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Plaehn's Preferred Pick: RLJ Lodging Trust

05/07/2020 5:00 am EST

Focus: REITS

Tim Plaehn

Lead Income Analyst, The Dividend Hunter

The stock market crash provides us with an opportunity to pick up preferred shares at steep discounts to their normal values, asserts income expert Tim Plaehn, editor of The Dividend Hunter.

Although preferred shares give a higher level of dividend safety compared to common stock dividends, many preferred issues have crashed alongside the related common shares.

I believe that preferred stock investments will lead the share price recovery when investors again start to believe in a positive future for American companies and stock market values.

(Editor's note: Tim Plaehn will be participating in the MoneyShow Virtual Event. On Monday, May 11th, Tim will be discussing "Generating 6% Dividends or more for Retirement without Spending Down your Capital". Register for FREE.)

Let's focus on making investments into this category for high yields and strong price appreciation potential. I am adding one more attractive REIT preferred issue here.

RLJ Lodging Trust Cumulative Convertible Preferred A (RLJ.P.A) is the only preferred issue of hotel lodging REIT RLJ Lodging Trust (RLJ). I like RLJ Loding as one of the better-managed lodging REITs with a more valuable portfolio.

On March 18, in response to the coronavirus outbreak effects on the travel industry, RLJ reduced its common stock dividend from $0.33 per share down to $0.01 per share.

Maintaining a common share dividend means the preferred share dividend of $1.95 per share per year ($0.4875 quarterly) is secure. In this stock market crash, RLJ.PRA has fallen from $28 to a current $16.50 per share. That gives us a current yield of 11.8%.

The preferred shares went ex-dividend on March 30, so it will be a quarter before we earn a dividend. The primary investment goal is to ride RLJ.P.A back up above $25. Be aware that stock symbols for preferred stocks are not uniform across financial websites and brokerage firms.

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