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Newcastle Investment Corp. Message Board

  • mrpreferred mrpreferred Oct 4, 2008 1:00 PM Flag

    Preferred Stock Information

    Here is the information on the preferred shares many have asked. Series B is a 9.75% cumm preferred with a callable date of 3/18/08, C is a 8.05% cumm preferred with a callable date of 10/25/10 and D is a 8.375% cumm preferred with a callable date of 3/15/12. This means they have the option not the obligation to call back the stock at the $25 par value after the date noted. They pay annual divividends of $2.4375, $2.0125, and $2.09375 respectively. Didvidends are paid quarterly on 1/31, 4/30, 7/31, and 10/31. The key risks are the following: 1) these are cummulative meaning they have the right to suspend dividend and if/when they call pay the then owner the cumm dividend owed (note they cannot pay a common dividend if they don't pay the preferred so unlikely unless bad times), 2) if they go bankrupt these are second to other debt and are unlikely to get paid out, and 3) they have no stated maturity so they may never call. These get taxed like regular income not 15% rate. B, C and D are equal in bankrupcy situation, but won't really matter if this happens, likely lose all value. Preferred divs are like an interest expense and deducted in calculating EPS, unlike common dividends. So assuming they continue to make sufficient eps to pay common div of $1.00/year these seem relatively safe but never know for sure. Reason to like B more is that it is callable now and has a higher interest rate so more likely to get called and issue a new preferred. This of course assumes you are interested in possible capital gain. Good luck.

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    • Mr. Preffered,

      If the pref. dividend is suspended, does accumulating dividend get paid before payments can resume on the common?

      • 1 Reply to alf58206
      • In the event that NCT stops paying the common dividend and then also suspends payment of the preferred due to some unforeseen challenges, they would need to pay the suspended preferred dividends before they could start paying the common dividend again. The preferred shares have priority over common but are secondary to other debt.

        Hopefully we'll never see any of these situations In last quarters earnings call management indicated that they might be in a position to buy back some stock after the fourth quarter (check out the transcript near end of call). If this happens or they increase the common dividend we will see a positive response in the preferred share price.

        For example, last week Wachovia Preferred (WNA_P) tripled in value from a low of 3 to nearly 15. This was due to the proposed takeover by Wells Fargo. Unbelieveable drop and gain for a preferred stock. We could see a similar jump if we can get a positive quarter or common dividend increase. We could also drop more if bad news. I'm hopeful we're done with that though.

        I'm holding on.

        Good luck.

    • I am replying to your msg. with an unrelated topic because yours is good info. that I do not want get "pushed down the list" of issues.

      My comment has to do with another posters comment that instituions were dumping in strong demand yesterday.

      Looking at the chart, I do not think that institutions, except maybe in the last 5 minutes, were dumping into strong demand during the day.

      At around 11:12 EST, NCT started the downtrend with normal volume. Volume did not increase until 3:55PM when the stock went from only $4.94 to $4.89. That included the NORMAL large last trade of the day.

      Volume yesterday was actually 87,000 BELOW normal volume.

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