come about from realizing that I was not successful enough to make money consistently from stocks that appreciate in value.  I slowly began to see the value in investing in companies that paid a dividend.  As this change took place, I started to recognize the different ways to invest for income and in the many classes of companies and securities that paid dividends or interest.   I feel that there are 2 basic ways to invest for income. 

Higher Yielding Securities.

These securities generally do not generate dividend growth, nor do they provide an opportunity for long term appreciation. 

The benefit of investing in securities with higher yields is that you receive more income – immediately.  You don’t have to wait for companies to increase their dividends over several years.  The good news is that there are a lot of options available.  The bad news is that the risk level is generally higher than lower yielding investments.  There is additional good news as there are many exceptions where investors can obtain higher yields with lower risk.

Lower Yielding Securities

These securities generally have the ability and willingness to pay and increase dividends.  And because of this growth, they also provide an opportunity for long term appreciation.

The benefit of investing in securities with lower yields that grow dividends is that over time, these companies will generate increasing income and increasing appreciation.  The bad news is that it could take a long time before the results are high enough to meet your needs.  More bad news is that not all low yield, dividend growth companies are successful.   

Yield and Risk

In general, as the yield increases, the risk also increases.  The lowest yield class are those companies that have a history of increasing their dividends for 25 and more years in a row.  That is quite a record.  They deserve to be classified as low risk.  At the other end of the table are the companies that have the highest yield, the mortgage REIT companies.  That top spot does not come easily.  Investors have voted with their dollar.  Investors have said that the only way they will invest in them is if the yield is high enough to compensate for the risk.

Each of these classes provide benefits to investors; however, as an income investor that invests on higher yielding securities, I have built my investment portfolio on a foundation of securities that yield more than 6%.  As an admitted “Yield Chaser”, I have learned the hard way that risk must be taken into account.  Yield and Risk are the 2 sides of my investment scale.    

Preferred Stocks & ETD Securities

I found that over the last 10 years, I gravitated to companies with high yields that provided reasonable risks for safety and the ability to pay their dividend or interest on a sustainable basis. The good news for me is that there are a lot of choices especially when I focused my search on Preferred Stocks and ETD securities.  Yes, I do own securities in all the classes with yields above those of preferred stocks & ETD securities, but they are harder to find, and I tend to own them for a shorter period of time.   It is interesting that many of the stocks in the higher yield classes have issued preferred stocks where risks are lower.  As an example, there are 8 cREITS, 14 mREITS and 29 BDC that have issued preferred stocks or ETD securities.

I have discovered that there are over 600 preferred stocks & ETD securities with a par value of $25 (I do not count convertibles).  These include 168 ETD securities, 278 traditional preferred stocks, 135 traditional preferred non-cum stocks and 18 trust preferreds. 

I now consider preferred stocks & ETD securities as my investment foundation.  The majority of my portfolio is built on this foundation and from there I work my way higher with selective higher yielding securities.  There are several reasons why I feel comfortable owning preferred stocks & ETD securities.  First, I consider myself to be a long-term investor.  I do not trade.  I buy for the long haul.  Preferred stocks are safer than the common stock of their parent company and ETD securities are safer than the preferred stocks.  Next, preferred stocks cannot stop paying the dividend unless they are in real trouble and not before they stop paying the dividend on their common stock.  That is very important as it provides a buffer or hurdle that must be crossed before the parent company can stop paying the dividend.  Then, most preferred stocks have the benefit of being “cumulative”.  This means that if they are forced to stop or delay paying the dividend, they must accumulate those missed payments and pay them back to the investor within a certain period of time. 

That is not all the benefits, but it gives you an idea of some of the beneficial features of owning a traditional preferred stock.  Yes, there are preferred non-cum stocks, but those are issued by companies that are generally considered stronger than the traditional preferreds. There are also ETD securities, which are even safer than preferreds as they are a debt and debts are higher on the list if it comes to the company being liquidated. 

Interest Rates & Preferred & ETD Securities

One of the issues that many investors point to for not investing in preferred stocks & ETD securities is that they are sensitive to interest rate fluctuations.  If interest rates rise, then market prices have a tendency to drop.  I recognize that this relationship is true, but many have missed out on this great class of investments for many years only to find that most preferreds & ETDs are currently at or above par.  If you are a long-term investor, the key is income, not the price.  Interest rates fluctuate just like the economy does.  If interest rates increase today and into the future, they will eventually change direction and fall once the economy falters.  Learn to take advantage of those changes. 

Yes, interest rates have increased, but many analysts feel that interest rates have peaked or stabilized.  We can see this trend in the 10-year treasury rate.  During 2018, it increased to over 3%, but has now dropped to around 2.65%.   These are sweet words for the preferred stock investor as stable rates means a stable market for interest sensitive securities. 

Here is one other thing to consider.  Have you ever thought of buying an annuity? If you are 70 and purchase a Single Premium, Immediate Annuity, you can probably receive about 6 to 6.5% yield for the rest of your life.  That doesn’t sound too bad until you realize that when you are gone, the principal is also gone.  However, if you were to invest the same amount in a preferred stock or ETD security, you could probably earn a higher yield.  The difference is that 100% of the principal would be maintained and available to your heirs.    

This article will be continued with articles such as the financial metrics I use to determine safety, reliability and dividend sustainability.  I will also present the various portfolios I maintain, such as the “Hot & Spicy” portfolio, the “Meat & Potatoes” portfolio, the and the “Investment Grade” portfolio.  Each of these contain specific securities that match the portfolio name.      

Thanks for reading,

Rich Hill
I Prefer Income




I Prefer Income Blog: 2-27-2019

The “I Prefer Income” Spreadsheet is a research tool that provides focused information on all preferred stocks and ETD (Exchange Traded Debt) securities with a par value of $25 (convertibles not included). The Spreadsheet contains basic information and financial metrics on both the preferred stocks & ETD securities, as well as the company that issued (or is currently responsible) for the security. This information will help provide the investor with the means to rate each security for safety, price, yield and timeliness so that risk/reward can be identified before making a buy/sell decision.
The Preferred Stock & ETD Securities Spreadsheet contains over 600 securities along with the parent company that is responsible for the security. This is not a simple list of securities. It provides a large amount of financial metrics, including both GAAP and Non-GAAP earnings. Some of the metrics include: 5 years & quarters of earnings, common stock & preferred stock dividend payout ratios, cash flow ratios, interest coverage ratios, debt ratios, price to book ratios and more.

With so much information, a filter has been added to allow the user to select up to 15 criteria to narrow the list. Example: I am using the filter to add these 3 criteria:

• Price < (Less than) 25.30
• Yield > (Greater than) 5.9%
• 15% Tax = Yes

Once submitted, there were 66 issues that met these 3 criteria of a price of less than $25.30, a yield greater than 5.9% and 15% Tax (Qualified Tax) = Yes. Once the list of securities is shown, you can go over each issue to see if any of the issues meet your investment requirements. This filter was meant to find the dividends that meet the requirements for being a qualified dividend. The Motley Fool said the following about qualified dividends: “Dividends are the payments companies make to their shareholders. If you receive a dividend, you’ll have to pay taxes on it — but how much you pay will depend on whether or not the dividend is a qualified one. Choosing stocks that pay qualified dividends can significantly reduce your tax bills — and the bigger your dividends are, the more you’ll save. The big benefit of qualified dividends is that they are taxed at the same rate as the long-term capital gains rate, whereas nonqualified dividends are taxed at the higher ordinary income tax rate. The rates for long-term capital gains and qualified dividends is based on your tax bracket. If your income puts you in a bracket that’s higher than 15% but lower than 39.6%, then your tax rate is 15%. If you’re in the 39.6% bracket, then your rate for qualified dividends is 20%; and if your top tax bracket is 15% or below, you enjoy a 0% rate, which means you won’t pay taxes on qualified dividends at all”.

 

“I Prefer Income” Website

Preferred stocks and ETD securities are different from common stocks. Most investors buy for the income they generate and because they are safer than the common stock dividend paid by the parent. In general, ETD securities are safer than preferreds and preferreds are safer than common stock. To learn more, go to our website at: www.ipreferincome.com and click on Basics to learn more about both securities. There is a lot to learn. Then click on Info to learn more about the IPI! spreadsheet. This page includes 4 Youtube videos for step by step info on the program. The Spreadsheet provides a variety of Financial Metrics to help determine the strength and safety of the parent and each issue. To learn more about what each metrics means, click Info and then Metrics.
Investing for Income

Like many investors, I have gone through a long period of investment experimentation. As a teenager, I had a friend whose dad was a broker for a local stock market investment brokerage. One day, I happened to visit the father at his office and after being dazzled by his discussion of the stock market, I decided to make a small investment in a stock he was recommending to his clients. That stock turned out to be a winner and it was something I would never forget. Over time, I have gone through various stages of trial and error investing that re-enforced the strategy that I now am most comfortable with.
As my name indicates: “I Prefer Income”. Appreciation is nice, but I would rather receive the majority of my income from dividends and interest. There are several reasons for the preference to income:

1. I have had terrible results trying to pick stocks that will appreciate on a steady, reliable basis.
2. Stocks and the market do not always go up. Appreciation is not a sure thing.
3. There are many income securities that are available with great yields.
4. There are many income securities that are safe and reliable.
5. These securities provide earning statements and SEC documents that I am able to analyze and understand.
6. I need income to pay my bills and enjoy life.
7. I can re-invest the income generated to increase future income.

Ok, there are many types of income, but I have zeroed in on securities with higher yields above 6%. If I was younger, I might aim for dividend growth companies whose dividends grow a little bit every year or so, but I found that those stocks generally pay out dividends with lower yields of 2 to 5%. If you picked the right company that is growing their business and their dividend, those companies will appreciate as their dividends increase. It is a good deal if you are young and patient. But if you are in or near retirement, you generally need the income sooner rather than later.

Investment Choices

As an income investor, I have a wide range of choices where I could find and invest in securities that provide yields above 6%. Some of the choices available are: Master Limited Partnerships or midstream related companies, REITS, commercial REITS, mortgage REITS, business development companies, closed end funds and more. I found that I could make a few investments in each of the types of securities; but over time, I found that Preferred stocks and ETD securities provided the largest number of reasonably safe and reliable securities with yields above 6% that I could invest in. They are also safer than their parent common stock dividends and the yields are generally higher than what can be obtained in the marketplace. The dividends are also fixed. That means they will not go up, but the good news is that they cannot go down. That cannot be said of common stock dividends. I also found that I could find quite a few issues with yields above 7 or even 8% – especially when the markets have short term corrections.

Introducing the “Meat & Potatoes” Portfolio

I love to read investment articles. Seeking Alpha has many authors who provide a wealth of information and generate a lot of good ideas and recommendations. However, if you are waiting for the next article to determine out what security to invest in, you miss out on the hundreds of other choices available to you. In reality, there are many good companies that have issued preferred stocks and ETD securities that provide reasonably safe and reliable dividends that are priced at or near par and have yields above 6%. I don’t consider these to be high risk or have unsustainable high yields. They are low to medium risk companies that provide a fair yield that I either own or am interested in buying. There are currently 15 issues in the portfolio. There are many more that could be added, but I wanted to keep it fairly small and manageable.

There are currently over 600 preferred stocks & ETD securities with a par value of $25. These include traditional cumulative preferred, traditional non-cumulative preferred, trust preferred and ETD (exchange traded debts). The Meat & Potato portfolio generally includes reasonably safe preferred stocks & ETD with yields between 6 and 7.5% and prices around par or below. This list will change as conditions, prices and yields change. But these securities represent good values and good yields with fair risk levels. I consider these issues to be good for those who prefer to buy and hold for the medium to long term. That doesn’t mean they can stop reviewing these companies throughout the year because murphy’s law is always in place. However, If the market corrected, I would hold them during the drop in prices and even look to buy more if prices dropped enough.

Basic information about the table and all fields can be obtained at the “I Prefer Income” website, but here is a quick review. Header row at top. All rows in gray are the parent row. The row directly under the parent is the preferred or ETD issue that is included in the portfolio. There are 15 Meat and Potato securities in the list. They are listed alphabetically.

Specific Information

Here is some information about each of the issues:

BFS-D: Parent is BFS. REIT involved in community shopping centers and office complexes. Current yield of 6.5 and Year-to-Call of 8.1. Company is a Dividend Diamond that has increased dividend 6 years in a row. Last 5 years and quarters have been profitable and 4th quarter FFO was higher than 2017. Stock dividend payout is .69 and preferred dividend payout is .12.

CHMI-D: Parent is CHMI. Mortgage REIT. Current yield of 8.3%. Company has been profitable last 5 years and 5 quarters. Parent has paid same dividend since 2015. Stock dividend payout is .29 and preferred stock dividend is .05.

CIM-D: Parent is CIM. Mortgage REIT. Current yield is 8%. Company has been profitable last 5 years and 5 quarters. Parent dividend has been relatively steady since 2015 with the last action being an increase in dividend in early 2017. Stock dividend payout is .64 and preferred stock dividend payout is .06

EPR-G: Parent is EPR. REIT engages in the development, finance, and leasing of theatres, entertainment retail and family entertainment centers. Current yield is 6.2 with yield-to-call of 8.4%. EPR is a dividend diamond that has increased their dividend every year for the last 9 years. Company has been profitable last 5 years and 5 quarters. Stock dividend payout is .75 and preferred stock dividend payout ratio is .05.
ETP-C: Parent is ET. Midstream company provides natural gas pipeline transportation and transmission services. Current yield is 7.6% and yield-to-call of 8.5%. Company has been profitable last 5 years and 5 quarters. Distributable cash flow payout is .47 and preferred stock dividend payout ratio is .008. Company dividend has history of increases with the last increase in 2018.

HCXY: Parent is HTGC. Business development company is a specialty finance company, which focuses on providing senior secured loans to high-growth, innovative venture capital-backed companies in a variety of technology, life sciences, and sustainable and renewable technology industries. This issue is an ETD and current yield is 6.4% and yield-to-call of 6.8%. HTGC has been profitable last 5 years and 5 quarters.

INN-E: Parent is INN. REIT that focuses on acquiring and owning premium-branded, select-service hotels in the upscale and upper-midscale segments of the U.S. lodging industry. Has been profitable last 4 of 5 years and last 5 quarters based on GAAP earnings. Current yield is 7.1 and yield-to-call of 10.7%. Company is a dividend diamond that has increased their dividend every year for the last 5 years. Stock dividend payout ratio is .53 and preferred stock dividend payout is .11.

JCAP-B: Parent is JCAP. Mortgage REIT that engages in the provision of debt and equity capital. Its investments include mortgage loans typically coupled with equity interests as well as outright ownership of self-storage facilities. Current yield is 7.1% and yield-to-call of 7.5%. This is a fairly new public company and has been profitable 2 out of the last 3 years and 5 out of the last 5 quarters. Stock dividend payout ratio is .71 and preferred stock dividend payout ratio is .29. Just reported 4th quarter earnings and last 4 quarterly non-GAAP adjusted EPS have increased every quarter.

LMRKO: Parent is LMRK. Company engages in the acquisition, ownership, and management of portfolio of real property interests. These include wireless communication cell towers, outdoor advertising, and renewable power generation. Current yield is 8.1 and yield-to-call is 9.3%. This is a fairly new public company and has been profitable 3 out of the last 4 years. It has also been profitable 5 out of the last 5 quarters. Its distributable cash flow payout ratio is 1.25 and the preferred stock dividend payout ratio is .25. Has positive recommendations from Seeking Alpha authors Rida Morwa and Brad Thomas.

MNR-C: Parent is MNR. Company engages in the ownership and management of single tenant, industrial buildings leased primarily to investment-grade tenants on long-term net leases. Current yield of 6.4% and yield-to-call of 7.7%. Company has been profitable 5 out of the last 5 years. It has also been profitable 5 out of 5 last quarters. Stock dividend payout ratio is .77 and preferred stock dividend payout ratio is .20.

NLY-G: Parent is NLY. Mortgage REIT that engages in the investment and financing of residential and commercial assets. Current yield is 6.7% and yield-to-call is 7.4%. Company has been profitable 4 out of the last 5 years and 5 out of 5 of the last 5 quarters. Considered to be the largest MREIT. Dividend has remained the same since 2013. Stock dividend payout ratio is .47 and preferred stock dividend payout ratio is .04.

OAK-A: Parent is OAK. Oaktree Capital Group LLC is an investment management company. It focuses on the investments in distressed debt, corporate debt, controls investing, convertible securities, real estate, and listed equities. Current yield is 6.6%. Rated BBB by S&P. Has been profitable 5 out of the last 5 years and 5 out of the last 5 quarters. Stock dividend payout ratio of .81 and preferred stock dividend payout ratio of .02.

QTS-A: Parent is QTS. QTS Realty Trust, Inc. engages in the provision of data center and portfolio of IT solutions. Current yield is 7%. Has been profitable 5 out of the last 5 years and 1 out of 4 of the last 5 years on a GAAP basis. However, on a Non-GAAP basis, it has been profitable 5 out of the last 5 quarters. Company is a dividend diamond and has increased their dividend every year for the last 5 quarters. Stock dividend payout is .55 and preferred stock dividend payout ratio is .08.

SAF: Parent is SAR. Company is a business development company and is a specialty finance company, which engages in the provision of financing solutions. This issue is an Exchange Traded Debt (ETD). Current yield is 6.3%. Company has been profitable 5 out of the last 5 years and 5 out of the last 5 quarters. Company has raised their dividend consistently since 2014 which it paid a dividend of .18. That dividend has increased virtually every quarter and they just announced the new dividend of .54.

SRC-A: Parent is SRC. Retail REIT. Current yield is 6.4 and yield-to-call of 8.1%. Company has been profitable 3 out of the last 5 years and 5 out of the last 5 quarters. They recently split off part of their company that was not performing well. Stock dividend payout ratio is over 1% but will improve once old results are past. Preferred stock dividend payout is .029.

Ok, this is my current Meat & Potatoes Portfolio. It will change as prices, yields and conditions change. I will keep this updated.

Dividend Updates

I track changes in common stock dividends from companies that have preferred stocks and ETD securities. There are several companies listed on the I Prefer Income Spreadsheet that made announcements of changes in their dividends over the last week. Increases are great as it probably means the company is doing well and has confidence in the future. Decreases may be cause for concern as it may mean that the company is not doing as well as they would like and are adjusting the dividend to a more realistic level. That doesn’t mean that the drop is a threat to their preferred or ETD securities, but investors should take this opportunity to check out the financial status of the company. There are times when this could provide an opportunity to buy – especially if prices drop on the news to an oversold position.

COMMON STOCK DIVIDEND INCREASES

• GRX: Raised dividend from .13 to .14
• SAR: Raised dividend from .53 to .54
• AGO: Raised dividend from .16 to .18

How to obtain the Preferred Stock & ETD Securities Spreadsheet

There is no charge for the “I Prefer Income” Spreadsheet. If you have received this article by email, I have attached the current spreadsheet. You can also go to www.ipreferincome.com and subscribe for a Free Membership. Once a member, go to the Spreadsheet page where you can download the file. I update the file every day after the market closes. In addition to the Spreadsheet, the website contains a great deal of information on preferred stocks and ETD securities. Please forward this email to friends or family members who are interested in income investing. They may find it helpful.
Disclosure: Please keep in mind that I am not a licensed securities dealer or advisor. The views here are solely my own and should not be considered as a recommendation. Individuals should determine the suitability for their own situation and perform their own due diligence before making any investment.

I hope you enjoy the newsletter, website and spreadsheet.

I Prefer Income Blog: 2/22/19

This newsletter is provided to those people who have an interest in income investing and in preferred stocks and ETD securities. Remember that the spreadsheet is updated every day after the market closes. It is available for download to all members. Memberships are FREE and are available at: www.ipreferincome.com . If you are just learning about Preferred stocks and ETD Securities, the website contains a wealth of information that will help you understand these securities and the financial metrics found on the spreadsheet.

About the “I Prefer Income” Spreadsheet

The “I Prefer Income” Spreadsheet is a research tool that provides focused information on all preferred stocks and ETD (Exchange Traded Debt) securities with a par value of $25 (convertibles not included). The Spreadsheet contains basic information and financial metrics on both the preferred stocks & ETD securities, as well as the company that issued (or is currently responsible) for the security. This information will help provide the investor with the means to rate each security for safety, price, yield and timeliness so that risk/reward can be identified before making a buy/sell decision.

The Preferred Stock & ETD Securities Spreadsheet contains over 600 securities along with the parent company that is responsible for the security. This is not a simple list of securities. It provides a large amount of financial metrics, including both GAAP and Non-GAAP earnings. Some of the metrics include: 5 years & quarters of earnings, common stock & preferred stock dividend payout ratios, cash flow ratios, interest coverage ratios, debt ratios, price to book ratios and more.

With so much information, a filter has been added to allow the user to select up to 15 criteria to narrow the list. Example: I am using the filter to add these 4 criteria:

• Price  < (Less than)  25.30
• Yield  > (Greater than)  6%
• Industry  REIT-LODGING
• Stock Payout  < (Less than)  .90

Once submitted, there were 36 issues that met these 4 criteria. Take a look at the filter below to see those 4 criteria. This set of criteria found issues with a price of less than $25, a yield greater than 6%, yield-to-call greater than 7% and were profitable 5 of the last 5 quarters. Once the list of securities is shown, you can go over each issue to see if it meets your investment requirements.

“I Prefer Income” Website

Preferred stocks and ETD securities are different from common stocks. Most investors buy for the income they generate and because they are safer than the common stock dividend paid by the parent. In general, ETD securities are safer than preferreds and preferreds are safer than common stock. To learn more, go to our website at; www.ipreferincome.com and click on Basics to learn more about both securities. There is a lot to learn. Then click on Info to learn more about the IPI! spreadsheet. This page includes 4 Youtube videos for step by step info on the program. The Spreadsheet provides a variety of Financial Metrics to help determine the strength and safety of the parent and each issue. To learn more about what each metrics means, click Info and then Metrics.

Update Preferred Stocks & ETD Securities

As of 2/22/2019, the “I Prefer Income” Spreadsheet contains the following:

• Traditional Preferred cumulative stocks: 281
• Traditional Preferred non-cumulative stocks: 145
• Trust Preferred: 18
• ETD securities: 169
• Issues with price under $25: 277
• Issues with yield greater than 7%: 212

Most income investors look for dividends that are sustainable, reliable, and safe. Here are some metrics that help identify these characteristics.

• 5 Profitable Years: There are 318 issues where the parent has been profitable 5 out of the last 5 years.
• 5 Profitable Quarters: There are 293 issues where the parent has been profitable 5 out of the last 5 quarters.
• Dividend Diamonds: There are 198 issues where the parent has raised their dividends 5 or more consecutive years in a row.
• Common Stock Payout Ratio: There are 342 preferred issues where the parent common stock dividend payout ratio is less than .75 (75%)
• Preferred Stock Payout Ratio: There are 390 preferred issues where the parent preferred stock dividend payout ratio is less than .25 (25%)
• Operating Cash Flow Payout Ratio: There are 294 preferred issues where the parent operating cash flow payout ratio is less than .10 (10%)

Dividend Updates

The “I Prefer Income” Spreadsheet tracks all companies that have increased their common stock dividends every year for 5 or more years. We have named these companies as “Dividend Diamonds” and we list the number of years these companies have increased their common stock dividends. A Dividend Diamond is a positive metric that identifies a company as being strong enough to raise their dividend on a regular basis. There are currently 193 issues where the parent is designated as a Dividend Diamond.

We also track changes in common stock dividends. There are several companies listed on the I Prefer Income Spreadsheet that made announcements of changes in their dividends over the last week. Increases are great as it shows the company is doing well and has confidence in the future. Decreases may be cause for concern as it shows that the company is not doing as well as they would like and are adjusting the dividend to a more realistic level. That doesn’t mean that the drop is a threat to their preferred or ETD securities, but investors should take this opportunity to check out the financial status of the company. There are times when this could provide an opportunity to buy – especially if prices drop on the news to an oversold position.

COMMON STOCK DIVIDEND INCREASES

• NEE: Raised dividend from 1.11 to 1.25
• APO: Raised dividend from .46 to .56
• AGM: Raised dividend from .58 to .70
• ARGO: Raised dividend from .27 to .31
• QTS: Raised dividend from .41 to .44
• TDS: Raised dividend from .16 to .165
• DLR: Raised dividend from 1.01 to 1.08

COMMON STOCK DIVIDEND DROP

• HCAP: Lowered dividend from .095 to .08

NOTEWORTHY ARTICLES

Seeking Alpha has a lot of great authors that write very informative articles on all investment subjects. I especially appreciate and read the articles on income investing. Personally, I focus on higher yielding investments that have limited appreciation potential. There are exceptions, but normally, the higher the yield, the less likely there is for appreciation unless you buy when the stock is depressed, such as during the market drop in November & December. Suddenly, the opportunity for high yield and appreciation was available.

One of the authors I follow and appreciate is Brad Thomas. He is an expert on REITS and writes many articles on these stocks. This week he wrote an article entitled “5 REITS To Avoid When The Next Recession Hits”. The article provides an overview of what types of REITS that could be hurt during the next recession. If you have not already read it, you might take a minute to check it out. SA only makes these articles available for 10 days, so better hurry.

CURRENT THOUGHTS ON PREFERRED STOCKS & ETD SECURITIES

It has only been 6 weeks since the start of 2019, but the market and preferred stocks & ETD securities have done a U turn – especially since Fed Chairman Powell gave his speech on upcoming interest rates on 1/4/2019. Here is the chart on PFF, which is an ETF that tracks preferred stocks and baby bonds (ETD). The turn-around is dramatic, but from the chart, there is still some room for these securities to rise further if we are to fully return to previous prices.

One of the other important factors that investors should pay attention to is the 10 year treasury rates. When rates are increasing, there is pressure on interest sensitive securities to drop in price. But the reverse happens when rates fall. From reviewing the chart below, the change has been dramatic over the last few weeks.

Many analysts have warned their readers to stay away or limit ownership in preferreds and ETD securities because of increasing interest rate fears; however, they were assuming that once interest rates started to rise, they would increase to ultra high levels. But many of these analysts did not think to mention that rates fluctuate and if rates do increase, they will eventually fall back to lower levels once those high rates have hurt the economy enough to cause economic concerns. It might be similar to oil prices. High oil prices cause low demand and low demand causes production to fall, which is followed by lower prices.

Every economic period is somewhat different than the past, but I am in the camp of investors who look at falling prices as a potential opportunity to buy good securities at bargain (or at least better) prices with higher yields.

Relationship Between Preferred and Common Stock

The IPI! spreadsheet displays the parent company for every preferred stock and ETD security. There are many reasons; but without the parent, there is no way to determine the overall financial health of the company that issued the security. Having so much information on the parent provides a wealth of information. But there are some things an investor could do besides just having access to financial data. Here are a couple of ideas:

1. Parent stock chart: Take a look at the parent stock chart. If the parent chart looks strong, it probably means overall financial well-being and a bright future. However, if the stock chart is weak and getting weaker, then it is time to take a hard look at whether or not an investment in the preferreds or ETD securities is warranted. The chart is just one of many things that investors should look at, but it may be one that is overlooked.

2. Check out the difference in yields. If the parent pays a dividend, there is a very good chance that the yield it offers will be completely different than the yield that their preferred stock(s) or ETD securities offers. In theory, the lower the risk, the lower the yield will be on dividends paid. And conversely, the higher the risk, the higher the yield will be. The investor should review the yields of the common and compare to the yields of the preferreds and ETD. A low common stock yield could mean low risk and a better chance for appreciation and increasing dividends. A high yield could mean high risk and low chance for appreciation and cuts in dividends. Once you know what the common stock dividend yield is, compare it to the preferred & ETD yields. In general, a low yielding common stock dividend will probably mean the preferred and ETD will provide a yield in the lower range for that industry group. However, if the common stock dividend yield is high, then there is a good chance the preferreds and ETD will also be high. Examples are the MREITS. Most MREIT common stock yields are high and the preferreds are also high.

How to obtain the Preferred Stock & ETD Securities Spreadsheet

There is no charge for the “I Prefer Income” Spreadsheet. If you have received this article by email, I have attached the current spreadsheet. You can also go to www.ipreferincome.com and subscribe for a Free Membership. Once a member, go to the Spreadsheet page where you can download the file. I update the file every day after the market closes. In addition to the Spreadsheet, the website contains a great deal of information on preferred stocks and ETD securities. Please forward this email to friends or family members who are interested in income investing. They may find it helpful.

I hope you enjoy the newsletter, website and spreadsheet.

Thanks.
Rich Hill
I Prefer Income

I Prefer Income Blog: 2-15-19

This newsletter is provided to those people who have an interest in income investing and in preferred stocks and ETD securities. Remember that the spreadsheet is updated every day after the market closes. It is available for download to all members. Memberships are FREE and are available at: www.ipreferincome.com . If you are just learning about Preferred stocks and ETD Securities, the website contains a wealth of information that will help you understand these securities and all of the financial metrics found on the spreadsheet.

About the “I Prefer Income” Spreadsheet

The “I Prefer Income” Spreadsheet is a research tool that provides focused information on all preferred stocks and ETD (Exchange Traded Debt) securities with a par value of $25 (convertibles not included). The Spreadsheet contains basic information and financial metrics on both the preferred stocks & ETD securities, as well as the company that issued (or is currently responsible) for the security. This information will help provide the investor with the means to rate each security for safety, price, yield and timeliness so that risk/reward can be identified before making a buy/sell decision.

The Preferred Stock & ETD Securities Spreadsheet contains over 610 securities along with the parent company that is responsible for the security. This is not a simple list of securities. It provides a large amount of financial metrics, including both GAAP and Non-GAAP earnings. Some of the metrics include: 5 years & quarters of earnings, common stock & preferred stock dividend payout ratios, cash flow ratios, interest coverage ratios, debt ratios, price to book ratios and more.
With so much information, a filter has been added to allow the user to select up to 15 criteria to narrow the list. Example: I am using the filter to add 4 criteria:

• Price: < (Less than) 25.00
• Yield: > (Greater than) 6%
• Yield-to-call: > (Greater than) 7%
• Quarters profitable: > (Greater than) 4

Once submitted, there were 36 issues that met these 4 criteria. Take a look at the filter below to see those 4 criteria. This set of criteria found issues with a price of less than $25, a yield greater than 6%, yield-to-call greater than 7% and were profitable 5 of the last 5 quarters. Once the list of securities is shown, you can go over each issue to see if it meets your investment requirements.

“I Prefer Income” Website

Preferred stocks and ETD securities are different from common stocks. Most investors buy for the income they generate and because they are safer than the common stock dividend paid by the parent. In general, ETD securities are safer than preferreds and preferreds are safer than common stock. To learn more, go to our website at; www.ipreferincome.com and click on Basics to learn more about both securities. There is a lot to learn. Then click on Info to learn more about the IPI! spreadsheet. This page includes 4 Youtube videos for step by step info on the program. The Spreadsheet provides a variety of Financial Metrics to help determine the strength and safety of the parent and each issue. To learn more about what each metrics means, click Info and then Metrics.

Update Preferred Stocks & ETD Securities

As of 2/15/2019, the “I Prefer Income” Spreadsheet contains the following:

• Traditional Preferred cumulative stocks: 283
• Traditional Preferred non-cumulative stocks: 145
• Trust Preferred: 18
• ETD securities: 169
• Issues with price under $25: 295
• Issues with yield greater than 7%: 226

Most income investors look for dividends that are sustainable, reliable, and safe. Here are some metrics that help identify these characteristics.

• 5 Profitable Years: There are 316 issues where the parent has been profitable 5 out of the last 5 years.
• 5 Profitable Quarters: There are 293 issues where the parent has been profitable 5 out of the last 5 quarters.
• Dividend Diamonds: There are 193 issues where the parent has raised their dividends 5 or more consecutive years in a row
• Common Stock Payout Ratio: There are 411 preferred issues where the parent common stock dividend payout ratio is less than .90 (90%)
• Preferred Stock Payout Ratio: There are 413 preferred issues where the parent preferred stock dividend payout ratio is less than .50 (50%)
• Operating Cash Flow Payout Ratio: There are 290 preferred issues where the parent operating cash flow payout ratio is less than .10 (10%)

Dividend Updates

The “I Prefer Income” Spreadsheet tracks all companies that have increased their common stock dividends every year for 5 or more years. We have named these companies as “Dividend Diamonds” and we list the number of years these companies have increased their common stock dividends. A Dividend Diamond is a positive metric that identifies a company as being strong enough to raise their dividend on a regular basis. There are currently 193 issues where the parent is designated as a Dividend Diamond.
We also track changes in common stock dividends. There are several companies listed on the I Prefer Income Spreadsheet that made announcements of changes in their dividends over the last week. Increases are great. Decreases may be cause for concern.

COMMON STOCK DIVIDEND INCREASES

• BPOP: Raised dividend from .25 to .30
• SF: Raised dividend from .12 to .15
• ARES: Raised dividend from .28 to 32
• PPL: Raised dividend from .41 to .4125
• REXR: Raised dividend from .16 to .185
• ARCC: Raised dividend from .39 to .40

COMMON STOCK DIVIDEND DROP

• CTL: Lowered dividend from .54 to .25
• NEWT: Lowered dividend from .50 to .40
• MCC: Lowered dividend from .10 to .05

NOTEWORTHY ARTICLES

Seeking Alpha has a lot of great authors that write very informative articles on all investment subjects. I especially appreciate and read the articles on income investing. Personally, I focus on higher yielding investments that “normally” do not have a lot of appreciation potential. There are exceptions, but normally, the higher the yield, the less likely there is for appreciation unless you buy when the stock is depressed, such as during the market drop in December. Suddenly, the opportunity for high yield and appreciation was available.
One of the authors I appreciate is Rida Morwa. He writes about high yield opportunities. This week he wrote an article entitled “What is Dividend Yield”. If you have not already read it, you might take a minute to check it out. SA only makes these articles available for 10 days, so better hurry.

SPREADSHEET MACROS

There are 4 macros on the spreadsheet that are tools to help the investor.

User Guide: Click on the User Guide and the macro will point out various areas of interest.


Filter Securities
: Click on the Filter Securities button to display the filter pop-up with 15 criteria you can use to narrow your search.


Profit & Loss Table
: Use mouse to click on the yellow cell B or C to display the last 5 years and 5 quarters of GAAP or Non-GAAP earnings.


Dividend History
: Click on the Yellow AD cell to open the last 5 quarters of dividend payments.


Preferred Stock Dividend Payout Ratio

Column G displays TTM (Trailing 12 months) Preferred Stock Dividend Payout. Simply put, it is the ratio of the preferred stock dividend compared to the earnings that are available to pay the dividend. It is clear that you want the dividend to be less than the earnings so you are looking for payout of much less than 1 (meaning 100%). This is one of the more important ratios. The lower the ratio the more sustainable the preferred stock dividend is. A healthy company is easily able to pay for their preferred stock dividend. I personally like to see the payout ratio less than .10 (10%).

How to obtain the Preferred Stock & ETD Securities Spreadsheet

There is no charge for the “I Prefer Income” Spreadsheet. If you have received this article by email, I have attached the current spreadsheet. You can also go to www.ipreferincome.com and subscribe for a Free Membership. Once a member, go to the Spreadsheet page where you can download the file. I update the file every day after the market closes. In addition to the Spreadsheet, the website contains a great deal of information on preferred stocks and ETD securities. Please forward this email to friends or family members who are interested in income investing. They may find it helpful.

Thanks. Rich Hill
I Prefer Income

IPI Spreadsheet Info – 2-8-19

This is a follow-up letter to those people who asked for the Preferred Stock & ETD Securities Spreadsheet from I Prefer Income. I hope that you have been able to open and use the Spreadsheet. I update it daily and make it available to I Prefer Income members. This is a free membership located at: www.ipreferincome.com . Besides the spreadsheet, there is much more information on the website. Hope you visit and take advantage of the resources.

About the “I Prefer Income” Spreadsheet

The “I Prefer Income” Spreadsheet is a research tool that provides focused information on all preferred stocks and ETD (Exchange Traded Debt) securities with a par value of $25 (convertibles not included). The Spreadsheet contains basic information and financial metrics on both the preferred stock & ETD security as well as the company that issued (or is currently responsible) for the security. This information will help provide the investor with the means to rate each security for safety, price, yield and timeliness so that risk/reward can be identified before making a buy/sell decision.

The Preferred Stock & ETD Securities Spreadsheet contains over 600 securities along with the parent company that is responsible for the security. This is not a simple list of securities. It provides a large amount of financial metrics, including both GAAP and Non-GAAP earnings. Some of the metrics include: 5 years & quarters of earnings, common stock dividend payout ratios, preferred stock dividend payout ratios, cash flow ratios, interest coverage ratios, debt ratios, price to book ratios and more.

With so much information, a filter has been added to allow the user to select up to 15 criteria to narrow the list. Example: I am using the filter to add 4 criteria:

• Type: Traditional Preferred cumulative stock
• Price: < ( less than) $25
• Yield: > (greater than) 6.5%
• Stock Div Payout: < (less than) .90

After the 4 criteria are entered and the Filter button clicked, 71 issues are displayed in the spreadsheet dated 2/8/2017. Now you can review those issues to see if they meet your investment requirements.

Update of Preferred Stocks & ETD Securities

As of 2/8/2019, the I Prefer Income Spreadsheet contains the following:

• Traditional Preferred cumulative stocks: 276
• Traditional Preferred non-cumulative stocks: 143
• Trust Preferred: 18
• ETD: 168
• Issues with price under $25: 316
• Issues with yield greater than 7%: 230

Dividend Updates

The “I Prefer Income” Spreadsheet also tracks all companies that have increased their common stock dividends every year for 5 or more years. We have named these companies as “Dividend Diamonds” and we list the number of years these companies have increased their common stock dividends. A Dividend Diamond is a positive metric that identifies a company as being strong enough to raise their dividend on a regular basis. There are currently 174 issues where the parent is designated as a Dividend Diamond.
We also track changes in common stock dividends. There are several companies listed on the I Prefer Income Spreadsheet that made announcements of changes in their dividends over the last week. Increases are great. Decreases may be cause for concern.

COMMON STOCK DIVIDEND INCREASES

ALL: Raised dividend from .46 to .50
BPR: Raised dividend from .315 to .33
KMPR: Raised dividend from .24 to .25
OAK: Raised dividend from .70 to .75
PRU: Raised dividend from .90 to 1.00
RNR: Raised dividend from .33 to .34

COMMON STOCK DIVIDEND DROP

PBI: Lowered dividend from .1875 to .05

NOTEWORTHY ARTICLE

Seeking Alpha has a lot of great authors that write very informative articles on all investment subjects. I especially appreciate and read the articles on income investing. Personally, I focus on higher yielding investments that “normally” do not have a lot of appreciation potential. There are exceptions, but normally, the higher the yield, the less likely there is for appreciation unless you buy when the stock is depressed, such as during the market drop in December. Suddenly, the opportunity for high yield and appreciation was available.
One of the authors I like is Rida Morwa. He writes about high yield opportunities. This week he wrote an article entitled “Global Economy Slows, Grab for Yield Will Accelerate”. If you have not already read it, you might take a minute to read it. SA only makes these articles available for 10 days, so better hurry. Here is the link:
https://seekingalpha.com/article/4237534-global-economy-slows-grab-yield-will-accelerate

SPREADSHEET FINANCIAL METRICS

Profit & Loss

In my last email, I wrote about the Profit & Loss (5 Yrs / 5 Qtrs) metric found in Column A & B. I also mentioned that the Spreadsheet has a macro that allows you to click on the cells in column A & B to display the historical record for both GAAP & Non-GAAP earnings. Unfortunately, the macro was not working at that time. Sorry. I hope you give it another try.
One thing to always keep in mind is that companies must report in GAAP (Generally Accepted Accounting Principles) for tax purposes; but for many, GAAP earnings are not representative of their true earnings or their ability to distribute dividends. For those companies, they turn to Non-GAAP earnings or cash flow. So when an investor is looking at determining the health of a company they are considering investing in, they must look at both GAAP and Non-GAAP results. To determine if a company reports Non-GAAP earnings, look at column E (Type Payout). A company that reports in GAAP, Cell E will show EPS (Earnings Per Share). Anything other than EPS will mean the company also reports in Non-GAAP. To see both, click your mouse on cell A or B and you will see a pop-up that shows both. An example is shown below. AHT reports Non-GAAP of AFFO (Adj Funds From Operations). Once you click on cell A or B, you will see that pop-up that displays EPS on top row and AFFO on bottom row. The difference is extreme. So make sure to use the macro in A & B to see the 5 year financial history.

TTM Stock Dividend Payout

Column F displays TTM (Trailing 12 months) Stock Dividend Payout. Simply put, it is the ratio of the common stock dividend compared to the earnings that are available to pay the dividend. It is very clear that you want the dividend to be less than the earnings so you are looking for payout of less than 1 (meaning 100%). This is one of the more important ratios. The lower the ratio the more sustainable the common stock dividend is. A healthy company is able to pay their common stock dividend; and even better, to increase the dividend over time. One thing to remember is that this ratio refers to the common stock dividend, not the preferred stock dividend. That ratio is reported in column G. More on that next week.

How to obtain the Preferred Stock & ETD Securities Spreadsheet

There is no charge for the I Prefer Income Spreadsheet. If you have received this article by email, I have attached the current spreadsheet. You can also go to www.ipreferincome.com and subscribe for a Free Membership. Once a member, go to the Spreadsheet page where you can download the file. I update the file every day after the market closes. In addition to the Spreadsheet, the website contains a great deal of information on preferred stocks and ETD securities. Please forward this email to friends or family members who are interested in income investing. They may find it helpful.

Let me know if you have any questions.

Thanks.

Rich Hill
I Prefer Income