US Bancorp Series-A
01/15/2014 6:00 am EST
If you don't trust the Federal Reserve or this manipulated economy, you'll like that you get protection from inflation and deflation from the same financially-strong bank, advises Jack Adamo, editor of Insiders Plus.
Our favorite conservative, income-oriented idea for the coming year is US Bancorp Series-A Floating Rate Non-Cumulative Perpetual Preferred Stock (USBPRA).
The dividend rate is the greater of 3.50%, or three-month LIBOR, plus 1.02%. At the current price of $757, it yields 4.6%. Your rate never goes lower.
Should we face deflation and depression, 4.6% will be a great yield. If inflation hits and LIBOR goes to 5%, your yield will be 7.95%. If the $1,000 par-value shares are redeemed, your capital gain is 32%.
In the last 25 years, three-month LIBOR has been higher than 9%, and as low as 0.24%. At my buy limit of $800 for the Series A preferred shares, the base yield, and yield at LIBOR 5%, would be 4.75% and 7.525%, respectively.
Buy the stock only with a limit order, never a market order. With patience, you can probably get the shares below $750. US Bancorp Series A Preferred is a buy up to $800. Preferred stock symbols are not uniform across brokers. Make sure you get the right one.