From the June 2009 issue of the CDx3 Newsletter (free, what's this?)
Historically, the declared dividend rate offered by new high quality preferred stocks ("CDx3 Preferred Stocks") ranges between 6.5% and 9.0% (Preferred Stock Investing, page 189). Paying out more than 9% in dividend expense is just too expensive for issuing companies, so we can think of 9% as a “new issue ceiling” above which new issues just do not happen.The current all-time record holder for the highest declared dividend rate of any CDx3 Preferred Stock pays 8.95% (see Preferred Stock Investing page 38 for trading symbol).
This chart shows the dividend yield of CDx3 Preferred Stocks by industry. There are now four industries that can get away with bringing a new CDx3 Preferred Stock to market – utilities, self-storage facilities, insurance companies and, for the first time in over a year, Big Banks (although they are currently awash with TARP, depositor savings and other cash).
While the 32 CDx3 Preferred Stocks offered by our Big Banks have realized a staggering 51% average market price increase since the TARP program kicked in last October, I was still surprised to see the Big Banks dip under the 9% new issue ceiling during May.
The average yield being offered by the CDx3 Preferred Stocks from the Big Banks is now 8.9%. I'm looking for the next new CDx3 Preferred Stock to come from the utilities industry and pay an annual dividend around 8% to 8.5%.
Many Happy Returns.
