In the normal course of my screens for income securities, I ran across and interesting preferred stock that isn't like other traditional issues. In this article, we'll take a look at the Gladstone Capital (NASDAQ:GLAD) Series 2016 Term Preferred Stock (GLADP, may differ depending on your broker) to see what makes it unique and whether or not it could be a nice addition to your income portfolio.
First off, this issue has several characteristics that are similar to traditional preferred stock offerings. GLADP was issued at $25 per share and pays regular monthly dividends to its holders, which is more desirable than the typical quarterly distributions. In addition, it has no debt issue backing it so it is a true preferred stock. Where GLADP sets itself apart, however, and why I think it could be a nice choice for those investors that normally choose bonds over preferreds, is that it has a stated maturity date. GLADP is required to be redeemed on December 31, 2016, meaning it has just under three years remaining. This creates a unique situation in the preferred stock world that can cater to not only preferred investors, but those investors who typically choose bonds. GLADP is essentially a high-yield, short term bond equivalent at this point given its maturity date.
GLAD also has the ability to call GLADP early if it chooses. GLADP has provisions that state it can be called beginning at year end 2012 for a 1% premium, at year end 2013 for a 0.5% premium, and year end 2014 for no premium. Essentially, GLAD can call GLADP right now for a 12.5 cent per share premium or it can wait until the end of this year to call it for no premium. Of course, with it maturing in less than three years anyway, I think that possibility is remote. It is something to keep
