Marty Fridson is a leading specialist in finding under-the-radar dividend investments; here, the editor of Forbes/Fridson Income Securities Investor at a trio of preferreds.
Federal Agricultural Mortgage Corp. (AGM), also referred to as Farmer Mac, is a government-sponsored enterprise (GSE). AGM is part of the Farm Credit System, established by Congress to improve the availability of long-term credit for U.S. farmers.
AGM fulfills its mandate by providing a secondary market for qualified agricultural mortgage loans, rural housing, and utilities loans. All of AGM’s preferred securities are issued by an agency of the U.S. government, which implies low credit risk.
Dividends on Federal Agricultural Mortgage Corp. 4.875% Fixed Rate, Non- Cumulative Series G Perpetual (AGM-G) are qualified and taxed at the 15%-20% rate. This issue may be called on 07/17/26, or any time thereafter, at par plus any declared and unpaid dividends.
AGM reported 3Q 2021 core net income of $27.6 million or $2.55 per share, essentially flat with a year ago. Results missed analysts’ $2.62 estimates, but nonetheless were solid for the quarterly period. Net interest income of $55.0 million was a key driver, climbing 23.2% year-over-year.
Credit quality remained healthy and the associated costs were held in check. Non-interest operating expenses were a core earnings headwind, while capital measures remained solid.
We recommend AGM’s 4.875% preferred as a suitable investment for low- to medium-risk taxable portfolios. Dividends are taxed at the 15%-20% rate. Buy at $25.00 or lower for a 4.875% current yield and a 4.875% yield to call.
JPMorgan Chase & Co. (JPM), a leading global financial institution with $3.8 trillion in total assets and $3.1 trillion in assets under management (AUM). The company posted strong 4Q 2021 net income of $10.4 billion or $3.33 per share, on solid investment banking revenue and soaring M&A fees. Additionally, the release of $1.8 billion in reserves for loan loss helped the bottom line outpace analysts’ $3.01 estimates.
Driving core ear ings momentum from a year earlier was a sharp 37% jump in revenue from Global Investment Banking, along with a 16% increase in Asset & Wealth Management revenue. AUM climbed a solid 15% from a year ago to $3.1 trillion on the strength of equity markets.
JPMorgan Chase & Co.; 4.20% Fixed Rate, Non-Cumulative, Series MM Perpetual (JPM-M) is callable on 07/30//26, or on any dividend payment date thereafter, at par plus any declared and unpaid dividends. Dividend distributions are qualified and taxed at the 15%-20% rate. This investment is suitable for low- to medium-risk taxable portfolios. Buy at $23.50 or lower for a 4.47% current yield and a 5.73% yield to call.
PennyMac Mortgage Investment Trust (PMT) is a specialty mortgage finance REIT with a comprehensive mortgage platform, investing in residential mortgage loans and mortgage-related assets. PMT’s objective is to provide attractive risk-adjusted returns over the long-term.
The Trust acquires and securitizes newly originated prime quality mortgage loans. Interest-rate-sensitive investments include mortgage servicing rights (MSRs), mortgage-backed securities (MBS), and related hedge instruments. PMT is managed by PNMAC Capital Management, LLC, a subsidiary of PennyMac Financial Services, Inc. (PFSI).
PennyMac Mortgage Investment Trust 6.750% Fixed Rate, Cumulative, Series C Perpetual (PMT-C) may be redeemed in whole or part on the initial 08/24/26 call date, or any time thereafter, at par plus any accumulated and unpaid dividends.
PMT reported a 4Q 2021 net loss of $27.3 million or ($0.28) per share, falling well short of analysts’ $0.49 estimates. Revenues of $49.5 million lagged expectations as well. Results were negatively affected by sharply rising interest rates and yield curve flattening. The latter led to lower mark-to-market MSR adjustments and elevated hedging costs.
We view 1Q 2021 and perhaps the 1Q 2022 results (yet to be released) as mar-ket aberrations and look for earnings and revenue momentum to gain traction later in the year. This preferred issue is suitable for high-risk tax-deferred portfolios. Dividends are taxed as ordinary income. Buy at $23.75 or lower for a 7.10% current yield and an 8.07% yield to call.
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