We have come a long way in our knowledge of preferred shares. In Preferred Shares 101, we talked about what they were and how they could increase your dividend returns. In Preferred Shares 102, we learned how to speak their language. Finally, in Preferred Shares 103, we discussed the Rule of 72 and why dividend yield is vital to maximizing returns.
Now, let’s review the most challenging part about investing in Preferred Shares; finding them. That is right; these babies are tough to find in the wild. Without a good technique and some help from other hunters, you will have difficulty discovering preferreds.
Why are preferreds so hard to find? I do not think that someone is playing hide n’ go seek with them. Most people know nothing about them. Even if they see the word or meaning of preferred, they usually do not have a deep understanding of their roles or functions. I know I didn’t before reading “The Billionaires Secret.”
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How do we find preferreds then, if they are hiding? I discovered two main ways to find preferreds. There is also a third way, but it will cost you some money. Before I get into my patterns to find preferreds, I want everyone to know these are my personal methods. You may want to do more research or analysis. My strategies can be risky because I do not have a deep knowledge of the companies issuing the preferreds.
Method #1– Preferred Websites. There is one main website I used to research for my preferreds. It takes about 1-2 hours for me to find 3-4 good choices of preferreds. Now that I have a nice stable of preferreds, I haven’t gone back to find more.
The website is Preferredstockchannel. I love digging through this website because it has all the information needed to do 90% of my research. Yahoo Finance is where I perform the final bit of research. Let’s walk through my process quickly. I will keep it vague so that it can work on any preferred website.
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1) First, I scan the homepage for any news that pops out at me. If I see discounts or information on companies that I know and trust, I can make an immediate purchasing decision.
2) I then go to the right-hand corner to the section labeled, highest yielding preferred stock. This action will bring up fifty slides of the highest yielding preferreds currently. Remember, yield is a function of the dividend and the price.
3) Then, I go through my checklist of things that I want to see. I covered these in detail in Preferred 102. The picture shows one that has promise— except for the call date. I like to purchase preferreds that are not past their call date. This way, I get some time with them before they are eligible to be called.
4) I do a quick read of the synopsis of the company. I have grown to favor these shipping companies. They seem to issue many preferred, and so far, they have been good to me. However, do your own analysis.
5) Once I have collected 3-4 high-yielding shares. I then move over to Yahoo Finance. First, I type in the preferred stock, by name, into the search bar. I then research if the preferred is paying its dividend. In the case above, it is.
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6) Now, I search the actual company to see if it is paying its dividend on the common stocks. Remember, companies have to pay all preferreds before paying dividends on common stocks. Therefore, if the company is delivering on common stocks, we should have at least a good buffer. In this case, the company has never paid a common stock dividend. So you will have to come to your own decision.
7) Now it is time to come to a buying decision. If you do not want to purchase, you can still add it to a watch list. I like to do this, and this is just me, is purchase two shares in my Wells Fargo account. I can give up $25-40 to get a high-yield product. Now I can easily follow my preferreds.
8) Over time, after getting paid a few dividends or following the company more closely, I can decide to purchase more shares. This technique is what I used for GLOP.C and all my other claims.
9) If I know and trust a company, and the price and yield are right, I can instantly make a mega-purchase. However, in a low-interest-rate environment, everyone is yield starved. Now preferreds are in favor because of their high yields. It is hard to find a good deal currently.
10) Create a schedule to check up on new preferreds. My current portfolio cannot be called for at least two years, so I can wait until the end of the year to search for additional preferreds. It is also good to have some names on a watchlist if a market correction occurs— you will already know where to shop.
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Method #2– Seeking Alpha. Seeking Alpha is a stock market website that has many different authors. Each author specializes in their corner of the stock market. Some follow dividend stocks; others oversee growth stocks. Many focus on REITs or closed-end funds.
My favorite author is Rida Morwa. He writes about high yield opportunities— these include high yield stocks, closed-end funds, and preferreds. He writes an article every day, and if you subscribe to him, he will come straight to your inbox.
He recommends preferred shares from time to time. I hold his recommendations in high regard. I then decide if the preferred will vibe with the other ones in my portfolio. Either way, it is good to have a professional giving some advice on preferreds.
Methods #3– Pay for Information. Rida Morwa also has a group that costs money, roughly $500/year. It is a lot of money, but inside you will have everything laid out for you and all the preferreds you could dream of buying.
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I have not joined because I like the thrill of the hunt. However, I can see the appeal of having a team of professionals doing all the legwork for you. If you have a lot of money to invest, you could probably earn back $500 in a month or two.
Many, many more groups focus on all sorts of stock market information. Being a Robert Kiyosaki fanboy, I follow his teachings. He recommends everyone learn how to invest for themselves. I am still in the learning process, so I will continue to do things for myself.
That about wraps it up. You will have to come up with a research method and routine that works for you. It feels good to find preferreds in the wild and add to your portfolio. Most people do not invest in the stock market, and even fewer people understand and invest in preferred stock. You should be proud of yourself.
In Preferred Shares 105, we will talk about our long-term strategy for our preferred. How to maximize yield over the long term and what to do if your company calls your shares. See you next time, and thanks for reading.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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