High Dividend Stocks and Preferreds Soar

A week like we have seen in the market provides so much information for analysis that it's hard to know where to start.  There's no doubt that we now have boatloads worth of material to research, and we've clearly set a new bar for comparisons with future market moves. 

Two investments that have quickly turned higher following the drastic government measures to get the markets functioning again are preferreds and high dividend paying stocks.  Below we highlight the performance of PEY (dividend ETF) and PFF (preferred stock ETF).  As shown, PEY is up huge over the last two days, and it's up 65% since July 15th.  PFF is up 23% from its recent low.  Along with most corporate bonds, preferred shares, especially financial preferreds, were falling like nothing ever seen before earlier in the week.  Now that the government is hoping to take all the bad debt off of these firms, it's not surprising to see their preferreds move higher.

   

Comments

[erniem:]

I wish I had bought NRO at 5.50 two days ago LOL

2008 Sep 19 04:28 PM

[whidbey:]

Does this flight to dividends and preferences shock you? Are you recommending others to think of investing? Why would it surprise when there is fear and loathing regarding all equity investments, even money markets; where would you go?

But, Long run this is NOT a good idea, earnings will suffer when interest rates rise and earnings collapse which will presumably effect dividend payouts. Just pointing out the "trees along the rode" is not helpful to those who don't know your work; someone might take you seriously, god forbid.

2008 Sep 19 06:05 PM

[edtheincome...:]

Right! This REIT ETF is very good income, entered at 8.50, 9.50. added more last night at 6.95 and its sister fund NOX (average B+ rating) They went down more than others, just because their parent is Lehman Brothers. All funds assets are kept in trust, safe from bankruptcy filing. Besides, Neuman Berger is separate & stable firm. Still many ETFs selling at significent discount to NAV now. ETFconnect my favorite screener tool, then DividendInvestor to check history, ex-dates, etc.

2008 Sep 19 06:10 PM

[buyitcheap:]

The other issue is that as we close in on 2010 dividends will go back to the Clinton era tax rates - 3X the current rates.

2008 Sep 20 05:31 PM

[PeteK:]

Thanks for reminding us of the Clinton Era Tax rates.
Most people forgot entirely.
Its more like will be 6X the current rates.

2008 Sep 20 06:11 PM

[anarchist:]

too bad we don't have the Clinton era budget surplus

2008 Sep 20 09:37 PM

[finmah@yaho...:]

Anyone can quickly raise taxes in conjunction with a Greenspan tech bubble for the immediate short term surplus pop.
The preferreds were clearly the play the last week - but some now at 9%-10% look like the requisite amount of risk for possible inflation, corp risk, higher taxation due to complete Dem control of all govern taking control. International real estate funds seems it might be better.

2008 Sep 21 06:53 AM

[buyitcheap:]

User 257896 - Amen! Split government seems to work better than when one party has total control.

Finmah- you raise an interesting thought - would that be the case across the board for international stocks as the dollar will likely be weakening in the face of all this debt issuance? I'd been thinking along those lines too and it was interesting to hear you raise it too.

2008 Sep 22 08:06 AM

[mlyn:]

3X taxes? 6X taxes? This is a Republican/neoconserva... recession! Better sell your hummers and motor boats, quit those ski trips to Vail, CO, clean your own mansion--but not the tithing to the church; oh, no, tithing makes up for the greed.

Just start saving like the rest of us, jack---! The middle class has been tightening its belt; it's time you do the same.

2008 Sep 23 02:17 AM