Preferred Stocks – Pick of the Week (8/16/2019)
As interest rates drop and the threat of a recession looming over us, many investors turn to preferred stocks & ETD securities for safety and stability of income. With interest rates being so low, companies have the option of calling in their current preferred stocks that are beyond the call date and replacing them with lower coupon rates. The result is higher prices and lower yields. The trend will continue as the Fed and many countries support a low interest rate environment.
The pick of the week will focus on Investment Grade preferred stocks with call dates in the future and prices close to par. Since the beginning of the year, prices for most preferreds and ETD securities have been increasing. That makes it a challenge to uncover solid choices that meet our requirements for safety and reliable / sustainable income. The 5 picks I have for you are shown in the table below
The table includes 5 important areas of analysis. These include Earnings, Payout Ratios, Debt Ratios, Credit Ratings and Dividend Metrics (highlighted areas). Each area is important and all of the 5 preferred stocks have excellent scores.
EPR Properties (EPR) is a triple net lease REIT with investments in entertainment, recreation and education. EPR-G is a traditional cumulative preferred stock with an investment grade rating of Baa3 / BB and a yield of 5.7%. It is the highest yield among the 5 preferreds in the list.
Federal Realty Investment Trust (FRT) is a REIT stock that invests in high quality retail investments. FRT-C is a traditional cumulative preferred stock with an investment grade rating of Baa1 / BBB. This is the highest rating of the 5 preferred stocks in this list. It has the lowest yield of 4.9%.
Kimco Realty Corp (KIM) is Retail REIT with primary investments in shopping center, open air type investments. KIM-L is a traditional cumulative preferred stock with an investment grade rating of Baa2 / BBB. The yield is currently 5.1%.
National Retail Properties, Inc (NNN) is another Retail REIT with primary focus on triple net lease, single tenant investments. NNN-F is a traditional cumulative preferred stock with an investment grade rating of Baa2 / BBB. The yield is 5.1%.
PS Business Parks, Inc (PSB) is a Diversified REIT with investments in multi-tenant, flex, office, and industrial properties. PSB-W is a traditional cumulative preferred stock with an investment grade rating of Baa2 / BBB. The yield is 5.1%.
In summary, all 5 preferred stocks are investment grade, have 5 years and quarters of profits, have low payout and debt ratios, and they also have excellent dividend growth rates. In addition, they are all classified as Dividend Diamonds. This means that they have all increased their dividend every year for 5 or more years. PSB has the lowest record. They have increased their dividend every year for the last 5 years while FRT has the best record with 51 consecutive years of increasing their dividend.
Thanks for reading.
I Prefer Income