Are Preferred Stocks even worth it?

[Wake]

I like the concept of these kinds of stocks. You buy them, and sit on them while they generate dividends every quarterly or monthly period.

However, one thing that's been popping up lately is that these stocks shouldn't be used because of rising interest rates.

Should investors consider preferreds? Is an APY around 6.5%-8% good?

-Edited out Mentions List in spoiler tag-

 

[syrenn]

LOL.... that is some list you got there

 

[Wake]

AHA, so it does work! Neat!

Since it works, I'll edit it out. Apologies if this experiment annoyed anyone.

 

[Book of Jeremiah]

I wouldn't invest in stocks, annuities of any kind, Wake. I'd pay the penalties for anything holding my money and cash out right now.

 

[Mertex]

AHA, so it does work! Neat!

Since it works, I'll edit it out. Apologies if this experiment annoyed anyone.

Not annoyed, just puzzled....came to see and didn't see where I was "mentioned' and got confused....then I read where you edited them out. It is a neat little feature....


Now about the stocks....my husband and I invested in Mutual Funds a long time ago and were sitting on a really nice nest egg, until the economy crashed under Bush.....they dropped terribly.....but several years later, we recovered quite a bit of it, so instead of keeping in the stocks we decided to do major renovation to the house....added a game room, so I guess it turned out okay....we didn't lose as much as we thought of at first...we still have some, but not buying any more.

 

[Wake]

I feel like that neanderthal who discovered fire.

 

[Spoonman]

I utilize them quite often. in fact high yield dividend stocks had been a very large part of my portfolio last year. most of the really high yields were tied into interest rates and they become risky as they rise. I've pulled out of stocks like NLY, CLS, IVR. Actually I think it was late last spring i pulled out of them. But those companies make insanely high profits when interest rates are low. so they can afford to pay the big dividends 10% + I guess it all depends on whether or not you are willing to ride out the drop in stock vallue but still retain the high dividend yield. i pulled out and went into stocks like american airlines and philip morris, michael kors. but i'll probably buy back into some of the high yields at lower rates again in the future

 

[Dot Com]

are these available to anyone who wishes to buy stock? How does one get the "preferred" status? YES, I know, google is my friend BUT I want to get the inside dope from our experts. I'm a novice in this field except to say that I watch how banks have increased their stranglehold over this great nation's gov't

 

[william the wie]

Preferreds ain't my cup of tea but if you limit yourself to convertible preferreds with an optionable underlying common that pays a dividend you can use puts to limit interest rate risk. Check with Zander, Sallow and/or Toro but what I would do is

make sure I could afford 4-6 issues for diversification.

Buy puts 3-6 months out that are slightly in the money so that I pay low or no pure premium.

Double-check that my put costs will not eat up my dividend income without either turning a profit on options or capital gains on my preferred.

It is much easier to lose money than to make it. And it is much harder financially to regain money than to take a small loss and say "oops" but vice versa for bragging rights so never make an investment out of a speculation or a speculation out of an investment.

 

[Zander]

The vast majority of individual investors should stay away from them. Preferred are complicated and each issue is unique. Caveat Emptor....

 

[Mr. H.]

I got nothin', sorry.

 

[william the wie]

I utilize them quite often. in fact high yield dividend stocks had been a very large part of my portfolio last year. most of the really high yields were tied into interest rates and they become risky as they rise. I've pulled out of stocks like NLY, CLS, IVR. Actually I think it was late last spring i pulled out of them. But those companies make insanely high profits when interest rates are low. so they can afford to pay the big dividends 10% + I guess it all depends on whether or not you are willing to ride out the drop in stock vallue but still retain the high dividend yield. i pulled out and went into stocks like american airlines and philip morris, michael kors. but i'll probably buy back into some of the high yields at lower rates again in the future

Yeah, dividends matter a lot.

 

[Sunshine]

The best way to choose stocks is to go into the marketplace and see what is selling. The population is getting very top heavy with older folks. Items that they use should be good investments.

 

[Wake]

I utilize them quite often. in fact high yield dividend stocks had been a very large part of my portfolio last year. most of the really high yields were tied into interest rates and they become risky as they rise. I've pulled out of stocks like NLY, CLS, IVR. Actually I think it was late last spring i pulled out of them. But those companies make insanely high profits when interest rates are low. so they can afford to pay the big dividends 10% + I guess it all depends on whether or not you are willing to ride out the drop in stock vallue but still retain the high dividend yield. i pulled out and went into stocks like american airlines and philip morris, michael kors. but i'll probably buy back into some of the high yields at lower rates again in the future

OK, I understand a bit better. Thank you very much. Right now my only stock is Green Hunter Resources Series C (GHRprC). It's taken a bit of a hit in value, but it's been coming back. On 12/2/13 bought 35 shares @ $679, and they charge $7 when either buying or selling shares @ Scottrade. Right now it is sitting @ $651.0035. It pays monthly, so each share I'm harvesting $0.2083 a month, or $7.29 at the end of each month. Not bad, but I don't know if it's worth the anxiety when it keeps dipping down in value and then back up. Gets the stomach knotted at times. Been considering some dividend aristocrats like AT&T (T), but it's so expensive just to buy one stock, like around $40-50 or more.

are these available to anyone who wishes to buy stock? How does one get the "preferred" status? YES, I know, google is my friend BUT I want to get the inside dope from our experts. I'm a novice in this field except to say that I watch how banks have increased their stranglehold over this great nation's gov't

Oh yeah. I use an online brokerage firm called Scottrade. Absolutely anyone can buy any kind of stock, to my knowledge (which ain't much ). Basically when it comes to stocks there are two main kinds: Common and Preferred stocks. Common stocks are your typical stocks. You buy fractions of a company, and with its successes and losses your shares increase or decrease in value. If your fortunate, and you buy a lot of common stock, and then that company does really well and its value shoots up, you can then sell that stock and make a good profit, which is called capital appreciation. For example, if you buy shares(also called stocks) at $8, and in that day it shoots up to $15, if you sell all of that stock you make a profit (before taxes) of $7 per each stock. So just imagine if you had bought 1,000 shares, and each share appreciated by $7. That's, like, $7,000 in profit from that one trade. When you buy and sell a stock, that's known as a trade.

With preferred stocks, you buy a stock and it pays you a lot more in dividends. HOWEVER, preferred stocks don't budge much when there are shifts in the market, so if a company has a windfall, its common stock will shoot up with it, but its preferred stock won't go up much, if at all. Then again, preferreds not going up or down much when there are major shifts in the market is a good thing, because they're staying near their value, and still paying dividends.

Also, common stock owners get more influence when it comes to the upper management of that stock's corporation, whereas preferred stocks don't. But, if a company goes bankrupt, common stock owners get paid dead last, whereas preferred stock owners get paid before common stock owners, and after bondholders.

If you want to go where I went to learn about everything stock markets and investing, check out Investopedia.com. To get you started here are the links I used to learn about common and preferred stocks.

 

[Spoonman]

are these available to anyone who wishes to buy stock? How does one get the "preferred" status? YES, I know, google is my friend BUT I want to get the inside dope from our experts. I'm a novice in this field except to say that I watch how banks have increased their stranglehold over this great nation's gov't

yes, they are avaiable to anyone. let your protfolio manager know you have an interest and they will work with you

 

[Wake]

While I was a homeless homecare-CNA, I met and cared for a very old and wealthy client who was a stock broker. The misery I had endured, plus a nearly unlimited supply of knowledge from his experiences, is what sparked my interest in investing.

 

[Sallow]

These are for investors who are in it for the long term. And getting a dividend is nice.

 

[Wolfsister77]

Yep, it worked. OK

 

[Misty]

Heehee. It depends. Some are some aren't.

Just as you learn this message board you learn how to trade.

 

[Foxfyre]

We don't deal in preferred stocks, but have almost all of our modest investments in 401Ks in conservative mutual funds that weather the wild fluctuations in the market pretty well. We were heavily invested in a much more aggressive portfolio when the housing bubble burst in 2008 and 2009 and we took a blood bath. But we reinvested what we had left in new more conservative funds--and they have earned back most of what we lost. Now we take the required distribution each year to supplement our other income and they have been earning enough to cover those distributions while leaving the principle intact and even increasing a bit each year.