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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (33579)2/20/2009 7:21:54 PM
From: E_K_S  Read Replies (1) of 78750
 
Paul that's a pretty good entry point for the HRPpB. It pays $0.5469/share per quarter ($2.10/year). I collected my first dividend last week for the batch I bought on 12/26/2008. My previous buy was at $12.20/share. I am not sure what the best way to play these high yielding preferrds are. I am tempted to buy an extra large position of my favorites and peel off gains after a 30% or more run. In the past 60 days my BDNpC went from $7.50 to $13.50. Today you can pick it up for $9.50/share.

Long term I like the income that these spin off but with such a crazy market they may be a good way to generate some very good short term gains. So far, they have a limited down side as the dividend approaches 20%. When the yield moves back to the 15%-16% range you can sell and lock in a short term gain of 30%-45%. The bonus is while you wait you get paid very well. Writing covered calls on the common is another way but both HRP and BDN have very little activity on their call options and the premium is not as attractive given the cumulative preferred dividend payment. The transaction cost is also a lot less.

If you buy these types of REIT preferred series (at the right price), I think they will hold up better than many other equities especially if the market turns sour. The two REITs I watch (BDN +13% & HRP +12%) both ended up today. I am still waiting for 2-3 days of more downside next week. Then I am thinking of loading up (including a trading position). Definitely not my normal small buy strategy but we are in interesting times.

EKS
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