6% Qualified Current Yield, 6% Yield-To-Worst, Plus Interest Rate Protection From A Stable Financial Company

Introduction The recent market correction and sell-off in treasuries brought a new trend to fixed income. I cannot say that this is a big surprise, because for the last several years most of us were only complaining how overvalued everything is. What is very important in this kind of environment is to understand what is the real fear and to find stocks that just got hit in sympathy.
We will kick off by examining some of the risks which preferred stocks entail and then proceed with a brief introduction of the company and the related products which caught our attention.
Credit Risk If a company's profitability keeps on worsening until a certain point, preferred stock holders start to worry about their investment. On the other hand, newcomers are being lured in by higher yield with the associated risks. In the current situation there are two very suitable examples of credit risk:
CBL & Associates Properties (NYSE: CBL) and its preferred stocks: Source: Google Finance
This is the CBL case. The common stock has been in a downtrend for a very long time. You do not need to be an expert to understand that something is wrong with the company. Preferred stock holders were armed with a lot of time to react.
AmTrust Financial Services (Nasdaq: AFSI) and its preferreds: Source: Google Finance
Here the situation is similar - preferred stock holders had a lot of time to react. There was plenty of turmoil around AFSI long before 'taking private' was a... Read more

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