Preferred stocks have several advantages over common stocks. If the company goes out of business, the preferred shareholders get paid off before the common shareholders. Preferreds pay a steady income. They are usually less volatile than the common stock. However, they don't participate in the growth of the company in the way the common stock does, unless it is a convertible preferred.
Preferreds can be a safer way to speculate on the recovery of a company. If the preferred stock has been knocked down because of the negative earnings of the company, as long as the dividends are still paid regularly and the company eventually recovers, the return can be fairly substantial. Plus, if the business does go belly up, you may still recover your investment, whereas the common shareholders may get little or nothing.
WallStreetNewsNetwork.com turned up a list of ten preferred stocks (and minibonds), all yielding over 10%, and all of which have kept their dividends up to date, as of the latest quarter. Most made payments in November and December of 2009. This does not guarantee that they will continue to make a payment three months from now, but if the economy and the company's business continues in an upward recovery mode, then you may receive not only your dividend but appreciation in the preferred stock price. Minibonds, which are bonds issued in very small denominations such as $25, were also included in this list due to their similarity with preferreds.
One example is the American International Group Preferred F shares ( AVF), which have a healthy yield of 12.4%. This preferred has been paying 48.1 cents per share every quarter. Assuming the US government doesn't let them go out of business, the dividend should be OK, but of course, that's a big assumption.
Supertel Hospitality Inc Preferred P (SPPRP) is another high yielder. This preferred of the Supertel real estate investment trust, pays 6.7 cents every month, generating a yield of 10.5%. The company operates limited service hotels such as Super 8, Comfort Inn/Comfort Suites, Hampton Inn, Holiday Inn Express, Best Western Suites, Days Inn, and Ramada.
To see other high yield preferreds yielding above 10%, some as much as 28.3% and still paying, check out the free database at wsnn.com.
Author does not own any of the above.