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| BondsOnline.com: instant access to and extensive coverage of over 3.5 million stocks, bonds, indexes and other securities covering major and emerging markets and exchanges across the globe. |
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| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
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0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| More |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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Should You Consider High-Yielding Preferred Stock? |
Elevated credit risk and new regulations are causing uncertainty for preferreds.
MORNINGSTAR - July 25, 2011 - By Timothy Strauts
Savings accounts are paying less than 1%, 10-year U.S. treasury bonds are paying 2.9%, and intermediate-corporate bonds are paying only 4%, so income investors have been putting their money into preferred stocks, or preferreds. With current yields over 6%, preferred stock exchange-traded funds have had inflows of over $1.5 billion year to date. The most popular preferred ETF, iShares S&P U.S. Preferred Stock Index (PFF), is up an impressive 11.28% annualized over the last three years. This trounces the S&P 500 return of only 3.99% and Barclays Aggregate Bond return of 6.9%. Given the recent strong performance (and performance chasing from investors), let's examine whether preferred stock still makes sense for investment today.
Preferreds 101
Before considering an investment here, it is important to understand that preferreds are a hybrid security that have characteristics of both stocks and bonds. Preferred stock is typically issued by financial institutions, utilities, and telecom firms. It makes regular income payments and is rated by the major credit-rating agencies. Preferreds have no voting rights, are senior in the capital structure to common stock, and have priority over common stock in the payment of dividends. They usually have a very long maturity of over 20 years, but they can be called at the discretion of the issuer after five years in most circumstances. Even though it is an equity security, it does not participate in the earnings growth of the company and the resulting common stock appreciation. It is priced similarly to long-term corporate bonds with a little higher credit risk. It is a unique asset class that will see many changes over the next few years.
It's All About the Financials
Financial institutions make up over 85% of preferred issuance, so the major factor affecting preferred stock prices is the perceived credit quality of the financial sector. They are many reasons to be concerned in the current environment, including the housing market, U.S. economy, and Europe's sovereign debt.
The housing market is still weak, and many forecasters are predicting more price declines. The foreclosure rate is already at an all-time high, and with 23% of properties with a mortgage underwater, it could go even higher in the months ahead. On the other hand, banks have been reserving capital to cover future loan losses for the last four years. In the last few quarters, the banks have been releasing reserves because losses have not been as bad as expected. The quality of the loan portfolio of banks is steadily improving because only 40% of the worst loans made in 2007 still exist and the underwriting since then has been very strict.
For the complete article.
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| Stuff to look at |
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| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
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