I have outlined why fundamentals look best at market highs, and worst at market lows. Just like we n...
Top Picks 2017: U.S. Bancorp Preferred A
01/18/2017 6:00 am EST
Our Top Pick for income investors for 2017 is a preferred stock issued by a bank that we consider one of the best-run in the country, asserts Jack Adamo, editor of Insider's Plus.
U.S. Bancorp (USB) is one of the banks in which Warren Buffett has had a large stake for a long time. It has a preferred stock I've watched for a long time.
I recommend buying the U.S. Bancorp Fixed/Floating Depositary Shares Non-Cumulative Perpetual Preferred Stock A (USB-A).
Despite the security of its preferred status, we get inflation protection because the dividend is the higher of 3.5% or the Three-Month LIBOR rate, plus 1.02%.
LIBOR is currently 0.9971%, so the shares pay the 3.5% minimum coupon, but with the shares trading at $870, the stock yields 4.0%.
The shares are redeemable at $1000 face value at any time. Redemption at face value would give us about a 15% bonus from the current price.
Given the state of the stock market with its historically high valuations, I'm quite happy to have an ironclad return in the 4% range with inflation protection or a 15% redemption bonus.
Buy U.S. Bancorp Preferred A up to $880. Be patient and Buy the stock only with a limit order, never a market order. The shares are thinly traded.
Also, be aware there is no set symbol for preferred issues; as a result, you may have to ask your broker what specific symbol their company uses.
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