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.

4 replies
    • Richard Hill
      Richard Hill says:

      Thanks for the feedback. Hope you are able to review the database where all of the information on over 600 preferred stocks and ETD securities resides. Membership is free so check it out. Thanks again. Rich

  1. j Evans
    j Evans says:

    Incredible amount of information that you are willing to share. Really appreciate your generosity and depth of knowledge.

    Reply
    • Rich Hill
      Rich Hill says:

      J, Thanks for the comment. Hope you get a chance to check out the database for all preferred/ETD stocks and also new REIT program. I feel like I am more of a data gatherer. Once you have the data, it becomes a lot easier to see trends that are a wealth of information. Thanks again Rich

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