Preferred stocks pay a dividend but do not participate in upside growth or extra profits. The advantage, historically speaking, is that they paid a nice dividend yield. An interesting aspect is to look to the hierarchy in the event of a company's bankruptcy. Bank debt is at the top of the structure. Then comes secured debt, unsecured debt, accounts payable, preferred stock, and then, last and least, common stock. Usually there is nothing left over by the time it gets to preferred and common.
The exchange-traded fund PGF owns preferred stocks from financial companies, both foreign and domestic, that all qualify for the 15% qualified tax rate.
What it does: PGF tracks the Wachovia Hybrid & Preferred Securities Financial Index. The underlying basket currently includes 40 holdings comprised of U.S. listed preferred stocks.
Who it's for: Investors looking for a high-yield option in the financial sector. Preferred shares have both debt and equity aspects, and PGF is likely to be more volatile than other regular equity financial ETFs. Preferred stock securities, like those found in PGF's portfolio, are taxed with the same 15% rate as common dividends. This 15% rate compares favorably to the rate that investors would pay on fixed income or bond interest payments, which are taxed as ordinary income at the maximum tax rate.
Top 10 holdings: (coupon rate, rating). Bank of America (BA, 8.20%, BB-/B3), Barclays(BCS Quote) (8.13%, BBB+/Baa2), JPMorgan Chase (8.63%, BBB+/A2), Wells Fargo (8%, NR/B2), Allianz (ALL.PA) (8.38%, A+/A3), HSBC Holdings(HBS Quote) (8.13%, A-/A1e), Metlife (6.50%, BBB-/Baa1), ING(ING Quote) (8.50%, BBB/A3), Bank of America (8.625% PD 8.63%, BB-/B3), Credit Suisse(CS Quote) (7.90%, NR/Aa3).
For one reason or another, the preferred stock of financials is a nice tracker of the market. In doing this, it’s flashing a warning: it seems to break down.
A correction – after the consolidation – seems not to far away for the coming days while we’re nearing the end of the first half-year.
The first line of defence – the 20 day moving average - seems to be in danger.
The exchange-traded fund PGF owns preferred stocks from financial companies, both foreign and domestic, that all qualify for the 15% qualified tax rate.
What it does: PGF tracks the Wachovia Hybrid & Preferred Securities Financial Index. The underlying basket currently includes 40 holdings comprised of U.S. listed preferred stocks.
Who it's for: Investors looking for a high-yield option in the financial sector. Preferred shares have both debt and equity aspects, and PGF is likely to be more volatile than other regular equity financial ETFs. Preferred stock securities, like those found in PGF's portfolio, are taxed with the same 15% rate as common dividends. This 15% rate compares favorably to the rate that investors would pay on fixed income or bond interest payments, which are taxed as ordinary income at the maximum tax rate.
Top 10 holdings: (coupon rate, rating). Bank of America (BA, 8.20%, BB-/B3), Barclays(BCS Quote) (8.13%, BBB+/Baa2), JPMorgan Chase (8.63%, BBB+/A2), Wells Fargo (8%, NR/B2), Allianz (ALL.PA) (8.38%, A+/A3), HSBC Holdings(HBS Quote) (8.13%, A-/A1e), Metlife (6.50%, BBB-/Baa1), ING(ING Quote) (8.50%, BBB/A3), Bank of America (8.625% PD 8.63%, BB-/B3), Credit Suisse(CS Quote) (7.90%, NR/Aa3).
For one reason or another, the preferred stock of financials is a nice tracker of the market. In doing this, it’s flashing a warning: it seems to break down.
A correction – after the consolidation – seems not to far away for the coming days while we’re nearing the end of the first half-year.
The first line of defence – the 20 day moving average - seems to be in danger.
Sphere: Related Content
No comments:
Post a Comment