Good Preferred Stocks Yielding 6% or More
Preferred stocks tend to pay more than than comparable bonds.
Preferred stocks combine elements of stocks and bonds in one investment. Typically issued at $25 a share, they pay a fixed rate of interest like bonds do. But preferreds trade like stocks and can bounce above or below the issue price. Preferreds tend to pay more than comparable bonds because they’re riskier. An issuer may be able to delay or cut payouts, and if the preferred is “non-cumulative,” the issuer isn’t on the hook to pay missed dividends. Issuers do owe all payments if a preferred is “cumulative,” but yields for these securities tend to be lower.
Earnings for All
- Bank Accounts: 1%-4%
- Municipal Bonds: 1%-3%
- Investment-Grade Bonds: 3%-5%
- Real-Estate Investment Trusts: 2%-6%
- Foreign Bonds: 3%-6%
- Closed-End Funds: 5%-11%
- High-Yield Bonds: 6%-8%
- Master Limited Partnerships: 5%-11%
Risks to your money. Similar to long-term bonds, preferred stocks tend to be sensitive to interest rate moves. Companies may be able to redeem, or “call,” their preferred shares at any time, potentially saddling investors with losses. Preferred stocks, which tumbled during the financial crisis, could dive if investors lose faith in banks and other issuers.
Hire a pro. The exchange-traded iShares U.S. Preferred Stock ETF (PFF, $39, 5.8%), a member of the Kiplinger ETF 20, offers access to hundreds of preferred securities issued by firms such as Allergan, HSBC and Wells Fargo. Banks and other financial firms account for 60% of its assets, though, concentrating most of the fund into one sector. Market Vectors Preferred Securities ex-Financials ETF (PFXF, $20, 6.0%) tracks an index of nonfinancial preferreds.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Do it yourself. With individual securities, stick to financially solid companies and buy shares below or only slightly above their $25 issuance price, says Michael Greco, cofounder of GCI Financial, an investment firm in Mendham, N.J. One preferred he likes: JPMorgan Chase 6.15% Non-Cumulative Preferred Series BB (JPM-PH, $26, 5.9%). Shares can’t be redeemed by JPMorgan until 2020, and dividends are considered to be “qualified,” meaning the maximum federal tax rate on the payments is 15% or 20%. Greco also favors Chesapeake Lodging Trust 7.75% Preferred (CHSP-PA, $26, 7.4%). A real estate investment trust, Chesapeake owns hotel properties such as the Hyatt Regency Boston and should easily cover its dividend payments, says Greco, though they don’t qualify for preferential tax treatment.
Next: Closed-End Funds to Earn 5% - 11%
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
Stock Market Today: Markets Reflect Global Uncertainty
Exuberance fades as investors confront micro challenges and a murkier macro environment.
By David Dittman Published
-
4 Things You Need to Know Before Applying for Social Security in 2025
Don't unnecessarily delay or reduce your Social Security benefits because you don't know all the rules and requirements.
By Donna LeValley Published
-
Is A Recession Looming? Two Big Bank CEOs See It That Way
Recession is likely, Citi's CEO told a Senate panel today, a sentiment echoed by JP Morgan's chief executive last week.
By Joey Solitro Published
-
Stock Market Today: S&P 500 Joins Nasdaq in Correction Territory
The Nasdaq managed to hold higher into the close thanks to a strong earnings reaction for mega-cap stock Amazon.
By Karee Venema Published
-
Stock Market Today: Stocks Finish Mixed as Q3 Earnings Season Kicks Off
The main markets opened higher thanks to solid bank earnings but sentiment fizzled into the close.
By Karee Venema Published
-
Dividends Are in a Rut
Dividends may be going through a rough patch, but income investors should exercise patience.
By Jeffrey R. Kosnett Published
-
Municipal Bonds Stand Firm
If you have the cash to invest, municipal bonds are a worthy alternative to CDs or Treasuries – even as they stare down credit-market Armageddon.
By Jeffrey R. Kosnett Published
-
Best Banks for High-Net-Worth Clients 2024
wealth management These banks welcome customers who keep high balances in deposit and investment accounts, showering them with fee breaks and access to financial-planning services.
By Lisa Gerstner Last updated
-
High Yields From High-Rate Lenders
Investors seeking out high yields can find them in high-rate lenders, non-bank lenders and a few financial REITs.
By Jeffrey R. Kosnett Published
-
Time to Consider Foreign Bonds
In 2023, foreign bonds deserve a place on the fringes of a total-return-oriented fixed-income portfolio.
By Jeffrey R. Kosnett Published