Pick of the week (8/19/2019)
Here is a break-down of the preferred stocks & ETD securities found in the Preferred Stock / ETD Securities Database Program.
There are 248 issues that are rated as “Investment Grade” by Moody’s or S&P.
With interest rates falling and prices rising, there are now only 124 out of the 639 issues that are priced below par. You might ask if there are any issues that could be considered as bargains. It is in the eye of the beholder, but with high prices and lower yields, there are fewer issues to choose from for investors who only look at issues selling at or near par.
For this Pick of the Week, I have selected 3 cumulative preferred stocks priced below $25.40, with yields above 6%, have reported profits for the last 5 years and 5 quarters on a GAAP basis (Non-GAAP is even better), good payout ratios and debt ratios.
As is my practice, I like to first analyze preferred stocks based on 5 important financial areas – Earnings, Payout Ratios, Debt Ratios, Dividend Metrics and Credit Ratings. This gives me a great first review of the issues and lays the foundation for further analysis. My goal is to uncover solid choices that meet my requirements for safety and reliable / sustainable income. The 3 picks for this week are located in the table below. There is no question that the 3 are higher risk than the 5 investment grade issues from last week’s Picks of the Week, but these also provide higher yields for those that are yield conscious.
To read the table properly, remember that the Parent company is located in the top row that has grey background. The preferred issue is located directly underneath. All metrics are on the parent as they are responsible for the preferred stock. Above the table, I have displayed cells to help identify Dividends, Earnings, Payout and Debt. Here is information on each parent and issue.
Saul Centers, Inc (BFS) is a self-managed REIT with a 90% focus on community shopping centers in the Wash DC and Baltimore areas. BFS-D is a traditional cumulative preferred stock. It is currently yielding 6% and has positive metrics for Dividends, Earnings, Payout, Debt and NF / NF rating.
Gaslog Partners LP (GLOP) 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. Shipping stocks are risky, but LNG appears to be doing well and the future looks brighter than other shipping sectors. GLOP also has a good record of Dividends, Earnings, Payout and Debt. GLOP-B is a cumulative preferred stock with a yield of 8.7% and Y-T-C of over 10% with a NF / NF rating. They are the only issue of the 3 that is designated as Tax Qualified. Investors who are looking to dip their toes into shipping stocks with high yields may want to consider this issue.
Summit Hotel Properties, Inc (INN) is a REIT focused on owning premium-branded hotels primarily in the Upscale segment of the lodging industry. As of July 31, 2019, the Company’s portfolio consisted of 69 hotels with a total of 10,715 guestrooms located in 24 states. INN-E is another cumulative preferred stock with a yield of 6.2%. It has good Earnings, Dividend metrics, Payout Ratios, Debt Ratio and a NF / NF rating. Of the 3 preferreds in this list, it has the lowest payout ratios, highest dividend growth and lowest debt-to-equity ratio.
In summary, all 3 preferred stocks are offering reasonably high yields (GLOP has high yield) with excellent Earnings, Dividend, Payout and Debt metrics. On top of that, all 3 are designated at Dividend Diamonds. That means that they have increased their dividends every year for 5 or more years.
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I Prefer Income
Disclosure: I own GLOP-B and INN-E