Preferred Stocks By Redemption Date
By: Tim McPartland,
Preferred stocks typically are redeemable (callable) 5 years after issue, at the option of the issuer, for Par (typically $25) plus accrued dividends. If interest rates are dropping they are more likely to redeem the issue and issue a security with a lower coupon (essentially it is a ‘refi’ transaction). If rates are rising the issuer is NOT likely to redeem the issue as they are getting a lower interest rate than is currently available to them.
- Preferred stock have a ‘coupon rate’ — the interest rate you will be paid. This interest rate remains constant on most–but not all, preferred issues. A small number of issues have a rate that ‘floats’, based upon a baseline such as Libor.
- Dividends are either cumulative—Cumulative means that dividends continue to accrue if they have been suspended, but they are not paid until the company decides to pay them after suspension or non-cumulative. Non Cumulative means they do not continue to accrue (they are gone forever). In either case if the dividends are suspended the company is likely in deep financial trouble.
- Dividends are generally paid quarterly, although a few pay them monthly.
- Preferred shares normally carry no voting rights (unlike common shares).
- Preferred shares generally have NO maturity date (most are perpetual).
- Most Preferred Stocks have an optional redemption period in which the shares may be redeemed, at the issuers option, generally this is 5 years afer issue, but may be more or less.
Below we list issues by 1st call redemption date.
How do You Buy Preferred Stocks?
You buy Preferreds just like you would any stock. Put in an order in your brokerage account and wait. The prime difference with preferred stocks is most trade very ‘thin’ (little volume) so you should always use ‘limit’ orders or you may pay way more than is necessary for your shares.
FOR A QUICK SCAN ON ISSUES FALLING MORE THAN $1.00/SHARE JUST LOOK FOR BLUE IN THE ‘CHANGE’ COLUMN