7 Preferred Dividend Stocks to Buy Now
By: Ned Piplovic,
In addition to collecting income from common stock distributions, investors can opt to receive income payouts from preferred dividend stocks, which generally distribute higher dividends with less risk than common shares.
Additionally, preferred stockholders receive dividend distributions before any earnings or asset disbursements are allocated to common stock dividend payouts. In case of bankruptcy proceedings or liquidation, holders of preferred shares again receive priority towards any asset distributions.
Just like dividends on common shares, preferred stocks can make distributions quarterly or monthly. Even with set dividend policies in place, common share dividends can fluctuate from one period to another. Generally, the company’s board of directors approves all distributions based on operational and financial results every period or at least several times per year.
Preferred stocks generally have set interest rates — coupon rates — that set fixed payments for the duration of the stock issue. The coupon rate or interest rate, generally remains the same for the entire duration of the preferred stock issue. However, in some cases, preferred dividend distributions also can be adjustable. With adjustable or floating rates, the coupon fluctuates in in relation to a variable benchmark. These benchmarks can be interest rates such as the Federal Reserve Funds Rate or the London Interbank Offered Rate (LIBOR) set by central banks or other banking institutions and organizations.
While some have specific end dates, preferred shares are typically perpetual — have no expiration date. However, most preferred stocks have a set redemption period. During this period, the issuer of the stock has the option to buy back the shares. The redemption period is often set to five years. However, this period can be shorter or longer, typically up to 20 years.
Also, the preferred dividends can be cumulative or non-cumulative. If the issuer of the shares suspends the dividends at some point, non-cumulative dividends stop immediately, and stockholders lose all income payout during the suspension period. However, in the same situation, cumulative dividends continue to accrue.
The company could decide to distribute the full accumulated amount at some point after the dividend suspension is lifted. However, investors should not be too hopeful, as any dividend suspension indicates that the company is in significant operational and financial problems.
Sorted in descending order by current dividend yield, each of the seven preferred dividend stocks on the list below currently yields more than 10%.
7 Preferred Dividend Stocks to Buy Now: #7
Tsakos Energy Navigation Ltd. Series E Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Shares (NYSE:TNP-E)
Current Dividend Yield: 10.12%
Tsakos Energy Navigation Limited uses a fleet of 64 double-hull vessels to offer seaborne crude oil and petroleum product transportation services worldwide. The company’s E Series preferred stock is a cumulative perpetual stock with an initial issue of four million shares and a call date of May 28, 2027. The original coupon rate was 9.25%, however, the stock’s current annual dividend distribution of $2.3125 is equivalent to a 10.12% dividend yield.
After a loss of more than 30% in late 2018, the share price has been rising steadily since its 52-week low of $16.88 in mid-December 2018. Since bottoming out at the end of last year, the share price has gained more than 35% to reach its current share price of $22.85, which is still 8.6% below the $25 liquidation preference amount.
7 Preferred Dividend Stocks to Buy Now: #6
Teekay Offshore Partners L.P. 8.50% Series B Cumulative Redeemable Preferred Units (NYSE:TOO-B)
Current Dividend Yield: 10.20%
Teekay Offshore Partners is a provider of marine transportation, oil production, storage, towage and floating accommodation services to the offshore oil industry. The company operates a fleet of 34 shuttle tankers, seven storage and offloading units, six floating storage and off-take units, four conventional oil tankers and 10 towing and anchor handling vessels.
The company’s perpetual and cumulative dividend pays distributions quarterly on the 15th day of February, May, August and November. With and initial allotment of five million shares and an 8.5% coupon rate, the preferred stock has a call date of April 20, 2020.
The stock’s current annualized payout is equivalent to a $2.1252 and a 10.2% forward dividend yield. In addition to dividend payouts, the share price has nearly doubled since early 2016. Additionally, the share price reversed its trend after hitting its 52-week low in mid-May 2019 to rise more than 32% before closing at $20.83 on October 8, 2019.
7 Preferred Dividend Stocks to Buy Now: #5
Cincinnati Bell, Inc. 6.75% Cumulative Convertible Preferred Stock (NYSE:CBB-B)
Current Dividend Yield: 10.31%
Headquartered in Cincinnati, Ohio, and founded in 1873, Cincinnati Bell, Inc. provides diversified telecommunications and technology services to residential and business customers in the United States. The company’s relatively small issue of just 155,250 shares came with an original coupon rate of 6.75%.
The stock’s current $3.3752 annualized dividend corresponds to a 10.31% dividend yield, which is more than 50% above the original coupon rate. The company pays dividend distribution on the fist day of January, April, July and October. While experiencing a significant pullback along with the overall market correction in late-2018, the share price has advanced more than 17% above its 52-week low in late-December 2018 to close on October 8, 2019, at $32.73.
7 Preferred Dividend Stocks to Buy Now: #4
Medical Transcription Billing Corporation 11% Series A Cumulative Redeemable Perpetual Preferred Stock (NASDAQ:MTBCP)
Current Dividend Yield: 10.33%
MTBC is a health care information technology company that provides a suite of web-based solutions and related business services to healthcare providers. The Series A issue of 204,000 redeemable and perpetual shares, came with an original coupon rate of 11%. The preferred shares issue will become redeemable on November 4, 2020.
The company distributes its dividend payout monthly and the current annual dividend of $2.75 is equivalent to a 10.33% forward dividend yield. The dividend payouts combined with share price growth for a combined total return of more than 17% over the trailing 12-month period, as well as delivered a total return of nearly 30% over the past three years.
7 Preferred Dividend Stocks to Buy Now: #3
Chesapeake Energy Corp. 4.50% Cumulative Convertible Preferred Stock (NYSE:CHK-P)
Current Dividend Yield: 10.85%
Founded in 1989 and headquartered in Oklahoma City, Oklahoma, the Chesapeake Energy Corporation engages in the acquisition, exploration and development of properties for production of oil, natural gas and natural gas liquids from underground reservoirs in the United States. The issue of three million shares had an initial coupon of 4.5%. The company will pay its next quarterly distribution on December 15, 2019.
After an initial pullback in 2015, the share price has risen more than six-fold. This share price growth advanced the current dividend yield to 10.85%. While the share price dropped again in the second-quarter 2019, the stock’s current Relative Strength Index indicates “Oversold” condition, which could be an opportunity to buy shares at discounted prices.
7 Preferred Dividend Stocks to Buy Now: #2
Fortress Biotech, Inc. 9.375% Series A Cumulative Redeemable Perpetual Preferred Stock (NASDAQ:FBIOP)
Current Dividend Yield: 11.36%
Fortress Biotech is a biopharmaceutical company focused on acquiring, developing and commercializing pharmaceutical and biotechnology products. For this preferred stock series, the company issued one million perpetual and cumulative shares with a 9.375% coupon. The call date is more than three years away on December 15, 2022.
The company’s current quarterly dividend amount translates to an annualized dividend payout of $2.34375 and an 11.36% forward dividend yield. The dividend yield continued its rise in concert with asset appreciation, which increased nearly 10% over the trailing 12 months to $20.64.
7 Preferred Dividend Stocks to Buy Now: #1
Just Energy Group, Inc. 8.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Shares (NYSE:JE-A)
Current Dividend Yield: 11.81%
Just Energy Group is engaged in the sale of natural gas and or electricity to residential and commercial customers, under long-term fixed-price, price-protected or variable-priced contracts, in Canada the United States and the United Kingdom. The Series A preferred stock comprises four million shares with an original coupon of 8.5% and a March 31, 2022, call date.
The stock’s current $2.125 annual dividend is equivalent to an 11.81% forward dividend yield, which is 27% higher than the original coupon rate. The dividend distributions occur quarterly on the last day of March, June, September and December.
Interested investors can find additional information regarding investing in preferred dividend stocks, general preferred stock terminology, specific investment suggestions by Tim McPartland and more on DividendInvstor.com.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.