Economy:
Fed left the FF range unchanged at 5.25%-5.5%. Federal Reserve Board- Federal Reserve issues FOMC statement
The Dot Plot released on 12/13/23 points to several rate cuts in 2024 and 2025:
The Fed - December 13, 2023: FOMC Projections materials, accessible version
FED Economic Projections:
The most important changes, compared to the predictions made last September, were the downward revisions for the FF rate and PCE inflation.
Discussed at Fed interest rate decision December 2023: Fed holds rates steady, indicates 3 cuts coming in 2024- CNBC
Fed’s John Williams says the central bank isn't 'really talking about rate cuts right now'
November CPI Report: Consumer Price Idndex Summary - 2023 M11 Results
CPI Annual = 3.1%, down from 3.2%
Core CPI Annual: 4%, unchanged. Still too high.
{The FED's goal is 2% Core PCE inflation, which is a different measure than CPI and was last reported at a 3% annual rate through October. Personal Income and Outlays, October 2023 | U.S. Bureau of Economic Analysis}
CPI Month-To-Month: .1%
Core CPI Month-to-Month: .3%
Owners Equivalent Rent Annual Increase (weighted at 25.825% in CPI and more in Core CPI since energy and food is excluded from CPI in the Core CPI calculation which would increase OER's weighting): +6.7%. Table 2. Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by detailed expenditure category - 2023 M11 Results
Owners equivalent rent is a major cause of inflation reported in the BLS calculations. For homeowners, who of course do not pay rent to themselves, inflation in owners equivalent rent is not an expense but a source of profit. The number is only a hypothetical expense for those who have been renting their primary residence, a separate expense category in CPI, and who will eventually purchase their first home. Inflation in home costs is an additional cost to them compared to those who already own their homes.
Discussed at CPI inflation report November 2023
Wholesale prices held flat in November, providing another encouraging inflation signal
Empire State Manufacturing Survey (overview) - FEDERAL RESERVE BANK of NEW YORK For this survey, zero is the dividing line between expansion and contraction. The general business conditions for NY manufacturing declined 24 points to -14.5%. The new orders component declined 6 points to -11.3%. Manufacturing has been persistently weak in these surveys for several months now.
++++
Allocation Shifts Discussed in this Post:
Treasury Bills Purchased at Auction: $27,000 in principal amount (All purchased in my Schwab account where there is an ongoing pileup of maturing T Bills and CDs)
Corporate Bonds: $4,000 in principal amount
SNOXX: +$2,000 (purchased Treasury MM Fund, 7 day yield at 5.06%)
Individual Common Stocks: +$426.21
(consisting of $921.52 in purchases minus $495.21 in proceeds)
Stock CEF: +$130.86 (yield at 11.47%)
Inflow Stocks/Stock Funds: +$557.72
U.S. Equity Preferred Stocks: -$366.28 (consisting of $721.91 in proceeds minus $355.63 in purchases)
U.S. Equity Preferred Stocks Realized Gain: +$125.18
Canadian Reset Equity Preferred Stocks: +C$2,000 (yield at 8.08% after a recent reset)
Exchange Traded First Mortgage Bonds: +$328.75 (weighted yield at 5.58%)
2023 Net Outflow Common Stocks/Stock Funds: -$27,234.07
+++
Righteous Brothers:
I have recently revisited the Righteous Brothers recordings, one of my favorite groups from the 1960s. The Righteous Brothers consisted of Bill Medley and Bobby Hatfield and were IMO the best rock male singing duo in history.
Hatfield did a solo performance of "Unchained Melody" live on the Andy Williams show in 1965 which I had never seen until I started to recently view their live performances available on YouTube. I view that performance to be the best live TV performance that I have ever seen from a male solo performer. (Unrestored Picture: Righteous Brothers - Unchained Melody (Live 1965)-YouTube; Restored Video: Righteous Brothers-Unchained Melody [Live - Best Quality] (1965) - YouTube)
Their 1964 recording of "You Have Lost That Loving Feeling" was the most played song on radio in the 20th Century. BMI Announces Top 100 Songs of the Century-BMI.com The music, lyrics and quality of the vocals combined to connect to people. You've Lost That Loving Feeling Righteous Brothers JAR-ReMix Stereo HiQ Hybrid JARichardsFilm - YouTube
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Demagogue Don and His Party:
RealClearPolitics-Electio-2024 Republican Presidential Nomination Don the Authoritarian has a 48.6% lead over his nearest challenger using the average of all polls.
RealClearPolitics - Election 2024 - General Election: Trump vs. Biden Trump is leading Biden by 3.1%.
Trump is viewed favorably by 40% of voters.
Trump's 2025 short list for Cabinet Positions: Tucker Carlson, Steve Bannon, Stephen Miller & J.D Vance Donald has not mentioned yet where he wants the My Pillow guy to serve. Senator Vance (R-Ohio) recently stated that Ukraine needs to give up territory in order to secure "peace" with Putin. J.D. Vance Home State Newspaper Compares Him to Putin; Republican senator says Ukraine may have to cede land to Russia to end war-The Guardian
‘Sociopath’: Trump on track to win 2024 & be a ‘dictator’ warns his coauthor from ‘Art of the Deal’ - YouTube Trump will probably be able to delay trials of the federal criminal cases until after the election. If he wins, which now looks better than 50/50, then he will pardon himself or have his Attorney General dismiss the federal cases. When that happens, the Democrats will impeach him again when they have the votes in the House, possibly in 2024. I view it more likely that the Democrats will regain control in the House rather than keep a majority in the Senate with the V-P as the tie breaking vote. The Senate republicans would then vote to acquit which will happen no matter what Trump has done to deserve the impeachment.
Fears of a NATO Withdrawal Rise as Trump Seeks a Return to Power - The New York Times
Opinion | The GOP’s return to isolationism endangers Ukraine’s survival - The Washington Post This is an opinion column authored by the former republican Max Boot. He points out that a majority of republicans in both the Senate and House voted against the Lend-Lease Act (1941). This Act provided critically needed supplies to the U.K., the primary country then resisting territorial aggression by another totalitarian regime, Hitler's Germany. Nothing has really changed.
The legislative terrorists in the GOP are still refusing to pass an aid package for Israel and Ukraine unless the democrats agree to their demands on immigration. Republicans will not compromise on immigration, such as agreeing on a path to citizenship for the DACA children in exchange for the demands that are being made now.
The mystery of the missing binder: How a collection of raw Russian intelligence disappeared under Trump The binder was last seen in the White House shortly before Trump had to leave.
Tax Cuts Are Primarily Responsible for the Increasing Debt Ratio - Center for American Progress
Appellate Court grants special counsel's request to expedite Trump's immunity appeal in election interference case Trump is claiming that he has absolute immunity for "alleged" crimes committed while he was in office. The Supreme Court has also been requested to take up the case without waiting for the Appellate Court to review the District Court's decision rejecting Trump's absolute immunity argument. Trump's attorneys opposed any expedited consideration but simply want a delay in the criminal trial as his appeal works its way slowly through the appellate process (a year or so for the Appellate court to decide and then a year or so for the Supreme Court to review and decide)
House votes to formalize impeachment inquiry into President Joe Biden with floor vote All republicans voted in favor. They want to impeach Biden and re-elect Donald for another 4 years.
Blatant hypocrisy has to be in their DNA. Uproar after Moms for Liberty co-founder caught in sex scandal - YouTube
Inside the Supreme Court’s Dismantling of Roe - The New York Times
+++
Putin and His Orwellian Empire of Misery:
Losses ∙ RussiaWarSpotting-documented material losses in Russo-Ukrainian war
Russia's Putin says he will run for president in 2024: State media I am going to predict that Russia's Dictator for Life will win in a landslide. He has been the dictator already for about 24 years, either as President or as Prime Minister. People in the illegally annexed Ukrainian territories will be allowed to vote for Putin. There is MORE to the Story of Putin's Announcement - YouTube
Russia continues to target apartment buildings with missile attacks. Russian Missile Attack on Kyiv Injures Dozens - The New York Times (12/12/23)
Female soldier of Ukraine’s elite 47th Brigade helps stop massive Russian attack on Avdiivka - YouTube This is a realistic video of battle conditions.
Ukrainian troops warn Avdiivka will fall to Russia without Western ammunition-YouTube
Hungary halts $54 billion European Union deal for Ukraine | The Hill The PM of Hungary, Viktor Orban, is an ally of Putin who is also favored by republican "conservatives". Orban is an authoritarian, similar to Trump in many ways. How the American right became aligned with Hungary and its authoritarian leader-NPR; Tucker Carlson, Viktor Orbán and the Anti-Democracy Playbook; Hungary’s authoritarian leader is no gift to US conservatives | Human Rights Watch
He’s Wanted for Wirecard’s Missing $2 Billion. He’s Now Suspected of Being a Russian Spy. - WSJ
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1. Small Ball Common Buys:
A. Added to CTO - Bought 15 at $17.27; 5 at $17.1 - Schwab Account:
Cost: $344.55
Management: External
Investment Category: Equity REIT Common and Preferred Stock Basket Strategy
Average cost per share: $17.76 (105+ shares)
Dividend: Quarterly at $.38 per share ($1.52 annually)
I am reinvesting the dividend.
CTO Stock Dividend History & Date
Yield at New AC = 8.56%
Last Ex Dividend: 12/13/23 (owned all as of)'
 |
| P. 17, 10-Q |
B. Started USD Priced TAC - Bought 10 at $8.12; 10 at $7.67 - Schwab Account:
TAC Analyst Estimates | MarketWatch
I value TAC based on free cash flow per share rather than the analyst estimates provided in the link above.
Since my last discussion, TAC announced an increase in its quarterly dividend and its capital spending plans. TransAlta Announces Growth Targets to 2028, Financial Outlook for 2024 and Declares Dividend Increase of 9% - TransAlta The quarterly dividend is now at C$.06 per share. I do not view the dividend as material.
C. Started AY - Bought 10 at $20; 5 at $19.55 - Schwab Account:
Quote: Atlantica Sustainable Infrastructure PLC (AY)
Cost: +$297.75
I have no trading history in AY. These were my first purchases.
Atlantica is a UK based company that owns interests in renewable energy generation. Our Assets-Atlantica It also owns storage facilities, 1,229 miles of transmission lines and some water desalination facilities.
Renewable Energy Storage Facts | ACP
Website: Atlantica- Sustainable Infrastructure
Corporate Presentation Nov-2023.pdf (Development pipeline is described at pages 6-7)
AY SEC Filings (foreign issuer forms)
2022 Annual Report (The buyers of energy production are mostly investment grade companies, see pages 51-52 for a listing)
Average cost per share: $19.85 (15 shares)
Dividend: Quarterly at US$.445 per share ($1.78 annually), last raised from $.44 effective for the 2022 second quarter.
Yield at AC: 8.97%
Last Ex Dividend: 11/29/23
AQN Ownership Stake: The Canadian Utility Algonquin Power & Utilities Corp. (AQN) has about a 42% ownership interest. I discuss AQN below in connection with a 100 share purchase of its reset equity preferred stock. AQN has put up for sale its renewable energy assets. I do not know whether its stake in Atlantica will be included in that sale.
If included and the buyer does not want to keep the shares, I would anticipate downward pressure on the AY stock price.
On the other hand, if the AY stock is included in AQN's sale of its renewable energy assets, and the buyer wants all of AY, a tender offer may be forthcoming for the AY stock that is owned by the public.
All of those future hypotheticals are unpredictable. I am just summarizing some of the possible outcomes.
SU Bond Ratings: BB+ by S&P; BB+ by Fitch
Fitch Affirms Atlantica Sustainable Infrastructure plc at 'BB+'; Outlook Stable (8/30/23)
Debt: About 96% of the debt is at fixed rates or hedged as noted in AY's last earnings report. Most of the project related debt is non-recourse to AY and is self-amortizing, which means that the debt is paid off during the term of the long term contract with the party buying the energy production.
Country/Currency Risk: While most of the generation is located in the U.S., the company has country and currency risk associated with smaller facilities located in Algeria, Chile, Columbia, Mexico, Peru, South Africa, and Uruguay.
There is currency risk for certain facilities owned in Canada, Italy and Spain. These risks will dictate a go slow approach to building a 100 share position. As noted in the Fitch report cited above, AY typically hedges its Euro exposure on a 24 month rolling basis.
Useful Life of Facilities: Most of the facilities are estimated to have a 25 year average life. After the debt associated with a project is paid off during the contract term, there is a question about how much longer the facility can operate without repairs that would be too costly.
Last Earnings Report (Q/E 9/30/23): SEC Filing
AY reports in USDs.
E.P.S. = $.18
Cash Available for Distribution per share: $.513
Revenues: $303.964M
9 Months 2023 compared to 2022:
D. Added to ICMB - Bought 10 at $3.6; 10 at $3.45 - Schwab Account:
Quote: Investcorp Credit Management BDC Inc. Overview - Externally Managed BDC
Cost: $70.5
Website: Home - Investcorp Credit Management BDC, Inc.
2023 Annual Report for the F/Y Ending 6/30/23 (Risk factor summary starts at page 27 and ends at page 55)
Classified by me as "A Deservedly Hated BDC"
Last Discussed: Item # 1.F. Added to ICMB - Bought 5 at $3.45; 5 at $3.27 (10/28/23 Post)
Net Asset Value per share history:
9/30/23: $5.83
3/31/23: $6.13
12/31/22: $6.36
12/31/21: $7.09
12/31/20: $7.84
9/30/19: $10.19
8/30/19 Change in Management
2014: Initial IPO at $15, SEC Filing The company was then called CM Finance.
With this kind of history, the stock price will trade at a large discount to net asset value per share. Investors will assume that assets will continue to be incinerated and consequently will discount their current claimed values when setting a buy price. The question is whether the future prediction embedded in the current discount will prove to be unjustified or justified.
A lot of the damage from bad loans is already reflected in the last reported net asset value per share. An improvement in the share price is not dependent IMO on the current dividend yield or the discount to net asset value per share, but on a long term improvement in operating results that substantially lowers the discount to net asset value per share buyers are willing to accept which has not yet happened. Performance has deteriorated further since ICMB reported 2nd quarter results as noted below.
Discount to Net Asset Value per share using the 9/30/23 claimed net asset value per share of $5.83 and a $3.45 share price: 41.17%
New Average Cost per share: $4.37 (194+ shares)
Discount at $5.83 claimed net asset value per share and $4.37 AC = 25.04%
Regular Dividend: Quarterly at $.12 per share, reduced from $.13 effective for the 2023 2nd quarter payment, which was reduced from $.15 effective for the 2023 first quarter payment (owned 184+ as of)
4th Quarter Supplemental Dividend: $.03 per share. The 2023 total for special dividends was $.11 per share with the last one going ex on 12/13 and is scheduled to be paid on 1/8/24.
Yield at New AC = 10.98% (using current regular dividend only)
Last Ex Dividend: 12/13/23 (regular and supplemental)
Last Earnings Report (Q/E 9/30/23): Investcorp Credit Management BDC, Inc. Announces Financial Results for the Quarter Ended September 30, 2023, and Quarterly and Supplemental Distribution
NII per share: $.11
Weighted average yield of loans: 11.01%
Number of portfolio companies: 40
Career Builder: $5.818M written down to $2.418+M
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| Page 40-41 |
Quote: Dow Inc. (DOW)
Cost: $51.07
I am not a fan of this company. Earnings will be highly erratic and cyclical. Valuation can not IMO based on a continuation of peak earnings during an up cycle.
DOW Analyst Estimates | MarketWatch The 2022 E.P.S. is shown here at $6.4 with the 2023 estimate at $3.02, $4.81 in 2024 and $5.81 in 2025. I view the forward estimates as highly speculative compared to forward estimates for non-cyclical companies. I have a very modest decree of comfort to take an average of those 4 annual E.P.S. numbers, which is $5.01, and slap a 10 to 12 multiple on that average for valuation purposes.
The goal is simply to harvest at some point an annualized total return of 2%+ in excess of the dividends paid.
New Average cost per share: $52.43 (7+ shares)
Dividend: Quarterly at $.70 per share ($2.8 annually)
Yield at New AC = 5.34%
Last Ex Dividend: 11/29/23 (owned 6+ as of)
Last Earnings Report (Q/E 9/30/23): SEC Filed Earnings Press Release
Comparisons are to the 2022 third quarter.
Revenue: $10.73B, down from $14.115B
Net Income: $302M, down from $739M
Diluted E.P.S. $.42, down from $1.02
I own 2 DOW SU bonds.
F. Started MEGI - Bought 10 at $13.08- Fidelity Account:
Quote: MainStay CBRE Global Infrastructure Megatrends Term Fund Overview - A Leveraged Balanced CEF (mostly common stocks with some convertibles, preferred stocks and bonds)
SEC Filing- Holdings as of 8/31/23
MainStay CBRE Global Infrastructure Megatrends Term Fund - SEC Filed Annual Report for the F/Y ending 5/31/23
Investment Category: Monthly Income Payments.
In this account, I am working my way up to $200 per month in monthly dividends paid just by CEFs in my Fidelity account. Using the November 2023 dividend payments, I was then at $119+ per month.
Sponsor's website: MEGI MainStay CBRE Global Infrastructure Megatrends Fund | New York Life Investments
Dividend: Monthly at $.125 per share ($1.5 annually)
MEGI Stock Dividend History & Date
Yield at $13.08: 11.47%
Next Ex Dividend: 12/22/23
Data Date of 12/15/23 Trade:
Net Asset Value per share: $15.63
Closing Market Price: $12.96
Discount: -15.55%
Sourced: MEGI - CEF Connect
MEGI Page at Morningstar (unrated)
MEGI Portfolio | Morningstar (lists top 25 holdings) Of those top holdings, I have positions in Enbridge (3 taxable accounts, waiting for a $40+ price to liquidate 1 duplicate), Atlantica Sustainable Infrastructure (purchase discussed above), OGE Energy, Pembina Pipeline, and Dominion Energy.
2. Canadian Reset Equity Preferred Stock:
I own a significant number of Canadian Reset Equity Preferred stocks in my Interactive Brokers account and have been somewhat active in trading them.
Round-trip profit snapshots can be found here: Advantages and Disadvantages of Equity Preferred Floating Rate Securities The first sale occurred in 2016. Realized gains on Canadian reset preferred stocks currently stands at C$16,951, excluding gains on one priced in USDs.
There are two primary reasons for using IB to trade Canadian preferred stocks that trade on the Toronto Exchange. Of all of my brokers, IB has the lowest commissions for those trades and the conversion of USDs into CADs and back.
I own preferred stocks that reset their coupons every 3 months at spreads to the 3 month Canadian Government bill and every 5 years at a spreads to the five year Canadian government bond. I then stagger the reset dates for the 5 year resets.
A. Bought 100 AQN.PRA at C$2o (C$1 IB Commission):
Quote: Algonquin Power & Utilities Reset Equity Preferred Stock (AQN-PA.TO)
Issuer: Algonquin Power & Utilities Corp (AQN)-(USD Traded Shares)
AQN Analyst Estimates | MarketWatch
Website: Algonquin Power & Utilities Corp
Significant Subsidiaries:
Page 4, SEC Filed 2022 Annual Report
Par Value: C$25
Fitch Places Algonquin Power Co on Rating Watch Evolving; Affirms APUC with Stable Outlook (8/16/23). Fitch rates the senior unsecured debt at BBB. The preferred stock is not rated by Fitch.
Algonquin Power & Utilities Corp.: Rating Report | DBRS Morningstar DBRS rates the AQN preferred stocks at Pfd-3L. This is equivalent to an S&P rating of BB-
I am more comfortable with the credit risk than an average BB- credit rating given the regulated utility business, the unlikely elimination of the common share dividend, and too many notches below the BBB rating IMO for SU debt
Coupon: 2.94% spread to the 5 year Canadian Government bond yield, resetting every five years.
Last Reset: The coupon recently reset for 5 years at 6.469% and will remain in effect to but excluding 12/31/2028. Algonquin Power & Utilities Corp. Announces Dividend Rates on Cumulative Rate Reset Preferred Shares, Series A (12/4/23)
Dividends: Paid quarterly and cumulative
Yield at C$20.01 Total Cost per share: 8.08%
(Coupon of .06469% x. C$25 par value = C$1.61725 per share annual dividend ÷ C$20.01 Total Cost per share = 8.0822%) The quarterly penny rate was increased to $.40431 from $.32263 due to this reset.
Last Ex Dividend: 12/14/23 (owned as of). This is the last quarterly dividend at the old penny rate of $.32263 per share. Algonquin Power & Utilities Corp. Declares Third Quarter 2023 Common Share Dividend of U.S.$0.1085 (C$0.1460), and Declares Third Quarter 2023 Preferred Share Dividends
Prospectus Excerpts:
 |
| Redemption |
Redemption: Only on reset dates. Once that period expires and the coupon resets, the issuer can not call until the next reset date.
I have discussed this Canadian utility in prior posts. I own the common shares which are in an unrealized loss position and have been adding recently in 5 share lots which I have not discussed here.
AQN was unsuccessful in its efforts to acquire Kentucky Power from AEP. The termination costs related to that failure were C$46.527M taken in 2023.
This failure caused the Board to replace the CEO and to pursue a sale of its substantial renewable energy assets which has created considerable certainty on valuation that further lowered the stock price. Algonquin Power & Utilities Corp. Will Pursue Sale of Renewable Energy Group Following Strategic Review (8/10/23). This makes no sense to me, and is a mistake IMO, but there it is. The sale when and if completed will at least simply the corporate structure.
In addition to owning interests in renewable energy generation, AQN also owns about 42% of Atlantica Sustainable Infrastructure PLC (AY), as noted in Item # 1.C. above.
AQN marked its investment in AY to fair value as of 9/30/23, which resulted in a C$212.499M non-cash charge.
SEC Filed Quarterly Report for the period ending 9/30/23 and SEC Filed Press Release
Starboard Value L.P. had a 8.8% stake in AQN as of 10/17/23. Schedule 13.D (Filed 10/19/23)
3. U.S. Equity Preferred Stocks:
A. Added 20 HPP.PRC at $12.5:
Cost: $250
Issuer: Hudson Pacific Properties Inc. (HPP)
Investment Category: Equity REIT Cumulative Equity Preferred Stocks, part of Equity REIT Common and Preferred Stock Basket Strategy
Website: Hudson Pacific Properties
View All the HPP Properties | Hudson Pacific Properties
I published last month a post that went into more details about this REIT than I normally do. Item # 5.A. Added 5 HPPPRC at $11.2; 5 at $11.73 (11/18/23 Post)
The common share dividend has been suspended but the REIT is continuing to pay the HPP.PRC cumulative preferred stock dividend. Hudson Pacific Properties Declares Fourth Quarter 2023 Preferred Stock Dividend
The short term problem was the substantial loss of rental revenue from multiple studio production facilities resulting from the SAG and Writer's strikes that have now been resolved. Redefining Studios Those strikes cost HPP about $100M which I believe is an EBITDA number. Hudson Pacific Says Hollywood Strikes Have Cost It $100M-Commercial Observer I will take a few months for production to ramp up back to normal. The resolution of those strikes caused me to add 10 more shares in mid-November.
I added this 15 share lot based on two developments since my last discussion: (1) the continued decline in interest rates makes the dividend yield more attractive and will hopefully relieve some of the financial stress resulting from higher interest costs; and (3) the company raised $189M by selling some assets that was used to pay down debt. Hudson Pacific Properties, Inc. - Hudson Pacific Raises $189 Million from Silicon Valley Land and Studio Debt Sales A 5.3 acre parcel, located in Silicon Valley, was sold for $43.5M before "prorations and closing costs". The other $145.8 in proceeds came from selling debt associated with the Hollywood Media Portfolio. The proceeds will be used to pay down the credit facility borrowings. I am a little fuzzy on this later transaction but he has something to do with buying bonds in connection with that studio portfolio.
New Average Cost per share: $12.9 (150 Shares)
Yield at New AC = 9.21%
(.0475% coupon x. $25 par value = $1.1875 annual dividend per share ÷ $12.9 Total Average cost per share = 9.2054%)
Annual Dividend on 150 Shares: $178.13
Last Ex Dividend: 12/15/23 (owned all as of)
B. Added 5 CCNEP at $21.13:
Quote: CNB Financial Corp. 7.125% Preferred Series A
Issuer: CNB Financial Corp. (CCNE) - A Bank Holding Company
CCNE SEC Filed Earnings Press Release for the Q/E 9/30/23
I have eliminated my common stock positions and will focus instead on this preferred stock that has a higher yield (Realized Gains CCNE to date = $1,190.91).
Last Discussed: Item # 2.A. Added to CCNEP - Bought 5 at $20 (11/11/23 Post)
Description: Bank Holding Company Equity Preferred Stock, senior only to common stock in the capital structure.
Par Value: $25
Coupon: 7.125%
Maturity: None, Potentially Perpetual
Issuer Optional Call: On or after 9/1/25 at par value + accrued and unpaid dividends.
Stopper Clause: Standard
Dividends: Paid quarterly, qualified and non-cumulative.
Once the preferred share dividend is legally eliminated under the Stopper Clause, non-cumulative means that there is no legal obligation to ever pay the dividends that were lawfully eliminated. They are just gone. The legal obligation to pay future dividends is usually triggered by the resumption of a cash common stock dividend but that only applies to the preferred dividends that would be owed after that resumption.
New Average cost per share: $20.58 (40 shares)
This add slightly increased my average cost per share.
Yield at New AC = 8.655%
(.07125% coupon x. $25 par value = $1.78125 annual dividend per share ÷ $20.58 total cost per share = 8.6552%)
Last Ex Dividend: 11/16/23
Last Sell Discussion: Item # 5.A. Eliminated CCNEP - Sold 10 at $26 (1/16/23 Post)(profit snapshot = $7.08)
C. Eliminated Duplicate Position in GNLPRB- Sold 25 GNL.PRB at $19.05:
Quote: Global Net Lease Inc. 6.875% Preferred Series B
Proceeds: $476.35
Issuer: Global Net Lease Inc.
I have a position in the common stock.
Profit Snapshot: $114.31
Last Elimination: Item # 2.A. Eliminated GNLPRB in Schwab Account-Sold 100 at $24.93 and 5 at $24.92 (8/20/20 Post)(profit snapshot = $65.54)
Par Value: $25
Capital Structure Placement: Equity Preferred Stock, senior only to common stock.
Maturity: None, potentially perpetual
Dividends: Quarterly, Cumulative and Non-Qualified
Optional Redemption: At par value + accrued and unpaid dividends on or after 11/26/24
Stopper Clause: Yes, a standard provision that stops the issuer from paying a cash common share dividend while deferring payment to the preferred shareholders.
D. Eliminated Duplicate Position in CFG.PRD (Fidelity Account) - Sold 10 at $24.56:
Issuer: Citizens Financial Group Inc. (CFG) I have a position in the common stock.
Proceeds: $245.56
Profit Snapshot: Net of +$10.87
Last Discussed: Item # 1.A. Added to CFGPRD - Bought 3 at $22.61 (7/8/23 Post); Item # 2.A. Added to CFGPRD at $21.65 (6/10/23 Post)
Fixed-to-floating rate non-cumulative equity preferred stock.
Fixed Rate Coupon: 6.35% to but excluding 4/6/24
Floating Rate: Spread of 3.642% to the 3 month Libor
Since Libor no longer exists, CFG announced that it would be using the 3 month SOFR plus the tenor spread of .26161% as the alternate rate. Citizens Financial Group, Inc. Announces Transition of U.S. LIBOR-linked Preferred Stock to Term SOFR Replacement Rate The tenor spread is designed to equal the historical LIBOR and SOFR rates. Definition: tenor spread adjustment from 12 USC § 5802(20); Determining Spread Adjustments for SOFR Loans; 90-Day Average SOFR- St. Louis Fed
Redemption: On or after 4/6/24 at par value plus accrued and unpaid dividends.
Potentially Perpetual if issuer does not exercise redemption option.
Dividends: Paid quarterly, non-cumulative, and qualified.
Next Ex Dividend: 12/21/23
4. Treasury Bills Purchased at Auction: +$27,000 in principal amount
A. Bought 15 Treasury Bills at the 12/14/23 Auction:
56 Day Bill
Matures on 2/13/24
Interest: $123.08
Investment Rate: 5.407%
B. Bought 10 Treasury Bills at the 12/11/23 Auction:
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Matures on 3/14/24
Interest: $132.96
Investment Rate: 5.42%
C. Bought 2 Treasury Bills at the 12/11/23 Auction:
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180 Day Bill
Matures on 6/13/24
Interest: $52.48
Investment Rate: 5.419%
5. Corporate Bonds:
A. Bought 2 Kilroy LP 4.375% SU Maturing on 10/1/25 at a Total Cost of 96.164:
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Issuer: Operating entity for Kilroy Realty Corp. (KRC), a REIT, who guarantees the notes:
REITs and BDCs are pass through entities which creates an additional layer of risk for bond owners given the common dividend payout ratios to cash flow.
KRC SEC Filed Supplemental for the Q/E 9/30/23 KRC has a low FAD payout ratio of 53.9%, page 3. "FAD" stands for funds available for distribution and is equivalent to cash available for distribution ("CAD")
Website: Kilroy Realty
This bond is actively traded.
New Finra Page: Bond Page | FINRA.org
Credit Ratings: Baa2/BBB
YTM at Total Cost: 6.663%
Current Yield at TC = 4.55%
I have 4 Kilroy SU bonds that mature on 12/15/24. Bond Page | FINRA.org That one is the next SU bond to mature. I will not be buying more until I receive the proceeds from those 4 bonds. The main risk IMO is the exposure to west coast office buildings.
Last Bond Offering (9/2021): Prospectus for $450M of 2.65% SU notes maturing in 2033.
B. Bought 2 CNO Financial 5.25% SU Maturing on 5/30/25 at a Total Cost of 98.928:
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Issuer: CNO Financial Group Inc. (CNO)
I have never owned the common stock and this is my first SU bond purchase.
CNO Analyst Estimates | MarketWatch
CNO SEC Filed Earnings Press Release for the Q/E 9/30/23
10-Q for the Q/E 9/30/23 (Debt is listed at page 50. The next SU to mature is this 2025 bond. As of 9/30/23, there was no borrowings using the credit facility.)
New Finra Page: Bond Page | FINRA.org
Credit Ratings: Baa3/BBB -
YTM at Total Cost: 6.027%
Current Yield at TC: 5.307%
6. Exchange Traded First Mortgage Baby Bonds:
Cost: $328.75
In my Vanguard taxable account, I receive the redemption proceeds for a 2 Truist bonds (formerly known as BB&T) on 12/6/23:
With the decline in interest rates, I decided to partially redeploy the proceeds into purchases of two stock exchange traded first mortgage baby bonds (EMP & EAI, issued by operating subsidiaries of ETR).
I own EMP and EAI in three taxable accounts and 2 RI accounts.
My maximum exposure to a FM baby bond is 300 shares given their interest rate risk resulting from potentially long maturities. I much prefer owning $1,000 par value FM bonds, traded in the bond market, that mature within 5 years of purchase. I own a number of those.
On the flip side, a continued decline in long term interest rates may at some point cause the issuers to redeem at the $25 par values and to refinance at lower coupons. I do not see that happening for as long as the 30 year treasury bond is trading over 3%.
A. Added 5 EMP at $22.15; 5 at $22:
Quote: Entergy Mississippi LLC 4.9% First Mortgage Bonds Overview
I discussed EMP in my last post: Item # 4.A. Added to EMP in Schwab Account - Bought 5 at $22.18 (12/9/23 Post)
Issuer: Wholly owned subsidiary of Entergy Corp. (ETR)
ETR 10-Q for the Q/E 9/30/23 (Entergy Mississippi results can be found at pages 143-158)
Investment Category: Exchange Traded Baby Bond
Next Ex Interest Date: 12/28/23
Par Value: $25
Coupon: 4.9% paid on the $25 par value
First Mortgage lien on substantially all assets
Trades Flat (whoever owns the security on the ex interest date receives the entire quarterly interest payment, just like a common or preferred stock in that regard)
Maturity: 10/1/2066, unless called earlier at the issuer's option.
Issuer optional Call: Call protection expired in 2021. Issuer may call at par value + accrued and unpaid interest.
B. Added 5 EAI at $21.6:
Quote: Entergy Arkansas 1st Mortgage Bonds 4.875% due 2066 (EAI)
Entergy Arkansas is a wholly owned operating subsidiary of Entergy Corp. (ETR).
Last Discussed: Item # 5. Added to EAI in Schwab Account - Bought 5 at $21.5; 5 at $21.22 (11/25/23 Post); Item # 5.B. Added 5 EAI at $20.1; 5 at $19.85 (10/21/23 Post); Item # 7.A. Added to EAI in Schwab Account - Bought 5 at $20.62; 5 at $20.36 (10/14/23 Post)
Investment Category: Exchange Traded Baby Bonds
First mortgage lien on substantially all assets
Par Value: $25
Maturity: 9/1/66
Issuer Optional Redemption: At par value + accrued and unpaid interest on or after 9/1/2021.
Trades Flat
Interest Payments: Quarterly
7. Common Stocks- Small Ball Sell:
A. Eliminated Duplicate Position in MFIC - Sold 36+ (Fidelity Account) at $13.46:
Quote: MidCap Financial Investment Corp.
Proceeds: $495.31
Website: MidCap Financial Investment Corporation
Profit Snapshot: Net of $48.08
The goal for any BDC is to realize a total return prior to any ROC adjustments to the tax cost basis in excess of the dividends paid, which was accomplished with this trade. There were no ROC adjustments in 2021 and 2022:
Any ROC classification would be listed under the "% Non-Dividends" column.
The 2023 dividend information will be reported in January 2024. I do not anticipate any ROC classifications.
Last Discussed: Item # 3.F. Eliminated 1 or 2 Duplicate Positions in MFIC (Vanguard Account) - Sold 50 at $13.64 ( Post)(profit snapshot = $30.12)
Remaining Position (Schwab Account): 72+ shares with an average cost per share of $12.81.
Dividend: Quarterly at $.38
MFIC Dividend History | Seeking Alpha
Last Ex Dividend: 12/11/23 (owned as of)
Net Asset Value per share (previously traded under the AINV symbol):
I classify this BDC as deservedly hated.
Adjusted for a 1 for 3 reverse split, the IPO price was $45.
9/3/23: $15.28 10-Q at page 1
12/31/22: $15.10
9/30/22: $15.45 10-Q for the Q/E 9/30/22
6/30/2022 $15.52 10-Q at page 1
12/31/2021 $16.08 10-Q at page 1
12/31/2020 $15.59 10-Q at page 1
12/31/2019 $18.27 10-Q at page 1
12/31/2018 $19.03 10-Q at page 1
1 for 3 stock split 12/3/2018 AINV Split History
12/31/2017 $6.6
3/31/16 $ 7.28
3/31/15 $ 8.18
3/31/14 $ 8.67
3/31/13 $ 8.27
3/31/12 $8.67
3/31/11 $10.03
3/31/10 $10.06
3/31/09 $ 9.82
3/31/08 $15.93 (Near Depression)
3/31/07 $17.87
3/31/06 $15.15
3/31/05 $14.27
IPO in 2005 at $15 per share: Final Prospectus
Adjusted for the 1 for 3 reverse split, the IPO price was at $45. My recommendation to the external managers is to consider mass Seppuku as a means to restore honor. On a more positive note, net asset value per share has been relatively stable for about 1 year now.
Last Earnings Report (9/30/23): SEC Filing
