Monday, May 4, 2015

Allstate Insurance Corporation Preferred Stocks: Opportunities And Risks

Allstate issued one ETD and five preferred stocks within eighteen months, ending in June 2014, raising about $2.2 billion. Through 2014, the company repurchased common stock, also valued at $2.2 billion, essentially converting voting common equity into non-voting preferred equity and $500 million in new debt. These six income securities from Allstate offer long-term, stable income with low default risk and the five preferreds are designated as being QDI tax-advantaged. But they also come with risks...

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Monday, April 6, 2015

Preferred Stock Market Q1/2015: Investment Grade Preferred Stocks Available Below $25

There are currently 39 investment grade preferred stocks selling for a market price below $25. The percentage of the market occupied by investment grade securities that are priced below $25 has fallen to 12 percent, down from 31 percent a year ago. Until the Fed starts backing out of our market, preferred stock investors will need to look harder to find high quality preferred stocks in today’s market for sub-$25 prices.

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Wednesday, March 4, 2015

How To Rate An Unrated Preferred Stock

Over the last few years we have seen an increase in the number of new preferred stocks that are unrated by either Moody's Investors Service or S&P. There are a number of reasons that a company will choose not to have its preferred stocks rated that have nothing to do with the company's wellbeing.

Preferred stock buyers can use a 'Best-In-Show' approach to rate an unrated preferred stock without having to become an industry expert. With this approach, you no longer have to determine if the target company's key metrics are good or bad; you just need to see if they are better or worse...

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Monday, February 2, 2015

Preferred Stock Versus Common Stock Investing Results

The common stock market had a great year last year, gaining 11.5 percent. And by the end of 2014, the average market price of high quality preferred stocks was $25.98 per share, a value gain of 9.5 percent.

But while the preferred stock value gain of 9.5 percent was not as impressive as the 11.5 percent seen by common stock investors, preferred stock investors realized substantially better dividend income throughout the year...

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Tuesday, January 6, 2015

Preferred Stock Buyers Change Tactics For Double-Digit Returns

Dramatically falling oil prices throughout the fourth quarter of last year have reduced inflation pressure, delaying, once again, any hope of a rate increase. On December 18, 2014 Fed Chair Janet Yellen stated that the Fed "…could continue to be patient." For preferred stock investors, downward pressure on rates means upward pressure on prices.

During such periods, savvy preferred stock investors can frequently purchase shares at wholesale (sub-$25) prices when new preferred stock issues are being distributed to the market. 83 percent of the non-convertible preferred stocks issued during 2014 (54 of 65) were introduced to the market by their underwriters using a temporary trading symbol on the wholesale Over-The-Counter (OTC) stock exchange. So how did buying shares during OTC distribution work out for preferred stock buyers during 2014?...

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Tuesday, December 2, 2014

Are Lower Tax Preferred Stock Dividends Really A Better Deal?

Preferred stock investors who acquire shares in a regular income account rather than a tax-deferred account such as an IRA, will often favor issues that are designated as qualifying for a lower tax treatment. But most risk-averse preferred stock investors would probably avoid all but six of today’s Qualified Dividend Income preferred stocks. And the lower coupon rate that QDI-designated preferred stocks offer often eliminates the tax savings when compared to similar non-QDI alternatives.

Favoring QDI-designated preferred stock for your regular income (non-IRA) account may not be delivering the after-tax benefit that you’ve been counting on...

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Monday, October 27, 2014

Preferred Stock Market Snapshot: Investment Grade Preferred Stocks Available Below $25

With the third quarter of 2014 now behind us, the number of investment grade preferred stocks selling for a market price below $25 is now at 71. While 71 candidates is much lower than the 167 we started the year with, it is still plenty for preferred stock buyers to pick from.

A strong retail sales report on September 11 pushed preferred stock prices lower for the second consecutive month. The implication was that if retail sales are picking up, inflation cannot be far behind so the Fed will surely be bumping up rates any time now. But when global oil prices fell during early October, speculators had the opposite reaction -- lower fuel costs drive prices down, which is sure to postpone any thoughts the Fed may have about raising rates.

Those reacting to such events are applying the short-term thinking of a value investor (buy low, sell high) to a long-term income investment (preferred stocks), which often creates buying opportunities for preferred stock investors who are paying attention...

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