4 Safe, High-Yield Preferred Stocks From California
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The World Bank just cut sharply its 2012 global growth forecast from 3.6% to 2.5%. In step, the German government revised its growth forecast lower to0.7% from 1.0%. Additionally, Chinese home prices declined in 52 of 70 cities in December. Investors may have accepted that Greece may default in March, but attention then shifts to Portugal, where 6-month bond yields hover above 5%. This may send you looking for cover in a bunker, but while you do so, good dividend yields may help your portfolio come out unscathed.
It may be time to consider adding more fixed-income instruments to your portfolio. More particularly, I like preferred stocks because you can smooth out the bumps and erratic moves of the market through consistent dividend payments. Also, these instruments do not ebb and flow like common shares and equities. Keep in mind that companies aim to make the dividend payments to avoid credit rating downgrades.
Below, I focus upon preferred stocks from utilities because of stable cash flows from customers. I also ran a stock screen, and noticed that higher yielding preferreds hale from California. I take care to mention those at or below par value or call price, which is the dollar amount that you get after the security reaches maturity. Generally speaking, you should avoid preferred stocks that trade significantly above par value, because you end up losing the gap between what you paid for and the par value or call price. With the Fed targeting 0%-0.25% for the federal funds rate and slowing global economic growth, you ought to consider the following.
Pacific Gas & Electric (NYSE: PCG) (Redeemable Series A) is callable anytime at $25 per share, and it trades currently right at $25 per share. The quarterly dividend payment is $0.3125. The company has made consecutive payments since April 2004.
The next dividend payment is on February 15 to shareholders of record on January 31. Moody’s rated this security at Baa2, and S&P gave it a BB+. The current yield is 5.0%, and the 52 week trading range is $20.90-26.00. The Yahoo! Finance ticker symbol is PCG-PE. For Google Finance, it is PCG-E, and Fidelity’s is PCG/PE. Keep in mind, that this is right at par value, so the dividend payment will be deducted from the share price on the ex-dividend date, which is at least 2 business days before the record date.
If you want to avoid calls, consider the Nonredeemable shares. It has the same ratings, payment and record dates, and dividend payment amounts, but it trades below $25.25 with a current yield of 4.9%, and has a par value of $25. The security has made all dividend payments since May 2004. The Yahoo! Finance ticker symbol is PCG-PC.
Pacific Gas & Electric is one of the largest combination natural gas and electric utilities in the US. It provides service to ~15 M people in northern and central California.
Southern California Edison (NYSE: EIX) (4.24% Cumulative) is callable anytime at $25.80 per share with a par value of $25, but it trades below $21.50 per share. When these shares are called, you can make up to 20% in capital appreciation. You get paid for your patience with a quarterly dividend payment, which is $0.265. This series has made all dividend payments since February 2002.
The next dividend payment is on February 28. The record date is February 4. Additionally, S&P rated this at BBB-. The current yield is 4.9%, and the 52 week trading range is $17.76-22.74. The Yahoo! Finance ticker symbol is SCE-PC, the Google Finance ticker symbol is SCE-C, and Fidelity’s symbol is SCE/PC.
Southern California Edison is a subsidiary of Edison International, which is a generator and distributor of electric power. Former CEO, John Bryson, is currently serving as the Commerce Secretary under President Obama.
PECO Energy (NYSE: EXC) ($4.40 Cumulative Series C) is callable anytime at $112.50 per share with a par value of $100, but it trades below $91.75 per share. You have the potential to make 22.6% in capital appreciation when this series is called, but while you wait, you collect quarterly dividend payments of $1.10. All dividend payments have been made since May 2002.
The next dividend payment is on February 1, but for shareholders of record on December 31. So, you can collect the next dividend on May 1, if you purchase this by the end of March. Moody’s gave this security a rating of Baa2, and S&P opted for a BB+. The current yield is 4.8%. The 52 week trading range is $79.71-95.00. The Yahoo! Finance ticker symbol is PE-PC. For Google Finance, it is PE-C, and Fidelity’s is PE/PC.
PECO Energy is an electric and natural gas utility, serving 1.6 M electric and 490 K natural gas customers in southeastern Pennsylvania. It is a subsidiary of Exelon Corporation.
San Diego Gas & Electric (NYSE: SRE) (4.40% Series) is callable anytime at $21.00 per share. It trades right at $20, so there is room to make 5% in capital appreciation once called. Par value is at $20 per share. This series also pays out a decent quarterly dividend of $0.22. All dividend payments have been made since April 2002.
The next dividend payment is on April 15. The record date will probably occur after the first week of March, based on history. S&P rates this preferred stock at BBB+. The current yield is 4.4%, and the 52 week trading range is $15.70-20.99. The Yahoo! Finance ticker symbol is SDO-PC. The Google Finance ticker symbol is SDO-C. The Fidelity ticker symbol is SDO/PC.
San Diego Gas & Electric provides energy service to 3.5 M people in San Diego and southern Orange counties. Sempra Energy is its holding company.
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