I have no idea whether any of these are worth buying, nor can I vouch for the accuracy of any of the info. But the list might be a starting point if you’re looking for some reasonably near-term, non-perpetuals. Just be aware of call risk if you buy at a price above par.
I just sold DDT for 26.80 a week ago. Someone paid 28.20 for shares just before New Years last year. That got my attention.
When I sold my house in NJ back in '06, I put most of my profits into trust preferred issues. I may have had as many as 20 of them. Most got called as interest rates declined. DDT was the last one I had.
Its a Dillard’s department store trust preferred. Dillards is a midscale mall based department store similar to Macy’s but mostly in the South. Headquarters is in Little Rock.
Some worry about a possible recession and declining earnings. Others think Dillards shoppers are not the paycheck to paycheck group. Their fashion conscious customers will continue to buy.
I sold because I don’t need the income and would rather trim taxable earnings.
The first pfd on the previous list is OXLCM, which is one of the five offered by Oxford Lane Capital. My fundie website says of the company’s financial health:
**(1) OXLC's short term assets ($61.0M) exceed its short term liabilities ($49.0M). [green flag]**
**(2) OXLC's short term assets ($61.0M) do not cover its long term liabilities ($411.9M). [red flag]**
**(3) Debt Level: OXLC's net debt to equity ratio (39.8%) is considered satisfactory. [green flag]**
**(4) OXLC's debt to equity ratio has reduced from 57.5% to 43.5% over the past 5 years. [geen flag]**
**(5) OXLC's operating cash flow is negative, therefore debt is not well covered. [red flag]**
**(6) OXLC's interest payments on its debt are well covered by EBIT (6.4x coverage). [red flag]**
The site scores OXLC’s valuation this way:
A green flag for having a PEG of 7.7x compared to US Capital Markets industry average of 28.8x. Another green flag for having a PE of 7.7x vs the US market’s 15.2x. A red flag for having a PB of 1x vs the US Capital Market industry average of (-19.6x), which is a flag I’d argue with and likely an unintended consequence of applying a general formula inappropriately.
Takeaway? OXLC isn’t 6 for 6 green across both ‘health’ and ‘value’. But it also isn’t unduely worrisome. I’d rate it ‘mid-tier’ in risk or ‘Enterprising’ and worth buying at the right price. So how are OXLC’s pfds trading, and what are their current YTCs and YTMs?
Were it me doing the buying, I’d favor OXLCO or OXLCP (which, in fact, I own.) Due your due diligence and make your opening position small, because prices are going to get cheaper as markets decline another (-30%) to (-60%) from where we are now.
Yeah, in retrospect we all could have done better in '08/'09. But the dynamic trio of Biden-Powell-Yellen are promising a repeat performance this fall/winter and another chance to do some bottom fishing.
DDS has a clean balance sheet. But earnings are forecast to decline by an avg of (-45%) per year for the next three years. So taking money off the table now was merely being cautious. Buy DDT back when it’s a lot cheaper this winter/next year.
That sounds right. Yes, during the '08 meltdown there was lots of concern about bankruptcy. But Dillards survived.
Of course they would have called DDT if they could refinance more cheaply with declining interest rates. Which implies their financial situation is not the best.
They have stores in St. Louis. The one nearest me in Chesterfield Mall closed after a water main break flooded their store. They did not reopen. The mall still has a Macy’s but most other stores have closed. New owners plan to redo it. Meanwhile a few miles away a big box store mall opened (in Chesterfield Valley) and that was followed by two outlet malls.
Chesterfield Mall is excellent location near a major highway intersection but enclosed malls are out of style and competition from everything else including internet sales makes it very tough.
“Of course, they would have called DDT if they could refinance more cheaply with declining interest rates. Which implies their financial situation is not the best.”
Paul,
That’s a shrewd observation and probably correct. To have to carry debt at 7% is more burdensome than the 4%-5% they might have gotten were they credit-worthy enough. I haven’t tried to benchmarking them against other retailers to see how they fared during the retail crash a couple weeks back. But it’s probably worth doing.
When prices moved against you in '09 and DDT was trading sub-$5 bucks, did you average down or just sit tight?
'09 was a delight for exchange traded bonds (or similar)!
My favorites were ISM and OSM (CPI-linked student loan company debt). I traded those two extensively from '06 through '17 until just before they matured at par. Sure, in '06 I paid a lot (22.something), and in '07 I still paid a lot (21.something), but '08 and '09 were a bonanza … on 10/10/08 I picked up a bunch of ISM at 7.50. Throughout that period (more than a decade!), I routinely discussed those bonds here on the boards, and I sometimes traded them when beneficial to avoid too large a position. Finally, I started selling, sold 1/3 of the total position in mid '16 at 24.82-24.85, and then sold the remainder in March '17 at 25.15-25.17.
Oh, and they never failed to make an interest payment in all those years. Every single month I received an interest payment, except that the 11/16/09 interest payment was ZERO due to deflation eating up the entire fixed portion. Remember when we were all worried about deflation?
'09 was a delight for exchange traded bonds (or similar)!
Yeah, lots of interesting opportunities back then. For instance, JBK was a fixed to float trust preferred set up by Lehman based on an underlying Goldman Sachs certificate paying 6.345% Lehman to made money on the spread - JBK initially paid 3.5% so, there a positive 3.345% spread for Lehman. The float was based on the 3 month LIBOR plus 0.75%, with a minimum of 3.5% and a maximum of 7.5% - so there was more positive spread opportunity than negative for Lehman. When Lehman went BK, per the prospectus, the trust became a pass-through for the interest from the underlying. However, the underlying paid dividends semi-annually (in Feb and Aug), while JBK was set up to pay quarterly (in Feb, May, Aug and Nov), so it appeared that JBK had missed a payment in November, 2008 - when they were just changing over to the semi-annual pass-through schedule. Great opportunity to buy a $25 par value with a 6.345% coupon for between $10 and $11 - if you thought that Goldman Sachs would survive. JBK still trades today, at around $26
