Protect Your Income With Preferred Stocks

johnN

Protect Your Income With Preferred Stocks https://seekingalpha.com/article/4561795-protect-your-income-with-preferred-stocks?source=Messenger


****Your retirement should not depend on the emotions of the markets.
Preferred securities provide additional reliability to your income.
Two discounted preferreds with up to 8.3% qualified dividends****


AEL.PB, HT

Could be two vehicles to add for long term preferred good stock list
Some good discussions about investing ideas at discussion section


We also held $PFF since 2014
Have/exposed $schd last 4 5 months

sma3

I have always been a bit suspicious of Rida Morwa's many many posts on Seeking Alpha.
They all seem to promise unlimited income with no or little risk. The articles are well written and seemingly wise and appear to offer great investment opportunities. But why are there so many many recommendations?

The recent article is pushing HT ( Hersha Hospitality Trust) preferreds. HT owns a lot of "high end" hotels nationwide ( Marriot?). The common dropped 75% during Covid and the dividend ($1.12 a year) disappeared until last month when it started paying $.20 a year.

The Preferreds crashed also. HTpD was down 75% and the dividend of $0.406 a quarter was eliminated for all of 2020. As it was cumulative, they did payback dividends in 3/2021 of $1.625 after Pandemic eased.

A quick Google search turns up a fair amount of concern about Rida Morwa's investment service ($550 a year) performance. I cannot find any information the service itself posts about past preformance on the website.

TipRanks says only 52% of his recs have been profitable one year later with an average return of 4.3%.

https://www.tipranks.com/experts/bloggers/rida-morwa

Interesting blog on income investing has worse accusations

https://innovativeincomeinvestor.com/new-discussion-areas/

"HDO is short for High Dividend Opportunities which is a paid service on Seeking Alpha. The head guy is Rida Morwa, but he is assisted by several other authors, often times Pendragon or Preferred Stock Trader.

On this board, III, they might be referred to as HDO, Rida or Pendy.
There are at least four issues that some III’ers have with HDO.

1) They typically pick the highest yielding preferred/baby bond to recommend to investors, because it is enticing. They often times understate the risk. Several of their recommendation have literally gone bankrupt. Others have suffered catastrophic losses but have not gone bankrupt (yet.)

2) They ignore their past history of recommendations. They might recommend an issue when it is selling for say $20. Then it drops to $10 and they write a NEW post recommending it again, WITHOUT mentioning they recommended it earlier. Obviously anybody that bought it on the first recommendation is suffering.

3) When someone posts any critical comments they typically get deleted on short order. We do NOT know if it is a HDO person or a SA person, but “responsible opposing comments” are NOT welcome.

4) There is a suspicion that is NOT provable by us, that they are taking advantage of very illiquid preferreds to reward “insiders”. The mechanism would be something like:

a) Have “insiders” buy positions in XYZ
b) Publish a recommendation to HDO paid subscribers on XYZ, which pushes the price up
c) Release the recommendation to the free SA readers on XYZ which further pushes the price up
d) Creates a potential opportunity for insiders and/or paid subscribers to make a quick profit, mostly based on HDO’s ability to move the price up.

In the last two days, a few of HDO’s picks have done very poorly. Yesterday it was HMLP-A which closed down 21%. Today it was ALIN-A,B, E which all closed down ~ 62%. HDO had written SA posts recommending all four of these. The posts are NOT recent, but at the same time they did NOT post any sell recommendations, so there is an assumption they were still valid HDO recommendations."

For Preferreds CEFS etc look at Forbes/Fridson Income Investing Newsletter ($200 a year). Marty Fridson is quoted in Barron's regularly

https://isinewsletter.com/profile-current-newsletter/

Four portfolios of preferreds, CEFs , lots of ideas and recommendations on individual issues. His portfolios of preferreds etc were down between 12 and 24% in 2020.

For income investing in individual stocks, I have found Simply Safe Dividends very useful

https://www.simplysafedividends.com/

He publishes three portfolios, with monthly return and risk stats, compares them to to SCHD, and SPHD and VIG and trades very little (now unfortunately price is up to $550 a year but there is a two week free trial).

Kiplinger's Investing for Income is much cheaper ($79 a year) and has pretty good ideas ( a little more volatile than SSD so much diversification necessary here) for mutual funds, ETFs, CEFs and stocks.

In my opinion, all three are much better choices than anything I have seen on Seeking Alpha

rforno

I agree - Rida tends to cheerlead them quite a bit, even when they're directly impacted by interest rates. The user comments, like usual, are helpful though.

But fwiw saying I'm planning a few preferred buys this month to use as income ballast. I prefer the 15% tax on QDI versus buying bonds that'll be taxed at my much higher bracket. But I may -- may -- dip my toes into agencies in Jan/Feb, depending on what their YTM/YTW look like.

Old_Joe

johnN has been a poster at MFO for many years. He seems attracted by offerings that promise above average returns, but upon closer examination also have well above average risks. Not for the faint of heart. Perhaps the gains and losses of these types of things average out over long periods of time- we have no way of knowing.

larryB

@ Old_Joe. With all due respect to our colleague JohnN,,,, his buy transaction list is as long as the Mississippi River if that makes any sense. Some of them must do Ok. He is a heavy trader.

stayCalm

I've subscribed previously to Rida's service and agree with sma3 comment on the sheer volume of recommendations. In effect the service might as well be an ETF or CEF with a write up of each position.

Each individual write up is well done and has depth but it is near impossible to keep up with the recommendations and likely can achieve the same performance with a CEF.

Sven

He is a heavy trader.

I believe many of us here are investors, not traders. I personally like to read the articles first so to ensure the content is suitable for the broader audience. Those with catchy titles, AKA click baits, require addition attention. This particular article is interesting but I keep asking myself what is the catch, and where are the outstanding risks with respect to interest rates, credit quality, and so fourth. Other posters above here also ponder the same questions. In the end, I passed.

larryB

I found Seeking Alpha to be entertaining but not often a trusted source. The comments were often better informed than the contributors.

Old_Joe

He is a heavy trader.

Actually, I've not seen much evidence of "trading". As larryB said, "his buy transaction list is as long as the Mississippi River" (nicely said!), but I've never seen any similar "sell list".

It's my impression that John likes to skate on the edge of high-promising income instruments which also have, of course, comparatively high chances of trouble. In the long term this may work, if the successes outnumber the failures- I have no idea. I do think that it's fair to say that John's risk tolerance is significantly higher than many of us here at MFO. It's sometimes a thin line between investing and gambling. To each his own.

kings53man

This is what I have done recently (reported on another thread).

I bought a preferred stock JPM-M, the company is very safe from default for US$ 16.998 per share, coupon is 4.2% with first call date being 9/1/2026.

Income is 6% to me based on my cost so I collect 6% till 9/1/26 (I get US$ .26 every quarter per share). This will not be paid only if JPM doesn't pay the dividend on the regular share (I think the chances are very remote but this is the little risk with any preferred).

If JPM calls the preferred stock after 9/1/26, I will get US$ 25 for each share - potential capital gain.

This is invested in Roth so 6% income and subsequent CG will be tax free.

Do you see any issue with this?

Mark - corrected & thanks for correcting me.

Thanks,

Old_Joe

Sounds pretty good to me, for what that's worth. Should be fine.

Mark

@kings53man, JPM-M pays you $0.26/share every quarter for a total of $1.25/share/year. Still a good deal.

rforno

Sounds ok to me.

My only beef w/banks' preferreds (and why I don't use them) is that they're nearly always non-cumulative. Meaning, if they're forced to suspend divs for some reason, your preferreds essentially then become interest-free cash for them to use unless you sell them. Just on principle, I have a problem w/that kind of one-sided relationship, especially with an industry that never learns from its mistakes and prefers others bail them out for self-inflicted problems.

johnN

Hello
Was quite busy today


I Quit trading last few months heavy loss
-50s% w trading acct and -30% w passive acct (mid Oct). Lucky I have large bond portfolio cushioned the loss last 12 months...group I followed traders each loss 50 - 70%. Too much Time vested w poor returns.

Last 4 6 wks been doing what have been working last 14 yrs (before heavily trading last 2 yrs). Been dca into indexes, Corp Bonds, Sp500, Vang vgstx vpccx 2045 techs etf Tsla snow LCID Rivn techs..

We do have Pff and schd. Will look at AEL.PB HT Dfp jps PFFA JPM-M more closely, but likely stick to previous basics buying.

Mine 401k surprised only down - 8% due to dca and market rebounded 18% since mid Oct, whereas the trading portfolio came back Little it still down - 19% but I just left it alone last few months.

I think next 12 months after new year maybe dismal returns Sp500 won't do well maybe max 5 7% most but we can never time market (expected recession /jobs loss, and diminish ER) . Lots folk could be wrong market timer and market may go haywire +20s% returns end 2023 (like 2010 lots pundits expected poor performance but it went up quite remarkable).

Short terms maybe good for gold since usd took heavy beatings. Short terms if Sp500 200 days MA hold and Market breadth hold /melt slowly up we may indeed get nice Xmas rally and hope finish 2022 strong.

Imho all these youtubers/traders /Seeking alpha writers all want your subscriptions 15-99$ per month and their performance are disappointing. Very difficult beat index or Buffet

Happy holidays

yogibearbull

Banks & financials can count preferred as Tier 1 capital only when they are noncumulative; some exceptions may apply. So, there are rarely any bank/financial preferreds that are cumulative.
https://content.next.westlaw.com/practical-law/document/I21061766ef0811e28578f7ccc38dcbee/Tier-1-Capital?transitionType=Default&contextData=(sc.Default)