One of the ultra conservative preferred stocks that we have held for quite some time is that of the closed end fund General American Investors (GAM).
The preferred shares (GAM Pr B) which have a coupon of 5.95% provide us with a reasonable return in times when we feel very uneasy about holding any stock whether they be commons or preferreds.
We wrote about Preferred Stocks on Closed End Funds way back in April--and generally speaking not much has changed since then. Preferreds on Closed End Funds remain some of the most attractive investments out there for the very conservative income investor. There are a number of reasons why this is true but rather than restating them I will just link to the previous article.
In the case of General American Investors there is a special attraction that adds a bit of stability to the preferreds as the company has had a buyback in place since December, 2008. The company authorized the buyback of up to 1 million preferred shares at any point in which the share price fell below $25 (par). There is still authority available for purchasing over 600,000 shares (as continued authorization was just granted by their board of directors last week).
It should be noted that these preferred shares have not traded below $25 nor above $26 for 22 months, so there should be no expectation of any capital gain- just a solid 5.7%-5.95% dividend (depending on purchase price). It should also be noted that these shares are redeemable at any time at $25/share (although we would be surprised if this happened anytime soon).
We have no particular feeling--positive or negative about the common shares of General American Investors.
Additional disclosure: We are long General American Investors Preferred shares