First Industrial (FR) did cut its common stock dividend to $.25 per share from $.72, which was anticipated. This new rate is linked to predictable income streams such as rent. This is good news for a preferred shareholder in my book. The new common share dividend rate will be supplemented by a special dividend when "capital recycling" is consummated which means selling property for a profit. The first such special dividend will be in the amount of $.20 payable in early 2009 for the 4th quarter of 2008. That is still a dividend cut for the common shareholder but the overall plan makes sense to me. Overall, I view the report today to be a net positive for me as a preferred stock shareholder.First Industrial Realty Trust Reports Third Quarter 2008 Results: Financial News - Yahoo! Finance The report did highlight one of my points, that is, the debt maturity schedule is very favorable to the company with only 135 million maturing between now and 2010. The company is also lowering its expenses to meet the challenges ahead.
I may be wrong about this next point. The main reason to own shares of a REIT common stock rather than a preferred issue is that the common shareholder may receive increases in the dividend rate over time whereas the preferred shareholder is stuck with a fixed coupon which will become less and less desirable when interest rates start to rise and continue to do so over an extended period, similar for example to the period between 1979 to 1982. For that negative feature, the preferred shareholder in a REIT has certain preference rights over the common shareholder with the most important being that the dividend is cumulative and has to be paid in full as long as the common shareholder receives anything. With common share dividend cuts starting to occur, as today with FR, this makes the preferred stock more appealing than the common when it is selling at such a deep discount to par value which spikes the yield way up. In today's low interest rate environment, taking this kind of risk for a 20% annualized dividend yield makes sense to me, even if it doesn't to the people selling these securities down to the current low levels. Each person has to act on their own judgment and I have been acting on mine.
I bought a few days ago shares of Liberty Interactive (LINTA)(SEE POST:LINTA)
This company reported this morning. Liberty Media Reports Third Quarter Financial Results: Financial News - Yahoo! Finance
QVC's revenues were down 3% which is not a surprise to me. Domestic revenues were down 9% while international revenues rose 11%. I view this report to be negative for me as a common shareholder so I will not add to my 50 shares recently bought this quarter. What interested me about the report was an offer to buy some of its senior debentures maturing in 2029 and 2030 in a modified Dutch Tender offer (i own some of those). This is the relevant portion of the release: " Our Board of Directors has authorized a change in the attribution of $551 million of our Viacom exchangeable senior debentures from Liberty Entertainment to Liberty Interactive along with $380 million in cash, which bolsters Liberty Interactive's liquidity. Liberty Interactive will use $300 million of this cash to fund a tender offer for two series of our senior debentures. A successful tender will reduce Liberty Interactive's interest expense........Liberty intends to use approximately $300 million of cash to purchase a portion of the outstanding principal amount (plus accrued interest) of its senior debentures due 2029 and 2030 through a modified dutch auction tender offer procedure. Liberty expects that the minimum and maximum purchase price for both series will be $550.00 and $620.00 per $1,000 principal amount, respectively."
The Cousin Realty Preferred A and B shares went ex dividend today.
I also thought that the Federal Reserve's rate cut to 1% would make electric utilities more attractive. The dividend is taxed at the favorable 15% rate and many are yielding around 5.5 to 6%, with one of my holdings Great Plains (GXP) yielding almost 9%. I also recently added Teco (TE) and Duke Energy (DUK) SEE POSTS: DUKE ENERGY (DUK) & Redux on Floating Rate Preferred Issues AND Notable News 10 22 2008 & END OF DAY TRADES (IR, INTC, TE AND EHL) I also own Con Ed (ED). I may buy another one today. Teco reported a lousy quarter today so I will not add to it and may even sell.Teco Energy third-quarter profit falls 37% - MarketWatch
Exxon is not feeling any pain posting the largest quarterly profit ever.Exxon Mobil posts biggest US quarterly profit ever: Financial News - Yahoo! Finance
SCANA (SCG) missed by .02 cents but reaffirmed full year guidance. This is the old South Carolina Electric and Gas.SCANA Reports Financial Results for Third Quarter and Year-To-Date 2008, Reaffirms 2008 Earnings Guidance - MarketWatch Goldman cut it to sell in JuneGoldman upgrades Portland General, cuts Scana, Nstar - MarketWatch This has to do with SCANA starting a new nuclear plant.SCE&G Receives Approval to Begin Work At Site of Proposed Nuclear Units: Financial News - Yahoo! Finance I do not own this one.
My other electric utility is Pinnacle West (PNW).PNW: Profile for Pinnacle West Capital Corp. - Yahoo! Finance It went ex-dividend today.
No comments:
Post a Comment