The Fed is cutting, and that’s bullish for preferred stocks and their big payouts. Let’s look at a trio yielding up to 9.8% that will benefit from every ease.
The Fed is cutting, and that’s bullish for preferred stocks and their big payouts. Let’s look at a trio yielding up to 9.8% (paying monthly dividends) that will benefit from every ease from Mr. “Dead Man Walking” Jay Powell.
Most vanilla investors know common shares—and stop there. They buy banks like Bank of America (BAC) or Wells Fargo (WFC) by typing “BAC” or “WFC” into their brokerage account.
Financial firms also offer preferred shares with much bigger payouts. All we need to do is keep typing.
Preferreds are part stock, part bond. These hybrids trade on regular exchanges under normal tickers. They pay dividends and represent ownership, but their income stems from “bond” DNA.
Because of that, preferreds often trade like bonds. That’s why they shine when rates fall.
Buying individual preferreds is a hassle, however. Their tickers are alphabet soups. Plus, we need a basket of them for diversification.
Enter closed-end funds (CEFs), which can employ leverage to juice their portfolios (and payouts) by an extra 10%, 20% and even 30%. These CEFs can, and often do, trade at discounts to their net asset values (NAVs). That makes them nice one-click buys for those of us who have actual lives.
Let’s discuss three preferred funds dishing divvies between 7.2% and 9.8%. And oh by the way, these funds pay monthly dividends.3 Monthly Dividends From Preferred Stocks
Cohen & Steers Limited Duration Preferred and Income Fund (LDP)
Distribution Rate: 7.2%
A steady 7.2% payer, Cohen & Steers Limited Duration Preferred and Income Fund (LDP) is a diversified bucket of 260 preferred payers from financial-sector stocks such as Goldman Sachs (GS) and Citigroup (C). It’s also global in nature, meaning U.S. companies are only part of the formula—50%, in fact. The other half of assets come from companies located in Canada, the U.K., France and a handful of other, predominantly developed markets.
