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Thank you! That is very helpful to my passive income portfolio. May I please ask if preferred stock ETF plays even a better role than individual preferred stock in terms of both income and risk. It would be great if you could do a podcast on preferred stock ETF. Thank you again
Thanks! Finally heard about preferred shares and how they qualify for Long Term capital gains. Meaning zero tax on dividends if your adjusted gross income is less than ~80k. Super sweet for retiree brokerage account... At least im moving most of the money market money into preferreds... If any advise on that, id like to hear it.
This brief introduction to Preferred Shares was helpful; and sparked an interest. Is there a particular website you find useful when researching preferred’s? Or, just use broker’s website (e.g., Fidelity & TD Ameritrade)?
The easiest way to find good recommendations is to join seekingalpha. That's what I do. Then I read the multiple viewpoints. www.sahg6dtr.com/BXCXC4/GTSC3/
Thank you for sharing this information. I have been looking at preferred stocks recently. While dividend stocks are nice one needs a diversified portfolio.
Are there Preferred Shares ETF? What if Bank of America collapses? How do you purchase the preferred shares? I don't think see them on Vanguard or Fidelity...Thanks.
some preferred shares ETFs listed here etfdb.com/etfs/asset-class/preferred-stock. You purchase preferred shares just like you purchase common shares--in any brokerage account. See our most recent video posted 6/25/24. If bank of America collapses that's a problem.
You answered everything I needed to know to make a well informed decision! Thank you for being straightforward and no nonsense. Especially the part about advisors not wanting to be involved with them. If chosen and allocated well, preferreds absolutely make sense for an income investor.
Helpful. Would like to see you go into more detail into choosing specific preferred shares. Which sites you use to search, how to choose which preferred if a company offers multiple preferred, which sector do you prefer, etc..? Do you prefer to buy short term, medium term, long term? Which shares to avoid (like maybe those with crazy coupons rates), etc.. So, am looking for your specific 20 step process so a geezer, like myself, doesn't get too badly burned. Thank you.
if a company offers multiple preferred issues, they may actually be different (different call features, interest rate fixed or resets, etc). Other times, they are quite similar and simply issues at different times in the life of the issuer. For example, I do not like those that reset their dividend in the future. I generally only buy fixed-rate preferreds. There is no such thing as short-term vs long term in preferred shares as they do not have maturity dates like bonds. The easiest way to find good recommendations is to join seekingalpha. That's what I do. Then I read the multiple viewpoints. The major concern is dividend coverage. If the company has earnings available for dividends of say $4 and they pay out $1 for preferred dividends, that's 4x coverage which is very good. seekingalpha www.sahg6dtr.com/BXCXC4/GTSC3/
it depends on the issue. see this table for preferred shares taxed as a qualified dividend quantumonline.com/pfdtable.cfm?Type=TaxAdvPfds&SortColumn=Company&SortOrder=ASC
So hypothetical someone could buy significantly (price) reduced callable preferreds in anticipation of a call - and profit from the difference in current price vs call price. Are there ways to anticipate or increase potential probability of a call? Am I understanding this correctly?
@seven-jt5ll callable preferred as in the shares could be called at X price. You bought at $10, they get called at $15, profit is $5. That's what I was referring to, not call options. Callable preferred shares.
Great video. Thank you. How does fhe stated call date affect the valuation of the price i should pay? And can a company redeem a preferred share before the stated call date? Thanks!
the issuer cannot redeem the preferred shares before the call date. if the call date has passed or is in the near future, and the call price is $25, you do not want to pay more than $25 as if the security is called, you will get only $25. In the last years, I have purchased several preferred shares trading from $18 to $21 per share. If they get called (which is unlikely for these specific securities), I would get $25.
If the call date is coming up soon, do not purchase the preferred shares at a price exceeding the call price. If the call date is a few years away and say at a price of 25, you may still choose to buy preferred at a price of say 26 IF the yield is sufficiently high to compensate for the call price of 25. I never buy preferred shares above the call price.
Does the Crestwood preferred have to report their income via a K-1? I ask because if the oil and gas MLPs issue a K-1, they cannot be purchased in a Roth due to UBIT tax issues. Does the same hold true to for the preferreds?
Crestwood is no more--acquired by Energy Transfer. They purchased our Crestwood preferred shares and gave holders a 5% bonus over the market price. Crestwood did issue a K1 for the preferred shares. I would never tell anyone to violate tax rules, but do you know anyone who was ever contacted by the IRS about UBTI?
