US Bancorp Series-A

01/15/2014 6:00 am EST

Focus: FUNDS

Jack Adamo

Editor, Jack Adamo's Insiders Plus

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.

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