Hi guys and thanks for the prompt answers , you are the best ! Even though it was hard for her to understand the financial terms in English, all of you got your point thru that RISKS are involved with JPS, especially with the current interest rate/debt invironment , and that better oportunities are out there . Thanks again, talk soon.
So in addition to the better yield, you get more diversity.
On top of that, Arwen, I got the impression that the type of debt that JPS owns are preferred and possibly trust preferred securities.
Companies can suspend dividends on these types of securities indefinitely without reprisal. The only penalty to corporations is that you cannot stiff preferred share holders and give a dividend to the common share holder.
OTOH, when it comes to bonds, if management quits paying, bondholders force bankruptcy. There is no stiffing a bondholder without corporate management feeling the pain.
I had a look at HSA , i wish i could see more holdings of this , looking back at 5 year chart it looks very mortgage related to me.?? But then at these prices that might be good, do you know why the P/E is so low on this? Considering i get taxed 30% on that dividend as a foreign investor, as any other stock... even though it is obvious since you own it, do you think HSA is a good investment? When did you get in ? Thanks.
RE JPS, I haven't looked in depth here but from Doc's link I'd be very concerned about a lot of BBB rated bonds right now.
Also notice that a big % of holdings are really long dated (30 years) so if long rates went up the effect on these bonds would be especially bad news.
Keep in mind, if Bernanke is successful, the effects will lead to a debased USD which should show up in higher LT bond yields and declining bond prices.
So buying LT bonds could in a sense be understood as a bet against the Fed.
<<I got the impression that the type of debt that JPS owns are preferred and possibly trust preferred securities.>>
That would be a concern of mine too.
I have not played much with preferred shares in recent years but there used to be a type called cumulative preferreds that might alleviate some (but not all) of my concerns with respect to bank preferreds.The 'cumulative' designation meant that no divvy could be paid on the common unless all missed divvies on the preferred were caught up and paid.
<<when it comes to bonds, if management quits paying, bondholders force bankruptcy>>
Normally, bondholders do have that as an option.
But with the big banks now, this raises an interesting question.
Can we be sure that banks will always be bailed out and that interest payments on debt will always be secure because of what's almost become an understanding that the govt provides an 'implicit' guarantee for these institutions?
I freely admit, I don't know the answer but one thing that would concern me is being caught in limbo land where bank solvency became a question and I couldn't be sure about my rights as a creditor.
Keeping in mind the devastating effects to the main indices and the health of many public sector pensions, I could see the govt being very reluctant to let the banks' equity get wiped out in favor of debthoders and that's a limboland I'm not not sure I want to have any part of.
OTOH, the govt's implicit guarantees might make the bond interest payments more secure but who knows if the SHTF and cash flows simply aren't enough to cover.
Unlike holding bank debt... 'private sector' equities do offer the prospect of higher earnings from foreign operations that could go to increasing dividends over time.