With interest rates a lot lower than 15 years ago, we are often asked “where can a retired investor get fixed income?” Periodically, in this newsletter, we revisit many options that generate income:
-Immediate annuities
-CDs
-Federally Backed Mortgage Notes
-Preferred Shares
We have noticed in recent years that many investors have been more interested in the growth potential of equities, rather than the income stream provided by fixed income securities. As a result, the prices of preferred shares have been depressed, as there is a lack of demand. We consider them "on sale.”
We've compiled a list of investment grade preferred shares 1 that all sell at a discount to their call price. While you hold such preferred shares, you obtain the fixed dividend. If the shares are called, you will also capture a profit (the difference between the $25 per share call price and your purchase price). Please note that a profit is not assured, as the company is not obligated to call the shares (in which case you continue to receive the fixed dividend). You always have the option to sell the shares on the exchange and the price may be higher or lower than your purchase price (i.e. prices fluctuate).
Who should invest in preferred shares? Those investors desiring a consistent source of income and who have other funds for their ongoing liquidity needs.
For more information and to have your questions answered on these and other fixed income opportunities, please check off on the coupon enclosed.