New & Redeemed Preferred Stocks & ETD Issues for January 2020 and 4 New Investment Grade Replacements

Summary

  1. Monthly summary of new and redeemed preferred stocks & ETD securities for January, 2020
  2. All existing issues are displayed to allow comparison of new to old rates.
  3. New coupon rates continue downward trend in rates. Waiting for higher rates could mean a long wait
  4. Four of the new issues have investment grade ratings and are excellent replacement choices for conservative investors.

This article is meant to inform income investors about the new and redeemed preferred stocks and ETD securities issued and called during the month of January, 2020, and to provide potential replacement choices that are all rated as “investment grade”.

The current list of preferred stocks and ETD securities is broken down and displayed in table 1. This list refers to issues with call prices of $25, but does not include convertibles.

Type Number Average Yield
Preferred Cumulative 279 7.15%
Preferred Non-Cum 177 5.89%
Trust Preferred 15 6.38%
ETD (Baby Bonds) 190 6.2%
TOTAL 661


(Table 1)

During the month of January, there were 6 new preferred stocks and 1 new ETD issued with a call price of $25. Here is the breakdown:

  • Cumulative preferred stocks: 2
  • Non-cumulative preferred stocks: 4
  • ETD (Baby Bond): 1

The table below displays all new and existing issues from each parent.

Preferred Stocks & ETD
(Table 2, Source: “I Prefer Income”)

All new issues are identified with a green cell in column A. I include all existing issues in order to compare the different issues along with the change in rates from oldest to newest. In most cases, it is obvious that the rates have dropped. Here is a list of the changes:

  1. ARR: rates reduced from 7.88 to 7%
  2. DCOM: no comparison.
  3. COF: rates dropped from 6.2 to 4.8%
  4. MET: rates dropped from 6.63 to 4.75%
  5. SO: ETD rates range from 6.25 to 4.95% on the new issue
  6. TRTN: rates reduced from 8.5 to 6.875%
  7. WFC: rates range from 6.63% to 4.75% on the new issue

In most cases, these rates are below the average shown in table 1. If the reduction in rates continues into the future, investors will find it a challenge to replace any called issues with similar rates in new issues with similar risk.

Redeemed Issues

Table 3 identifies the 8 issues that were redeemed during January 2020. Note the coupon rates of the redeemed issues. In general, the new rates are less than the issues that were redeemed.


(Table 3, Source “I Prefer Income”)

For those whose preferred stocks were redeemed, 4 of the new issues are rated as investment grade and would be excellent choices for conservative income investors.


(Table 4, Source “I Prefer Income”)

Table 4 shows the 4 new preferred stocks that are available. They are all investment grade and have excellent financial metrics including these 5 metrics:

  1. 3 Year average dividend growth are all stable or show growth over the last 3 years. 2 of the companies have increased dividends every year for 7 & 9 years.
  2. All 4 companies were profitable every year for the last 5 years and last 5 quarters.
  3. All companies have excellent dividend payout scores and preferred dividend payout scores
  4. All companies have low to reasonable debt ratios.
  5. All companies are rated as investment grade

In addition to the excellent metrics, 3 of the 4 are tax qualified.

Summary

During the month of January 2020, 7 new preferred stocks and ETD were issued and 8 were redeemed. The new issues have rates lower than all previous issues and appear to suggest that investors will probably not be able to replace any redeemed issues with new issues with same coupon rates as the old. However, for those looking to replace any issues that were redeemed, or add to your current portfolio, the 4 new investment grade issues listed in table 4 are excellent choices for conservative income investors. Thus, if you are waiting for higher rates, you may be in for a long wait.

Thanks for reading.

Rich Hill

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