Tag Archives: preferreds

Low Volatility Effect in the U.S. Preferred Stock Market

The low volatility effect in equities refers to the findings that stocks that previously exhibited lower realized volatility outperform those with higher volatility as well as the broad based market on a risk-adjusted basis. It has been well documented in academic and practitioner research, and we have also seen widespread adoption in investment product offerings Read more […]

The Power of Dividends: Preferred Stock

Similar to fixed income securities, the U.S. Preferred Stock market has started 2014 with positive performance. The S&P U.S. Preferred Stock Index  (Total Return) ended January 2014 up 2.68% .  A good start given the S&P 500 Index (Total Return) was down 3.46%.  As a fixed income comparison the S&P/BGCantor U.S. Treasury Bond  7-10 Year Read more […]

4 Benefits Offered by Preferred Securities

Preferred stocks can offer investors greater assurances than common shares in terms of both knowing that they will receive the dividend payment and knowing what the dividend amount will be.  Since preferred securities are higher in seniority than common equities, dividends must be paid to preferred shareholders before common shareholders.  Also, since most preferreds provide Read more […]

5 Risks Associated With Investing in Preferreds

Due to their hybrid nature, the potential risks of preferred securities are related to the interest rate environment, issuer’s credit quality and liquidity. Interest Rate Risk: Due to their bond-like fixed dividend payments, preferreds are vulnerable to changes in interest rates.  There is an inverse relationship between preferred prices and changes in interest rates.  In Read more […]

3 Reasons Companies Issue Preferreds

Companies may issue preferred stocks for a variety of reasons.  The three reasons below are the most common. Preferred stock issuances give companies a relatively cheap way to acquire additional capital.  The preferred market is dominated by banks and related financial institutions, which are required by regulators to have adequate Tier 1 capital to support Read more […]

Jekyll & Hyde: The U.S. Preferred Stock Market

Preferred stocks have a split personality, part equity and part bond. The bond characteristics of preferred stock has, at least for the time being, become the ‘Mr. Hyde’ of the asset class.  The high dividends that preferred stock owners enjoy can be compared to future interest payments of bonds. Like bonds, the prospect of the Read more […]