In my article, "Financial Repression Spreads Across Income Markets," I, among other things, offer readers the details of five newly issued investment grade corporate bonds. I would like to follow up by providing readers with the details of four more recently issued corporates as well as one idea for building a position across a company's capital structure that could help to counter the financial repression while still maintaining fixed income holdings in a portfolio.
Kroger's (KR) senior unsecured note (CUSIP: 501044CQ2) maturing 4/15/2022 has a 3.40% coupon and is asking 100.048 cents on the dollar (3.394% yield-to-maturity before commissions). It pays interest semi-annually, has a make whole call until 1/15/2022, and is thereafter continuously callable at par. Moody's currently rates the note Baa2; S&P rates it BBB.
Molson Coors Brewing Company's (TAP) senior unsecured note (CUSIP: 60871RAC4) maturing 5/1/2022 has a 3.50% coupon and is asking 100.968 cents on the dollar (3.385% yield-to-maturity before commissions). It has a make whole call and pays interest semi-annually. Moody's currently rates the note Baa2; S&P rates it BBB-.
WellPoint's (WLP) senior unsecured note (CUSIP: 94973VAX5) maturing 5/15/2022 has a 3.125% coupon and is asking 99.777 cents on the dollar (3.151% yield-to-maturity before commissions). It has a make whole call and pays interest semi-annually. Moody's currently rates the note Baa1; S&P rates it A-.
BP Capital Markets' (BP) senior unsecured note (CUSIP: 05565QBZ0) maturing 5/6/2022 has a 3.245% coupon and is asking 100.861 cents on the dollar (3.144% yield-to-maturity before commissions). It has a make whole call and pays interest semi-annually. Moody's currently rates the note A2; S&P rates it A.
If you are open to the idea of investing across a company's capital structure, below I outline one idea for how to maintain a fixed income holding in your portfolio and have the potential for rising income and capital appreciation. Let's use Molson Coors as the example.
If you are interested in investing in Molson Coors, typically are a fixed income oriented investor, and are horrified by the yields being offered in today's financial reality, you might consider splitting your total investment 50/50 (or any other ratio you desire) between the bond and the stock. If you do split the investment this way, your yearly yield based on the bond's current yield (not yield-to-maturity) and the stock's dividends would be 3.28%. Of course, it may be difficult to split the investment exactly 50-50, so the annual yield may need to be adjusted slightly. This total annual yield from your investment across Molson Coors' capital structure would also be subject to going higher over time if the company raises its dividend. Furthermore, you would share in some of the upside of the stock since 50% of your investment would be in the stock. And, by maintaining 50% of your investment in the bond, you provide more protection to your principal and quite likely create lower volatility in the overall investment. While I am sure the fixed income investor would rather be in a bond with a higher yield, this strategy is available if the financial repression becomes too much to take.
Naturally, the strategy I outlined for Molson Coors can be applied to other companies as well. In my article, "Thinking About Buying Nokia Stock? Read This First," I outline a similar strategy using Nokia (NOK) as an example.
Please be aware that prices in the over-the-counter U.S. bond market may vary depending on the broker you use. I discuss this in my article, "Are You Paying Too Much For Your Bonds?" The current prices may also differ greatly from those listed at the time this article was written. For more information on any of these notes, including additional call or put features, please contact your broker or read the indenture.
Also, please do your own due diligence on the financial profiles of the companies mentioned in this article. Only you can determine if taking the counterparty risk of purchasing individual bonds is suitable for you.
Disclosure: I am long BP.