Qurate Retail (QRTEA) operates the retail brands QVC, HSN, Zulily, Ballard Designs, Frontgate, Garnet Hill, and Grandin Road, explains Tim Plaehn, income specialist and editor of The Dividend Hunter.
Over the last year, the Qurate brands have suffered primarily due to supply chain issues, as the company struggled to source the best-selling items for the QVC and HSN shopping networks. Earnings have declined, and the common stock share price is down 75% over the last year.
Qurate has made significant new leadership hires and restructured its supply chain with a solid plan to return to profitable growth.
My Top Pick for aggressive investors in 2023 is Qurate Retail, Inc. 8.0% Fixed Rate Cumulative Redeemable Preferred (QRTEP). These shares have a par value of $100 per share and pay a $2.00 quarterly dividend. From the September 2020 IPO until January 2022, QRTEP traded close to $100.
As we moved into 2022, rising interest rates pushed preferred stock values down — the iShares Preferred and Income Securities ETF (PFF), a widely tracked preferred shares fund often used as a sort of index for preferreds, is down 19% this year.
I also believe that investors and traders did not differentiate between QRTEA, the common shares, and QRTEP, the preferred shares. As a result, the QRTEP share price dropped from $103 in January to around $40 at the end of the year.
Now we get to the good stuff:
* QRTEP continues to pay its $2.00 quarterly dividend as preferred stock, giving the shares a current yield of 20%.
* QRTEP has a mandatory redemption of $100 per share no later than March 15, 2031.
If Qurate does not go bankrupt, QRTEP has a locked-in return of $100 in eight years, plus $64 per share in dividends over those years. A $40 investment now will return $164 per share during that period. The math works out to an 18% compound annual return which you will earn, or your investment will go to zero. I like the odds.
