Of primary interest is the coupon rate(dividend), call and maturity dates, call price, whether it is convertible, x-div dates, and whether the dividend falls under the 15% tax rate.
One can try to get into the prospectus, or wait until it is posted to the quantumonline site.
Note that the -A suffix is expressed differently depending on the sites you are working on.
Well i do believe its competing with itself as generallly a pref pays a higher divi then the common now i wont pair it up versus itself but im long for a 50 to 100 cent freebie in my mind and if all seems okay ill hold for $2 divi and $2 appreciation (maybe but doubtful but i think $1 appreciation is in the cards.
only getting 3 to 6k
but as i said
others have popped and worth the risk
and using nly-a as a bench mark i see it moving towards nly-a 25.50 - 26 range to start.
heres a few
ill stop there.
id look at agnc a bit differently since its competing against self.
26 buucks seems possible with nly as a benchmark
26.50 to 27 is do able if the things stabilize
worth the risk long
scoop up agncp and wait.
yes , preferreds are not for everyone.
I see your stories and I see the money you guys make. I am more of an income investor. Sure I will trade when see an opportunity but A few more years of collecting bonds, preferreds and reits and MLPs and I will have enough income to just sit back and DO NOTHING.
This board is great in having folks with such various professional backgrounds that add value for the readership.
I will think more on the Preferred. If I have been unwilling to hold the common for 19%, in the past, it will be difficult to think about the Preferred @ 8%.
Options, for me, make so much more sense. I was just reviewing a time a few years back when I was out of the market, playing hookie, and F went down to a dollar and change. My neighbor told me to jump on, but I was too busy skiing(snow), in Feb 2009.
The 10Jan2.50Calls were .52/contract. Doing a mini-Roy @ 1000 contracts for $52,000, would have netted you $850,000 in 10 months. We all have those stories, its having the temerity and the foresight, at the time, to pull the trigger.
Good luck to you and thanks again,
I have not read the ENTIRE prospectus. But most preferreds have the same type of covenant.
for lack of a better term a pref. is a bond that trades like a stock. That is, in this case it has a maturity pays a fixed coupon and has a call date. Companies issue preferreds because they dont go on the books as debt. Normally the company cannot call it before the call date: in this case 2017- unless there is some extra ordinary circumstance ( I will read the prospectus) For banks prefs count as capital and some can be called if the laws that govern capital change- This happened to me with BBT. However what is at risk is any premium over $25. The company can ONLY call this at $25.
Regardless if the market price is 27 or 23.
Now the way bonds works is if there is a call date and I pay over par then I must always anticipate the bond being called on that date.
For example is a bond pays 5% and has a call date in 1 yr and I pay a 4% premium and the bond is called my "yield to call" is 1% - make sense?
well if 1% is a good yield for 1 yr then i would buy that bond.
OK so when I say AGNCP can trade up to 27 ( within the next year) My bloomberg tells me that if I paid 27 today I would still yield over 6% if called in 2017.
However, as time passes and that period of time between now and the call date deminishes, so will the amount of permium some people will pay.
Usually, when a company issues another preferred in this example a "B" its usually at a lower coupon because they are going to call "A"
But in your example, if they offer a 9%, the maket price on the 8's will be discounted. (Ho Hum I will have to be happy earning 8%)
When the company starts issuing preferreds under subsidiary names thats when it could get dicey.
But basically IMHO the only way you might lose with AGNCP is if AGNC goes into liquidation. In which case these win and the common is the loser.
You are the person I have been looking for. I forgot about your background. I have a few questions about the AGNC Preferred(specifically).
Is it true that after 5 years...anytime after 5 years...that if the company redeems the Preferred, they have to pay the full 25.00/share price to liquidate your position?
It might be trading at 27.00/share(after 5 years), but they can still liquidate it at 25.00, correct?
Short of 5 years they can Call the shares and liquidate your holdings at the current PPS, correct?
If they offer another series, in the future, of PreferredsB's, that are @ 9% @ 25.00 PPS and your PreferredA's are trading @ 27, might you not have liquidity issues in unloading your shares because of lack of demand?
I believe NLY is going to be suffering severely in the near future because of their 10K Earnings showing miserable Earnings as a result of their low performing MBS that are eating , like a cancer, at their lungs. As we approach the end of low , short term basement rates in 2014, I envision another NFI.
I do not want CIM or any other part of them, now(in Preferreds) or especially then, when they take the hammer to the Piggy Bank, trying to find coin for their creditors. The Preferreds will be just as much SOL, IMO, as the common, as there won't be anything left after assets are liquidated to pay obligations on their debt.
Its great that the charter says Preferred B4 common, but if there's no money left, there's no money left...
I appreciate your help and your experience in this field. Forgive my simple questions...;-)
being a broker/ portfolio manager its all about asset allocation/ diversification/ risk-reward. I own both the common and the preferred now. What happens if the common's divi gets crushed because of bizzare happening in the Agency MBS market.(think CIM) And yes that is possible- remember I sell MBS for a living. The PPS would go down a lot more than in your scenario. After getting left holding the bag on CIM I have a little more comfort holding the preferred.
Think about this...my yield at cost on CIM is now 11.5% not bad...but I originally bought in at a yield at cost of 16%
and my position is now 27% underwater. |
If they would have offered a preferred at 8% I would have been in a better place total return wise, liquidity wise and have a few less gray hairs
FYI NLY has a preferred out there 7.875 coupon and that trades at a premium to $25 - small premium because it can be called in May.
I sleep better at night getting 8%
less risk/ less reward.
And at 8% I yield more than 90% of the fixed income market.
I admit, I do not know much about Preferreds. I did read the lengthy prospectus and thanked God I didn't go into law....;-)
Having said that it just doesn't make sense to me why someone would buy this over the common. Oh, there are the Apocalyptic reasons, like being in front of the common for dividends and/or dissolution, IF there is anything left after assets are liquidated to settle owners debt obligations, but baring that as a main reason, then why?
Sure, the 25 might be more stable cf to the PPS, but how much, in relation to 8% vs 16.66%? Ok, eg.
1) The PPS loses value:
Suppose the PPS goes down to BV and stays there. How much do you think the Preferreds will fall...24?
Say you bought in at 25 and bought the common for 30. We are now at 27.71 on the common and 24.5(I'm being generous on this figure, in favor of the Preferred) on the Preferred. You get my point already, correct?
At the end of year one, everything staying at those levels and the dividends remaining the same between the two species,you collect 5.00 common, 2.00 Preferred. Common realizes 5.00-2.29 = 2.71(9%). Preferred realizes 2.00-.6= 1.4(5.6%).
PPS goes down to 25.00(ouch..Apocalypse), Preferred goes down to 23.5. Common BE for year(0%), Preferred lose(-2%).
2) PPS gains value(my thought):
PPS @ 32, this time next April. Preferred 25.75. Dividend back to 1.40 for Common. Sorry, by charter, Preferred stay at .50.
Result Common(5.6 dividends, 2.00 capital appreciation)...(+25.33%). Preferred(2.00 dividends, .75 capital appreciation)...(+11%).
11% is good, but cf to what?
I am here to learn, but I have not heard one explanation yet that is a good argument for the Preferred over the common.