Hidden Risks Of Tax-Advantaged Preferred Stocks

There are seven tax-advantaged preferred stocks that offer cumulative dividends, investment-grade ratings and a non-zero trading volume with at least one year of call protection. But tax-advantaged preferred stocks offer a lower coupon rate than their non-tax advantaged peers to begin with, eliminating much, if not all, of the tax savings. And today's tax-advantaged preferred stocks, with their lower coupon rates, are highly unlikely to be redeemed by their issuers, so the principal invested by today's buyers may not be returned. The tax savings from tax-advantaged preferred stocks may not be enough to outweigh the lower after-tax income and lower risk to principal offered by their non-tax-advantaged peers...

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