Up until now I’ve never really considered investing in preferred stocks at all. I always thought they were for rich guys like Warren Buffet. But after doing some research it does seem that they could be a good mix between bonds and stocks and some preferred stocks pay some really high yields (10%+).
There are also various preferred stock ETFs such as PFF and PGF that sound like they might be good options as well, although it seems that not all of the preferred stocks in those ETFs are necessarily companies with high credit ratings.
Does anyone here invest in preferred stock and would you consider them good investments for someone looking to make good interest on a dividend with a moderate amount of risk?
Also if so, can anyone recommend some good high dividend, good credit rating preferred stocks? So far I’ve been looking at KIM.PR.G, BBT.PR.B, SFI.PR.E, TCB.PR.A, PSA.PR.W (note that these symbols are E-Trade symbols and may vary depending on your brokerage). I’m a little scared to invest any big money in any of these though considering I’ve never even heard of these companies and they seem to be very thinly traded.
One thing to watch out for on dividend yielding preferred stocks. Their movement is similar to bonds on interest rate fluctuations. All yields tend to be priced relative to the zero-risk rate of return (generally considered the treasury yield). If interest/treasury rates go up, the face price (preferred stock price) will go down. What the dividends give, the stock price movement may take away.
[quote=ucodegen]One thing to watch out for on dividend yielding preferred stocks. Their movement is similar to bonds on interest rate fluctuations. All yields tend to be priced relative to the zero-risk rate of return (generally considered the treasury yield). If interest/treasury rates go up, the face price (preferred stock price) will go down. What the dividends give, the stock price movement may take away.[/quote]
That makes sense. A lot of websites talk about them as hybrid investments that are part bond and part stock.
I wonder if it would make more sense to just invest purely in bonds and stocks and forgo preferred stocks completely.
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