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Resource Capital Corp. Message Board

  • tony27719 tony27719 Dec 26, 2013 12:01 PM Flag

    RSO preferreds A and B are yielding over 9%

    I like the preferreds and have owned them several years. You have call protection for 3.5 years.

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    • I see the RSO-B shares are yielding 9.38% vs the A shares at 9.04% - that's a 3.4% discount on 'pricing' -over 75 cents, or so....a bit of an anomaly. I've seen such anomalies in past preferreds I've owned (AHT's)...can be that the company has more to issue (on shelf?) if they desire. But I do not know why this current anomaly exists (just conjecture)...But in the past, I just bought the 'discounted / higher yielding' series, and did well. (NRF-C&D did well today...looks like tax loss selling is gone for many of the mreits).

    • I've also moved money into a few preferreds (NRF-C&D / RSO-B) for the "fixed payouts"...I will say that I'm fully aware that rising rates will push down these preferreds more, over time...Hard to tell when / where they'll equilibrate...probably when the 10 yr rate peaks in a year or 2...or? This is NOT a strategy for everyone, for sure...and probably / definitely not 'in favor', given rising rates (i.e. 'fixed income" is being treated like it's poison...people run from this stuff...hahaha). I'll just say that IF you can ignore the "price bleed" on the preferreds (and have no intention of ever selling them...and be honest), and just focus on the dividends & yield, then it's just a vehicle for getting some good cash flows for retirement....within an IRA ! Right now, I don't need the dividends / cash flows, so I'm able to reinvest the dividends, at decent yields. (I'd also point out that even when the call dates are reached, many companies don't exercise the call...which is fine with me...just let the money sit...But if they ever do get called at $25, well, I'll go hunt some more 9% reit preferreds).

      • 1 Reply to h5n1eric
      • I beleive you can get a number of mREIT preferreds pretty cehap right now -- example: NLY has been around for many years and I don't see them dropping off the map; they have some preferreds that are trading at a fair discount to par. However, these are not risk free. And there are hidden risks that you need to watch out for. A good example is the NRF or NCT preferreds

        NRF is spinning off its asset management. That takes a lot of the "good stuff" out of NRF and puts it into the new company. Now suppose they were to spinoff their manufactured housing into a seperate REIT; then NRF is left with CDOs and other real estate loans. NRF is fully responsible for paying the preferred dividends; the spin-off companies are completely off the hook. My point is that a preferred that looked very safe a year ago, suddenly took on more risk. Same deal with NCT preferreeds -- what if they spun-off their senior housing into a seperate REIT?

        Could RSO spin-off part of its business to add "total value" to common share holders? Probably not anytime soon, but if it did, then its preferreds would suddenly become more risky. Just something to watch for...

    • "have owned them several years".

      That's not possible

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