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Summary

  • The new preferred issue by Northern Trust offers an attractive dividend yield.
  • Preferred yield is 385 basis better than common yield, 226 basis points over the bond due 2025, and 333 basis points over the UST 10-year.
  • Less risk than common, with a nice yield pickup.

Northern Trust Corp. (NASDAQ:NTRS) has issued a perpetual preferred stock at what appears to be attractive terms for income investors. The proposed preferred stock symbol is NTRSP. It is trading in the pink sheets under the symbol NTRNP.

The dividend rate on Northern Trust preferred stock (applied for symbol NTRSP) is 5.85%, and is greater than that on the common stock and bonds issued by Northern Trust. The common stock yield is roughly 2.00% ($1.32 dividend divided by $66.14 closing stock price); the preferred issue enjoys a 385 basis-point yield advantage over the common stock. The common stock may provide a greater longer-term total return (price change plus dividends) than the preferred stock. However, the new preferred stock provides an attractive yield pickup.

The preferred stock yield of 5.85% exceeds the yield on the longest-term fixed coupon Northern Trust bond, according to the FINRA website. It shows the longest maturity bond to be the 3.95% due October 20, 2025 that yields 3.589%, based upon the last sale price of $103.310. The preferred issue offers a 226 basis point pickup.

The dividend payment on the preferred stock issue will occur on the first day of January, April, July, and October. The first dividend pending board declaration will be paid on January 1, 2015.

Investors that are bullish on the outlook for Northern Trust may wish to consider using the preferred cash flow to purchase the common stock.

Income investors may find the Northern Trust preferred issue to be attractive when compared with the common stock or bond issues.

The Northern Trust preferred issue yield of 5.85% is 333 basis points greater than the 10-year US Treasury yield.

Investors seeking yield may wish to explore the new Northern Trust preferred issue. And review the details from the link in the first paragraph. Each investor must decide if the risk-reward profile meets their needs.

Source: Income Opportunity - Northern Trust Perpetual Preferred New Issue

Additional disclosure: Have position in the new issue NTRNP via pink sheets. Applied-for symbol is NTRSP.