Wow, lots of confusion on Preferreds. I have owned Arr-Pa, Amtg-Pa, CYS-Pa, Mitt-Pb, and AgncP. All, roughly 8% when PPS close to par(25.00).
To Mike, a "Call" is advantageous to the Company not the Preferred share holder. Therefore they would not Call the shares if they were trading less than Par. So the Call is at Par(25.00, 50.00 or whatever the initial issue price). So it works like a bond, in that the Call date is your maturity date on the bond, and if you don't have enough dividend potential to the Call date, when examining the PPS, don't buy.
Example XYZ trading at 28.00(par 25) has two years to call. It gives you 2.00/ year in dividends. Should you buy? No. You get 4.00 over two years but might have to give three dollars back. Not good. So think of it as a bond and determine "Yield to Call" before buying.
AGNC doing a BK is not the only way you can lose Par. The PPS can go from 25.00 to 15.00, and stay there. There is no rule that says it has to trade above 25.00. If the common goes down to 20, and the common dividend is .50, it will be the same dividend as the Preferred(.50) but the purchasers today of the Preferred will have given up 11.00 in lost paper capital.
All of the mReit Preferreds are cumulative.
You are more or less guaranteed 8% until it's callable in 2017.
If the #$%$ hits the fan, the board of directors can stop the dividend, in which case your preferred stock would probably go down to a few dollars in value.
If you want an example, go look at the chart for the national bank of greeces preferred stock using this tikcer on Google -- NBG-A
It stopped paying it's dividend.
This is the risk with preferred stock. When things go bad, it's a big BUST.
Preferred stock has higher dividend priority than the normal AGNC stock.
So if AGNC's divi gets cut, AGNCP's will just keep getting payed at the normal rate.
They can't cut it, and have to pay it out unless they cancel the dividend.
AGNCP looks pretty good to me. The price at close $25.89 gives you a 7.72% yield. A new Prefered issue can not be called before 5 years. Three dividends have been paid so at least 17 more for sure. If rising interest rates it might not be called. It is "Cummulative" if the BOD fails to pay a Dividend on AGNCP it has to be paid with interest at a later time. They cant declare a common Dividend if money owed on a"Commulative" Preferred share. The only way to lose its PPS would go down with rising interest. AGNC doing a BK would be the only chance of a loss of Parr or due Dividends and Interest. I plan to put this on my watchlist.
The big disadvantage is that you can get a much better yield investing in AGNC instead of AGNCP. But, like people have said, if AGNC's earnings deteriorate, you have less risk of a dividend cut or worse holding AGNCP. However, if things go horribly bad with the business, the preferred investors could still take substantial losses. For example, back in the Financial Crisis of 2008, investors who owned what they thought was safe securities (bank issued preferred stock) took heavy losses. I would expect that AGNCP stock would follow AGNC's stock price down if things went horribly bad so you are getting a small amount of safety in AGNCP and giving up about 6% in yield.
The losses on Preferred stock were because investors sold at a low market price. For instance BAC Preferred PPS dropped to $16. The price recovered as the company recovered. The only way to lose all is thru BK. all Preferred shares are different you must read the prospective to get the details.
Ok. Firstly.. Agnc will only yield 10 percent soon based on NAV. So 8 percent is good for the safety of no cuts. Second.. The agnc common would have a 0 dividend before you can suspend (delay) agnc preferred dividends. Any dividend on common even 5 cents would mean preferred gets paid.
xxavatarxx !!! FFC and PGF are closedend funds and i buy when PPS gets near NAV. They have a good Dividend and are easy to trade. But theyare in line for a Dividend decrease due to the High interest Capital Trust Preferreds being called. I have been on the watch for FFC to get near NAV of $18 and change.
mr.phil2u, My personal prefy portfolio in terms of dividend is decreasing as well for it's yield.
Nothing we can do about it.
Banks are buying back the fat paying prefy's they issued back in the 2008 crash.
I have Barclays D and BofA Q that will probably get called this summer, and that will be two more fat cows gone.
I'm fully expecting a continual decline in the dividend.
Actually FFC is a bit mis-leading on google.
Their last dividend was .12 which puts them at a 7.23% yield.
So they just cut from .14 a month to .12 a month.
Anyway just pointing out there are prefy funds if you didn't want to be exposed to one company only and feel more comfortable in a diversified fund.
There are no disadvantages, just limited upside. You do not get price action like common
but you wont experience a 20% drop in price (unless of some catostrophic event)
I own 2000.
Also own MITT.B, ARR.A , MFO, and a few others I have to check.
I bought BAC Preferred in March, 2009 for $9 per share, and sold it about a year later for $28 .... plus got the 8.75% divy. But, still not like the common of bank stocks - like Citi or Fifth Third - which sold for as little as a $1 in March, 2009 [note: Citi has had a 10:1 reverse split since].
Onion !! Thankyou, some Preferred on your list do not show on my Fidelity screens. Questions: Do you see Interest rate risk on some preferred with big premiums?
Also DUA is Exdate today, do you put in a low ball on the open to catch the shares that are dumped cheap?
I am sorry I do not reply to these requests on a timely basis this MB format is just too complicated.
If I want to add to a position I will buy on the exdate. a few cents hardly affects my yield and I dont have time to monitor it.
As for Premiums please be careful. There is something called "yield to call"
which is what your yield would be to the call date as you would lose your premium.
In some cases when the call date is short and the premium is high that yield could be negative.
This means you would not get enough divis to cover your premium.
Hope this helps.
xxavatarxx !!! Also like to add 20% of portfolio in S&P500 and Dow ETF's for a little growth. The DUA that exdated today recovered strong with little drop. Prehaps will pick up some cheap shares in March when many exdate.