If you are an income investor looking for high dividend stocks and are looking to diversify into investment banking stocks, you have several to choose from, but not with high yields. For example, the yield on Morgan Stanley (MS) is only about 0.8%.
However, there is another safer way to invest in the company and get a much higher yield, with inflation protection. Morgan Stanley happens to have a preferred stock called Morgan Stanley Floating Rate Depositary Shares Non-Cumulative Preferred A (MS-PA). This security currently sells for 20.15, a big discount to its par value amount of $25. The first call date is 7/15/2011.
The annual dividend payout is one dollar per year based on 4% of the par value, payable quarterly, giving the stock a current yield of about 5%. The dollar a year dividend is the minimum payout, as the yield is adjustable upwards if rates increase. The rate is based on the three month LIBOR rate plus 0.7%, subject to the minimum.
If you like these adjustable rate preferred stocks, you should take a look at How to Get a 6% Yield from Chesapeake Energy (CHK), How to Get a 4.9% Yield from Goldman Sachs (GS), and Lucent (ALU) Pays a Yield of 13%.
A list of about 20 adjustable rate preferreds, with yields ranging from 1.83% to 8.59%, is available at WallStreetNewsNetwork.com. The list includes the minimum yield, the floating rate calculation, the par value, annual income and yield.
Disclosure: Author does not own any of the above.
By Stockerblog.com
Showing posts with label ARPS. Show all posts
Showing posts with label ARPS. Show all posts
Tuesday, October 12, 2010
Monday, August 02, 2010
How to Get a 4.9% Yield from Goldman Sachs or 6.7% from JP Morgan Chase
Let say that you are an income investor. You own plenty of utilities and plenty of high income stocks, but you want more diversification. And maybe you also want some inflation protection. Where do you turn?
How about Adjustable Rate Preferred Stocks, which hold a senior position to common shares and pay a dividend that usually has a minimum rate, but will also be adjusted upward if interest rates rise. There is no growth potential in these preferreds that you would normally get from common shares, but if you are investing for income and you have your inflation protection, what difference does it make.
WallStreetNewsNetwork.com just came out with its list of adjustable rate preferred stocks, also known as ARPS, and lists several with great CD beating yields. A good example is the Goldman Sachs Group preferred D shares (GS-PD) (GS-D) with a $25 par value and minimum payout rate of 4.00% based on the par. The yield is based on the 3 month LIBOR + 0.75% and isn't callable until 5/24/2011. (The three month LIBOR is about 0.48%, so the adjustable rate wouldn't kick in until it gets up to about 3.25%. Because the stock is selling below $25, it provides a yield of 4.91%. If you by the Goldman Sachs (GS) common stock, you would only receive a yield of 0.9%.
Another ARP with an even higher yield is the J P Morgan Chase Capital preferred B (JPM-PB) (JPM-B) shares with a $25 par value. Payout is based on the 3 month LIBOR + 4.46%, however, it pays 7.2% until 12/22/2014, and at that time, would have no minimum. It does not qualify for 15% tax. The current yield is 6.76%. If you bought the JPMorgan Chase (JPM) common stock, you would just receive a yield of 0.5%.
If you want a list of about 20 adjustable rate preferreds, with yields ranging from 1.83% to 8.59%, go to WallStreetNewsNetwork.com.
A couple different stock symbols are shown for the above preferreds because the symbol varies from brokerage firm to brokerage firm.
Author does not own any of the above.
By Stockerblog.com
How about Adjustable Rate Preferred Stocks, which hold a senior position to common shares and pay a dividend that usually has a minimum rate, but will also be adjusted upward if interest rates rise. There is no growth potential in these preferreds that you would normally get from common shares, but if you are investing for income and you have your inflation protection, what difference does it make.
WallStreetNewsNetwork.com just came out with its list of adjustable rate preferred stocks, also known as ARPS, and lists several with great CD beating yields. A good example is the Goldman Sachs Group preferred D shares (GS-PD) (GS-D) with a $25 par value and minimum payout rate of 4.00% based on the par. The yield is based on the 3 month LIBOR + 0.75% and isn't callable until 5/24/2011. (The three month LIBOR is about 0.48%, so the adjustable rate wouldn't kick in until it gets up to about 3.25%. Because the stock is selling below $25, it provides a yield of 4.91%. If you by the Goldman Sachs (GS) common stock, you would only receive a yield of 0.9%.
Another ARP with an even higher yield is the J P Morgan Chase Capital preferred B (JPM-PB) (JPM-B) shares with a $25 par value. Payout is based on the 3 month LIBOR + 4.46%, however, it pays 7.2% until 12/22/2014, and at that time, would have no minimum. It does not qualify for 15% tax. The current yield is 6.76%. If you bought the JPMorgan Chase (JPM) common stock, you would just receive a yield of 0.5%.
If you want a list of about 20 adjustable rate preferreds, with yields ranging from 1.83% to 8.59%, go to WallStreetNewsNetwork.com.
A couple different stock symbols are shown for the above preferreds because the symbol varies from brokerage firm to brokerage firm.
Author does not own any of the above.
By Stockerblog.com
Monday, March 22, 2010
The Almost Perfect Income Stocks
Income investors are always searching for the perfect investment. Although such an investment may not exist, there may be investments that are close. One type of stock that you don't hear much about is the Adjustable Rate Preferred Stock or ARPS, also known as a Floating Rate Preferred Stock or FRPS.
First, let's look at what a preferred stock is. It is an income paying stock, usually issued for $25 per share, which pays out a set dividend. The preferreds have no growth potential, unless they are convertible into common stock. If a company goes out of business, the bonds are paid off first, then the preferred stockholders, and then if there is anything left, the common stockholders.
The ARPS have other benefits over the regular preferreds. If interest rates in general go up, the rate on the preferred also goes up. The payout rate is generally based on the three-month LIBOR rate plus a specific percentage amount. LIBOR is the London Interbank Offered Rate, which is based on interest rates at which banks borrow unsecured funds from each other in the London wholesale money market, and is published by the British Bankers' Association on a daily basis. The three-month LIBOR is currently 0.26%.
Many of these ARPS preferreds even have minimum interest rate payouts, below which the rates won't drop. So if rates drop, the investor will also be protected on the downside, with the interest rate floor. Some of the ARPS are fixed-to-float preferreds, which means that the interest rates are fixed for a period of years, then floating after a particular date.
In addition, most of these preferreds are eligible to receive the beneficial 15% tax rate, after the required holding period.
WallStreetNewsNetwork.com has developed a list of almost 20 of these Adjustable Rate Preferred Stocks in the form of an Excel spreadsheet, which can be downloaded, sorted, and changed. The database contains extensive information including the company, the Yahoo Finance symbol, the Standard & Poor's stock symbol, the par value (call price), minimum interest rate, the floating rate calculation, the maximum rate if any, the first call date, the current yield, and whether the dividend is cumulative or non-cumulative.
Cumulative means that if the company runs into financial difficulty and is unable to make payments for a while, the unpaid back dividends on the preferreds must be caught up and paid to the preferred shareholders before any payments can be made to the common shareholders. Non-cumulative means that the dividends do not accrue.
Many of these ARPS have call features, which means that on a particular date, the issuer has the right to buy back the preferred stock at the call price, usually $25 per share.
The ARPS preferreds will fluctuate but because of the variable rate feature, they shouldn't fluctuate as much as regular preferreds. But these fluctuations can create opportunities, as many of the ARPS are trading below their $25 par value issue price.
An example would be the Goldman Sachs Series C Preferred (GS-PC), which was issued at 25 per share, and is currently trading below 24. Please note that the Yahoo Finance stock symbol is shown, which may be different from the ticker your brokerage firm uses. (The S&P symbol would be GS-C.) The shares came out at a yield of the three-month LIBOR rate plus 0.75%, subject to a minimum yield of 4.00%, or a dollar a share per year. The dividends are non-cumulative. The stock has a call date of 10/31/2010, and based on the current price, the stock yields about 4.17%.
Currently, the LIBOR rate is around a quarter of a percent. So in the Goldman Sachs example, if interests rates rise and the LIBOR rate jumped up to 5%, then the yield would be adjusted to 5.75%.
Another example is MetLife Preferred Series A (MET-PA), also issued at 25, and issued with a yield calculated at the three-month LIBOR rate plus 1%, subject to a minimum yield of 4.00%. The stock has a call date of 9/15/10. Based on the current price of the stock, the yield is 4.23%.
Remember that even though these ARPS should be more stable than regular preferreds, they can still drop in value as you can see from the current prices for many of them. Since they were hammered during the market crash, many haven't fully recovered, and there may be some interesting prospects worth looking into.
For a detailed list of adjustable rate preferred stocks, go to WallStreetNewsNetwork.com.
Author does not own any of the above.
By Stockerblog.com
First, let's look at what a preferred stock is. It is an income paying stock, usually issued for $25 per share, which pays out a set dividend. The preferreds have no growth potential, unless they are convertible into common stock. If a company goes out of business, the bonds are paid off first, then the preferred stockholders, and then if there is anything left, the common stockholders.
The ARPS have other benefits over the regular preferreds. If interest rates in general go up, the rate on the preferred also goes up. The payout rate is generally based on the three-month LIBOR rate plus a specific percentage amount. LIBOR is the London Interbank Offered Rate, which is based on interest rates at which banks borrow unsecured funds from each other in the London wholesale money market, and is published by the British Bankers' Association on a daily basis. The three-month LIBOR is currently 0.26%.
Many of these ARPS preferreds even have minimum interest rate payouts, below which the rates won't drop. So if rates drop, the investor will also be protected on the downside, with the interest rate floor. Some of the ARPS are fixed-to-float preferreds, which means that the interest rates are fixed for a period of years, then floating after a particular date.
In addition, most of these preferreds are eligible to receive the beneficial 15% tax rate, after the required holding period.
WallStreetNewsNetwork.com has developed a list of almost 20 of these Adjustable Rate Preferred Stocks in the form of an Excel spreadsheet, which can be downloaded, sorted, and changed. The database contains extensive information including the company, the Yahoo Finance symbol, the Standard & Poor's stock symbol, the par value (call price), minimum interest rate, the floating rate calculation, the maximum rate if any, the first call date, the current yield, and whether the dividend is cumulative or non-cumulative.
Cumulative means that if the company runs into financial difficulty and is unable to make payments for a while, the unpaid back dividends on the preferreds must be caught up and paid to the preferred shareholders before any payments can be made to the common shareholders. Non-cumulative means that the dividends do not accrue.
Many of these ARPS have call features, which means that on a particular date, the issuer has the right to buy back the preferred stock at the call price, usually $25 per share.
The ARPS preferreds will fluctuate but because of the variable rate feature, they shouldn't fluctuate as much as regular preferreds. But these fluctuations can create opportunities, as many of the ARPS are trading below their $25 par value issue price.
An example would be the Goldman Sachs Series C Preferred (GS-PC), which was issued at 25 per share, and is currently trading below 24. Please note that the Yahoo Finance stock symbol is shown, which may be different from the ticker your brokerage firm uses. (The S&P symbol would be GS-C.) The shares came out at a yield of the three-month LIBOR rate plus 0.75%, subject to a minimum yield of 4.00%, or a dollar a share per year. The dividends are non-cumulative. The stock has a call date of 10/31/2010, and based on the current price, the stock yields about 4.17%.
Currently, the LIBOR rate is around a quarter of a percent. So in the Goldman Sachs example, if interests rates rise and the LIBOR rate jumped up to 5%, then the yield would be adjusted to 5.75%.
Another example is MetLife Preferred Series A (MET-PA), also issued at 25, and issued with a yield calculated at the three-month LIBOR rate plus 1%, subject to a minimum yield of 4.00%. The stock has a call date of 9/15/10. Based on the current price of the stock, the yield is 4.23%.
Remember that even though these ARPS should be more stable than regular preferreds, they can still drop in value as you can see from the current prices for many of them. Since they were hammered during the market crash, many haven't fully recovered, and there may be some interesting prospects worth looking into.
For a detailed list of adjustable rate preferred stocks, go to WallStreetNewsNetwork.com.
Author does not own any of the above.
By Stockerblog.com
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