REIT Preferreds: An Attractive Alternative To Big Bank TRUPS In 2012

As odd as it seems, the Wall Street Reform Act, signed into law in July 2010, is likely to make high quality preferred stocks issued by Real Estate Investment Trusts (REITs) very popular throughout 2012. Odd since the Act has nothing to do with REITs.

Trust Preferred Stocks (TRUPS), issued by our Big Banks for the purpose of boosting a key metric of their regulatory reserves ("Tier 1 Capital"), are no longer going to be able to be counted as such beginning on January 1, 2013. Consequently, such TRUPS, which are very popular with preferred stock investors, are highly likely to be retired ("called") as their call dates arrive.

As the relevant provisions of the Wall Street Reform Act reduce the supply of bank-issued TRUPS throughout the year, high quality preferred stocks from REITs will offer an attractive alternative to many risk-averse investors seeking to preserve their dividend income...

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