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On June 29th I posted an article on Seeking Alpha suggesting that one take a look at the preferred stocks listed below.

Preferred Stock

Coupon Rate

Selling Price in June

Actual Rate on Selling price

Selling Price currently

Rate at current selling price

ABR-B

7.75%

$24.00

8%

$24.00

8%

ARR-B

7.875%

$24.00

8%

$20.85

9.4%

NNN-E

5.7%

$22.75

6.25%

$20.17

7.1%

BXP-B

5.25%

$24.25

5.4%

$20.80

6.25%

DDR-K

6.25%

$23.50

6.6%

$21.82

7.15%

DX-B

7.625%

$24.00

7.9%

$21.65

8.75%

LHO-I

6.375%

$22.75

7%

$21.29

7.45%

MITT-B

8%

$24.00

8.3%

$22.70

8.8%

NLY-D

7.5%

$24.50

7.6%

$23.23

8%

NRF-D

8.5%

$25.00

8.5%

$23.87

8.8%

PSA-W

5.2%

$23.20

5.6%

$20.35

6.35%

PSB-V

5.7%

$23.50

6%

20.71

6.8%

RSO-B

8.25%

$24.40

8.4%

23.74

8.6%

At the time, I considered these preferreds to be mispriced, that is priced too low for the dividend return they offered. Obviously I was wrong because all of these issues are now lower in price than they were in June. Since I was invested in these issues, I have taken a capital loss on these purchases. Fortunately I do not place all my capital in preferred issues. I only invest about 40% of my capital in what I consider the fixed income part of my portfolio. As long as I don't sell they continue to pay the dividend quarterly and so the cash continues to come in irrespective of the stock price.

If this list of preferred stocks was mispriced in June, these issues appear to be an even better deal now. Choosing an assortment of the stocks listed above one can receive a 7% or better average return. Some of them carry more risk than others so one should investigate the companies behind each of these preferred issues to understand the business and level of risk before investing one's money.

Here is a list of the companies represented by each stock along with the CUSIP for each issue:

Preferred Issue

CUSIP

Company Symbol

Company Name

Business

ABR-B

038292370

ABR

Arbor Realty Trust

Mortgage REIT

ARR-B

042315408

ARR

Armour Residential REIT

Mortgage REIT

NNN-E

637417809

NNN

National Retail Properties

REIT Retail Stores

BXP-B

101121408

BXP

Boston Properties

REIT Offices

DDR-K

23317H805

DDR

DDR Corp.

REIT Shopping Ctrs

DX-B

26817Q803

DX

Dynex Capital Inc

Mortgage REIT

LHO-I

517942801

LHO

LaSalle Hotel Properties

REIT Hotels

MITT-B

001228303

MITT

AG Mort. Inv. Trust Inc.

Mortgage REIT

NLY-D

035710805

NLY

Annaly Capital Mgmt.

Mortgage REIT

NRF-D

66705V209

NRF

Northstar Realty Finance

Mortgage REIT

PSA-W

74460W875

PSA

Public Storage Inc.

REIT Self-Storage Units

PSB-V

69360J644

PSB

PS Business Parks Inc

REIT Offices & Industrial

RSO-B

76120W500

RSO

Resource Capital Corp.

REIT Specialty Finance

Since the article in June I have added several other preferred stocks to my portfolio. The list is below:

Here is a list of the companies represented by each stock along with the CUSIP for each issue:

Preferred Issue

CUSIP

Company Symbol

Company Name

Business

CWH-D

203233408

CWH

CommonWealth REIT

REIT Offices, Industrial

CYS-B

12673A306

CYS

CYS Investments Inc

REIT Finance, Mortgage

DLR-G

253868889

DLR

Digital Realty Trust Inc

REIT Tech Real Estate

HT-C

427825401

HT

Hersha Hospitality Trust

REIT Hotels

IPL-D

461070856

LNT

Alliant Energy Corp

Electric - Gas Utility

DFT-A

26613Q205

DFT

DuPont Fabros Tech.

REIT Tech Real Estate

All except one of the preferred issues listed above are underwritten by REITs. Some of these preferred issues are offering better rates of return than the underlying common shares. On the other hand most of the mortgage REIT preferred issues offer lower rates of return than the underlying common. The advantage of the preferred shares is that preferred dividends must be paid before common dividends can be paid and provide a greater margin of safety.

All of the preferred stocks listed above are cumulative, that is if the company discontinues the preferred dividend, they accumulate until the company is able to pay them again. If the company stays solvent, the dividends will be paid at some future time.

I have included the Alliant Energy preferred because it offers the 15% tax rate on the dividend and works well in a regular stock account. All of the others work best in a tax protected account like an IRA. The reason to consider these issues is the offer of a steady source of income from one's investments. Research the preferred stocks listed above to understand their risk profile to see if they will fit profitably into one's portfolio.

One further caution to consider when buying preferred shares. They do not participate in the growth of the company as common shares do. The dividend is set for the life of these issues or until the companies recall them. If interest rates were to increase drastically, the selling price of these issues would continue to decrease in line with the increase in interest rates. In effect, they operate similarly to long-term bonds.

Source: Some Preferred Shares That Offer 6% To 9% Dividends

Additional disclosure: I have positions in every preferred stock listed in the article.