The Hidden Risk Of Buying Today's Trust Preferred Stocks

There is a special risk with several bank-issued trust preferred stocks (TRUPS) that many preferred stocks investors appear to have forgotten about (or never knew about before investing).

Several TRUPS, issued by our Big Banks over the years, are prematurely callable right now even though they have yet to reach their published call dates. Unknowingly, many preferred stock investors are buying shares of these prematurely callable preferred stocks every day for prices well above par, exposing themselves to a sudden and unexpected capital loss.

Case Study: BBT.PB From BB&T Corporation

BBT.PB from BB&T Corporation (BBT) provides a good example. The average daily volume of BBT.PB is over 100,000 shares (50,423 last Friday) so there are obviously a lot of preferred stock investors whose eyes are glazed over by BBT.PB's 9.6% dividend rate.

As I am about to explain, these preferred stock investors are exposing themselves to a hidden risk in today's market for Big Bank TRUPS and are most likely doing so without being aware of it...

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