Co-produced with Beyond Saving
Every bear market is unique. There are a few things that will set this bear market apart from prior ones and likely from future ones.
The first is the incredible speed at which it developed. As the US and world economies went from 100 MPH to 30 MPH in an instant, the shock rippled throughout the market.
The second was the panicked rush to cash. Many companies drew down their lines of credit to hold cash on their balance sheets. This, in turn, caused banks, insurance companies and other lenders to raise cash in a hurry. This meant selling anything, even AAA-rated securities, at any price to ensure they had the liquidity they need.
The third was the swift response from the Federal Reserve and from governments to inject liquidity. We have seen variations of everything that was done before - the Fed buying treasuries, agency MBS and CMBS, slashing the target rate, and providing repo financing - the government offering loans, making cash distributions to individuals, extending unemployment benefits, and much more. What we have not seen is all of these things done within a month, at a scale larger and more aggressively than anything we have seen before.
At High Dividend Opportunities, we have significant exposure to preferred equity. A sector that's normally less volatile than common equities, with less price volatility and fixed dividends that have priority over common dividends.
Like all fixed-income, preferred equity saw a major sell-off as institutions and investors sought liquidity at all costs. For income investors, this is an opportunity to buy.
Today, we take a look at three preferred shares that normally do not have a high enough yield to meet our target. Yet thanks to the sell-off, these three preferred shares have yields of 5%-8%, which is not likely to
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