Current PIP Memos
2015-02-25 Why You Should Prefer Preferreds
Mr. and Mrs. Smith,
TIA developed our Preferred Income Portfolio (PIP) to achieve a fixed income strategy designed to produce superior yields while avoiding the "perpetual maturity" inherent in these securities. We have shared dozens of related articles on preferred stock issues with you. TIA is maybe the only firm to utilize the financial crisis to introduce a "call protection" portfolio. We believe virtually all of our preferreds will be called because of their historically high interest rate. PIP has an average coupon of 7.17%, a 6.74% current yield with 37 months of call protection as of February 20, 2015.
Since 2000, preferreds with a coupon of over 6.50% have been called because issuers don't want to pay these high interest rates any longer than their call period which is normally five years. This is the basis for our 5 year U. S. Treasury benchmark currently with a yield spread of 5.15% (historically only 2%).
TIA is a fundamental equity research investment firm. We have a proven equity process that has been tested for over 27 years. We utilize this research expertise to qualify preferred issues for PIP. If our equity research analysis approves the common stock of these companies, we can buy their preferreds because they have credit preference over the common stock in the capital structure. PIP is a once-in-a-lifetime fixed income opportunity to achieve such relatively superior yields in a marketable, highly diversified portfolio which is NYSE listed.