Preferred Picks for High Yield

06/07/2017 2:50 am EST


Jack Adamo

Editor, Jack Adamo's Insiders Plus

Jack Adamo, editor of Insiders Plus, is a long-standing expert income investing, with a particular expertise in the often under-followed market for preferred stocks. For sophisticated investors familiar with preferred shares, he reviews two of his high-yielding picks.

We got a nice report for our Public Storage 5.90% Cumulative Preferred Shares of Beneficial Interest, Series S (PSA-S). Revenues rose 5.8% and net income rose 8.4%.

Our preferred dividends were covered 5.7 times, up from 5.1 times in last year's comparable quarter. This coverage seems low compared to most of our other recommend preferred shares.

However, but you must take into account that this is a very stable business with low overhead and almost no intangibles to eat up money, so the coverage is more than adequate.

In fact, I was pleasantly flabbergasted to see that a company that's in the real estate business — it is a REIT — had interest coverage of over 300-times.

Usually REITs are highly leveraged because their steady income allows it. We're up 3.9% in the two months we've owned the stock. Public Storage 5.90% Cumulative Preferred Series S is a buy on pullbacks to $24.85.

When I looked at the quarterly report for our Deutsche Bank Contingent Capital Trust II, 6.55% Trust Preferred Securities (DXB) I was surprised to see that it did not break out preferred stock dividends.

Hence, I don't know what our coverage was. However, its Basel lll Common Equity Tier 1 capital ratio was a very strong 12.7% and net earnings rose 153%, so we're looking good. The market thinks so too. It has warmed up.

This is a "smart money" buy based on the declaration of exceptional bank analyst R. Christopher Whalen that Deutsche Bank did not have liquidity problems.

Buy Deutsche Bank Contingent Capital Preferred on pullbacks to $24. Take a 2% position in the High Income Portfolio.

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