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As the Dow and S&P 500 continue to approach all-time highs, it's easy to feel like you may have missed the January rally. Some opportunities have certainly gone the way of the Dodo and are no longer available while others have hid quietly in the bushes and are waiting to be discovered. A handful of banks with strong balance sheets offer preferreds that fall into the latter category.

Banking Sector

Since the beginning of December, stocks within the banking sector have been on a tear (from their respective December opening prices, Morgan Stanley (NYSE:MS) is up 32.8%, Citigroup(NYSE:C) is up 20.7%, and Bank of America (NYSE:BAC) is up 15.7%, just to highlight a few). In the beginning of January, Goldman declared that bank stocks are the top pick of 2013 and it's no secret that Warren Buffett likes the sector with investments in Bank of New York Mellon (NYSE:BK), Wells Fargo (NYSE:WFC) and Bank of America. With the balance sheets of banks continuing to improve, investing in preferred stocks of the right financial institutions will provide a consistent source of dividend income while minimizing volatility and uncertainty.

While preferred stock trades in a similar manner to common stock, it is vitally important that potential investors understand the unique risks associated with the asset class. If you have not already done so, please read Navigating The Risks Of Buying Bank Preferred Stocks.

Criteria

To narrow down the universe of bank preferred stocks to the below 15, I used the following criteria:

  • Premium - Any premium paid has to be recaptured in one quarter or less (no limit on the discount side)
  • Current Yield - Must be greater than 5%
  • Yield to Call - Must be greater than 4.5%
  • Liquidity - Average 10 Day Volume must be greater than 50,000 shares
  • Capital Ratios - Bank must be considered "Well Capitalized" by all three capital ratios from most recent company filings
  • Traditional Preferreds - Only Traditional Preferreds are in this list, no Trust Preferreds (TruPS) or Exchange Traded Debt

And without further ado, 15 bank preferreds that offer solid returns with minimal risk:

BB&T Corp (NYSE:BBT) 5.20% Series F Non-Cumulative Perpetual Preferred Stock

BB&T has three traditional preferreds - BBT-D, BBT-E, and BBT-F - but only BBT-F falls under the above criteria. BBT-F has not paid its first dividend yet, but it traded Ex-Div on January 15 (the first dividend will be paid on February 1). This means that anyone purchasing the preferred at this point will not receive the February 1 distribution and their first dividend payment will be on May 1 (this is why the "Years to Call" above is 4.75).

Ratings

Both Moody's and S&P have rated BBT-F (and all of BB&T's traditional preferreds) as Investment Grade securities.

Price and Yield

Prior to the Ex-Div date of January 15, BBT-F was trading above par. Since then it has traded below and offers investors a current yield of 5.261% and a yield to call ("YTC") of 5.479%. The YTC is greater than the current yield because the preferred is currently trading at a discount to par.

Capitalization Ratios

BB&T is a "Well Capitalized" financial institution by all three ratios.

A copy of the BBT-F prospectus is available on EDGAR by either searching for company filings or by following this link.

Bank of New York Mellon Corp 5.20% Series C Non-Cumulative Perpetual Preferred Stock

This is the only outstanding Bank of New York Mellon traditional preferred. BK-C has paid one dividend in December 2012 and will pay the next on March 20 with an Ex-Dividend Date of March 1 (e.g. if you want to receive the March dividend payment, you must purchase BK-C prior to March 1). The 10 day average volume is 112k, which should provide sufficient liquidity for most investors.

Ratings

Both Moody's and S&P have given BK-C an investment grade rating.

Price and Yield

BK-C has traded above or around par since early October. When the preferred traded Ex-Div in early December, the price came down as expected. The price of BK-C has recently come down from its high and is trading at a slight premium with a current yield of 5.175% and a yield to call of 5.086%. The YTC is lower than the current yield because BK-C is trading at a slight premium.

Capitalization Ratios

Bank of New York Mellon is a "Well Capitalized" institution by all three ratios.

A copy of the BK-C prospectus is available on EDGAR by either searching for company filings or by following this link.

Capital One Financial Corp (COF) 6.00% Series B Non-Cumulative Perpetual Preferred Stock

COF-P has paid one dividend in early December 2012 and will pay the next in early March. The 10 day average volume is 237k, which should provide sufficient liquidity for most investors.

Ratings

COF-P has a split rating with Moody's rating it as Investment Grade and S&P as Non-Investment Grade.

Price and Yield

COF-P was trading above par prior to the first Ex-Div Date on November 13. At that point the price dropped below par and has been gradually increasing since. Over the past two weeks, the price has declined to its current level of $25.12, where it has a current yield of 5.971% and a yield to call of 5.883%.

Capitalization Ratios

Capital One is a "Well Capitalized" financial institution by all three ratios. This may provide comfort to investors if they are weary about the Non-Investment Grade rating from S&P - however it should be noted that two of the three ratios have declined from 2012 Q3 to Q4.

A copy of the COF-P prospectus is available on EDGAR by either searching for company filings or by following this link.

City National Corp (CYN) 5.50% Series C Non-Cumulative Perpetual Preferred Stock

CYN-C has will pay its first dividend on February 13 with an Ex-Div Date of February 7. The 10 day average volume is 58,841 - a lower amount of average shares traded than the above bank preferreds but still enough that it should provide sufficient liquidity.

Ratings

CYN-C has an investment grade rating from both Moody's and S&P.

Price and Yield

CYN-C has traded around par since the start of the new year and prior to that was trading at a fairly steep discount. It is currently trading at a slight discount to par with a current yield of 5.540% and a yield to call of 5.666%.

Capitalization Ratios

City National is a "Well Capitalized" financial institution by all three ratios.

A copy of the CYN-C prospectus is available on EDGAR by either searching for company filings or by following this link.

EverBank Financial Corp (EVER) 6.75% Series A Non-Cumulative Perpetual Preferred Stock

EVER-A paid its first dividend in early January. The next dividend is payable in early April and should trade Ex-Div in mid-to-late March. The average 10 day volume is 58k, which is on the low side of the list but should still provide sufficient liquidity for an individual investor.

Ratings

EVER-A is not rated by either Moody's or S&P.

Price and Yield

EVER-A has traded below par since being issued. While it did touch the $25 threshold, it has since slowly leaked down to the current price of $24.60. EVER-A has a current yield of 6.860% and a yield to call of 7.133%.

Capitalization Ratios

EverBank is a "Well Capitalized" financial institution by all three ratios. At the time of this writing, fourth quarter financials have not yet been released.

A copy of the EVER-A prospectus is available on EDGAR by either searching for company filings or by following this link.

First Republic Bank (FRC) 5.625% Series C Non-Cumulative Perpetual Preferred Stock

FRC-C paid a smaller dividend at the end of December 2012 (this occurred because the accrual period for the dividend was for 1.5 months instead of 3 months). FRC-C will pay its second (and first full) dividend on March 30 and will go Ex-Div in mid-March.

Ratings

FRC-C has an investment grade rating from both Moody's and S&P.

Price and Yield

FRC-C traded below par until the beginning of the year. It reached its high mid-month and has since traded slightly down. At $25.06 the current yield of FRC-C is 5.612% and the yield to call is 5.570%.

Capitalization Ratios

First Republic Bank is a "Well Capitalized" financial institution by all three ratios.

For more information on First Republic Bank, as well as access to any company filings, please see the Investor Relations portion of the First Republic Bank website.

Goldman Sachs Group (GS) 5.95% Series I Non-Cumulative Perpetual Preferred Stock

GS-I has not paid any dividends yet, although is has traded Ex-Div for the first payment. The Ex-Dividend Date was January 23 but the dividend payment will not be received until February 11, this is why the Years to Call is 4.75. With an average 10 day volume of 634k, GS-I should have more than enough liquidity for any investor.

Ratings

GS-I is rated Non-Investment Grade by both Moody's and S&P.

Price and Yield

As mentioned above, GS-I traded Ex-Div on January 23 and at this point the price of the security dropped below par. It is currently trading at $24.81 with a current yield of 5.995% and a yield to call of 6.136%.

Capitalization Ratios

Goldman Sachs is a "Well Capitalized" financial institution by all three ratios. At the time of this writing, not all of the 2012 Q4 ratios are available.

A copy of the GS-I prospectus is available on EDGAR by either searching for company filings or by following this link.

JPMorgan Chase & Co (JPM) 5.50% Series O Non-Cumulative Perpetual Preferred Stock

JPM-D paid its first dividend in December 2012 and the Ex-Dividend Date for the March payment was January 28. This means that anyone purchasing JPM-D at this point will not receive the March dividend payment and their first dividend will be June 2013. Over the past 10 days the average volume has been 223k, which should provide sufficient liquidity for most investors.

Ratings

JPM-D has a split rating - Investment Grade by S&P and Non-Investment Grade by Moody's.

Price and Yield

As mentioned above, JPM-D traded Ex-Div on January 28, which is why the price has gone from trading above $25.60 to below par. The drop in price is substantially more than the ~$0.34 per share dividend, offering investors a better initial investment level then they would have had a few weeks ago. At $24.90, the current yield is 5.522% and the yield to call is 5.601%.

Capitalization Ratios

JPMorgan is a "Well Capitalized" financial institution by all three ratios.

A copy of the JPM-D prospectus is available on EDGAR by either searching for company filings or by following this link.

PNC Financial Services Group (PNC) 5.375% Series Q Non-Cumulative Perpetual Preferred Stock

PNC-Q paid its first dividend at the beginning of December and pays its next dividend on March 1. It will trade Ex-Div on February 12, so if you want to receive the March 1 dividend payment you need to purchase the security before then. The average 10 day volume is 71k, which is not the highest average trading volume of the list but should still provide enough liquidity for the typical investor.

Ratings

PNC-Q has Investment Grade ratings by both Moody's and S&P.

Price and Yield

Prior to the January rally, PNC-Q traded around par. Since the start of the year, the security rallied with the market to its highest closing level of $25.60 and has since traded off to its current level of $25.22, where it has a current yield of 5.328% and a yield to call of 5.174%.

Capitalization Ratios

PNC is a "Well Capitalized" financial institution by all three ratios.

A copy of the PNC-Q prospectus is available on EDGAR by either searching for company filings or by following this link.

Regions Financial Corp (RF) 6.375% Series A Non-Cumulative Perpetual Preferred Stock

RF-A paid a smaller dividend in December and pays its first full dividend on March 15 (for which it will start trading Ex-Div on February 27). The average 10 day volume is 237k, which should provide RF-A with enough liquidity for investors.

Ratings

RF-A is rated Non-Investment Grade by both Moody's and S&P.

Price and Yield

RF-A had a quick run-up in price in early January and has since come back to a level where it traded from IPO through the end of December. The security is now trading below par with a current yield of 6.398% and a yield to call of 6.460%.

Capitalization Ratios

Regions Financial is a "Well Capitalized" financial institution by all three ratios.

A copy of the RF-A prospectus is available on EDGAR by either searching for company filings or by following this link.

SunTrust Banks (STI) 5.875% Series E Non-Cumulative Perpetual Preferred Stock

STI-E had its IPO in mid-December and has not paid a dividend yet - the first dividend is payable on March 15. The 10 day average volume is 320k, which should be enough liquidity for investors.

Ratings

STI-E has Non-Investment Grade ratings from both Moody's and S&P.

Price and Yield

Since its IPO in mid-December, STI-E has traded in a range below par (except for a week in January where the $25 par threshold was breached). STI-E is trading below par again with a current yield of 5.918% and a yield to call of 6.036%.

Capitalization Ratios

SunTrust is a "Well Capitalized" financial institution by all three ratios.

A copy of the STI-E prospectus is available on EDGAR by either searching for company filings or by following this link.

State Street Corp (STT) 5.25% Series C Non-Cumulative Perpetual Preferred Stock

STT-C paid its first dividend on December 17 and the next dividend will be paid on March 15 (it will begin trading Ex-Div at the end of February). The average 10 day volume is 265k, which is very liquid in the preferreds universe.

Ratings

STT-C has an Investment Grade rating from both Moody's and S&P.

Price and Yield

Prior to the first dividend payment STT-C was trading around $26. After trading Ex-Div at the end of November, the price crept up towards the $26 level again. STT-C has traded off recently to $25.20, where is has a current yield of 5.208% and a yield to call of 5.059%.

Capitalization Ratios

State Street is a "Well Capitalized" financial institution by all three ratios.

A copy of the STT-C prospectus is available on EDGAR by either searching for company filings or by following this link.

Webster Financial Corp (WBS) 6.40% Series E Non-Cumulative Perpetual Preferred Stock

WBS-E pays its first dividend on March 15 and will trade Ex-Div on March 1. Its 10 day average volume is 78k, which should provide sufficient liquidity for most investors but is by no means the most liquid security on this list.

Ratings

WBS-E has Non-Investment Grade ratings from both Moody's and S&P.

Price and Yield

During the month of January WBS-E traded up towards $26 and back down towards par. At $25.15, the current yield is 6.362% and the yield to call is 6.259%.

Capitalization Ratios

Webster Financial is a "Well Capitalized" financial institution by all three ratios.

A copy of the WBS-E prospectus is available on EDGAR by either searching for company filings or by following this link.

Wells Fargo & Co 5.20% Series N Non-Cumulative Perpetual Preferred Stock

WFC-N paid its first dividend on December 17 and will pay the next dividend on March 15, trading Ex-Div at the end of February. The 10 day average volume is 149k, which is more than enough liquidity for more investors.

Ratings

WFC-N has Investment Grade ratings from both Moody's and S&P.

Price and Yield

After trading Ex-Div at the end of November, WFC-N traded down to par and remained around that level until a strong rally at the end of December through mid-January. Since reaching its recent high, it has traded back down to par, so it trades with both a current yield and a yield to call of 5.20%.

Capitalization Ratios

Wells Fargo is a "Well Capitalized" financial institution by all three ratios.

A copy of the WFC-N prospectus is available on EDGAR by either searching for company filings or by following this link.

Wells Fargo & Co 5.125% Series O Non-Cumulative Perpetual Preferred Stock

WFC-O had its IPO in mid-November and has not paid its first dividend yet. The first dividend will be paid on March 15 and will trade Ex-Div at the end of February. The average 10 day volume is 288k (almost double WFC-N) making it one of the most liquid preferreds of this list.

Ratings

Moody's and S&P both rate WFC-O as Investment Grade.

Price and Yield

WFC-O traded around par until the beginning of the year, when it followed the same price pattern as most of the bank preferred market - it traded up and then returned to pre-2013 levels. At $24.92, the current yield of WFC-O is 5.141% and the yield to call is 5.198%.

Capitalization Ratios

Wells Fargo is a "Well Capitalized" financial institution by all three ratios.

A copy of the WFC-N prospectus is available on EDGAR by either searching for company filings or by following this link.

Summary

When analyzing bank preferreds (or any potential security) there is always a lot of data to take in. As a quick snapshot, below are the 15 bank preferreds that have been discussed and some of the data points that minimize the risk associated with them:

If you are a first time bank preferred stock investor or someone who is looking to add to an established portfolio, the above 15 bank preferreds each offer a solid yield, sufficient liquidity, minimal (or no) premium risk, and are backed by financial institutions that are well capitalized.

Source: 15 Bank Preferred Stocks That Offer Solid Returns With Minimal Risk

Additional disclosure: I am long all of the preferred stocks mentioned in this article - BBT-F, BK-C, COF-P, CYN-C, EVER-A, FRC-C, GS-I, JPM-D, PNC-Q, RF-A, STI-E, STT-C, WBS-E, WFC-N, WFC-O