In normal markets, most $25 issue price preferred stocks typically trade in the $26 to $29 per share range. However, currently, most of our preferred picks are currently trading between $18 and $22, explains Harry Domash, editor of Dividend Detective.
Eventually, the market should normalize and most of our recommendations will trade back up to $25 or higher, which implies 25% or so capital gains — plus the dividends.
However, that only holds true if our preferreds continue paying the specified dividends. Thus, priority number 1 is making sure that happens. Consequently, we pay a lot of attention to issuer’s financial strength when we add new preferreds to the portfolio.
We recommending these three preferreds which are rated investment quality by S&P. As a plus, they are offering 9% to 25% capital gains potential should they eventually trade up to their $25 IPO price. Here's a look a our new picks:
Brookfield Renewable Partners L.P. 5.25% Class A (BEP-A), based in Bermuda, owns renewable power generating facilities in North America, Colombia, Brazil, Europe, India, and China. Brookfield, credit-rated BBB-, pays cumulative dividends, meaning that Brookfield remains on the hook for any missed payouts.
Brookfield’s shares recently traded at $19.61 per share, offering 27% appreciation potential should it trade back up to $25 per share. Its current market yield is 6.7%.
Entergy New Orleans 5.50% Series First Mortgage Bonds (ENO), credit-rated BBB, operates electric utilities and distributes natural gas in four Southern states. Its shares recently traded at $22.84, offering 9% appreciation potential should it trade back up to $25 per share. The current market yield is 6.0%.
PartnerRe Non-Cumulative 4.875% Series J (PRE-J), credit rated BBB, offers reinsurance services in Europe, North America, Asia, Australia, New Zealand, Latin America, the Caribbean, and Africa. It recently traded at $18.84 per share, offering 33% appreciation potential should it trade back up to $25 share. The current market yield is 6.5%.
