re: the case for PREFERREDs and their CEVs
This was pretty clear to me (and others) from the start recently, once the more fine-grained details of the new Finregs were announced, which are slated to be phased in over the next couple of years.
One section (the so called COLLINS amandement) is going to deny banks access to cheap preferred (and trust preferred) Tier-1 capital. To banks it is way cheaper than common shares as they were able to pay interest pre-tax, instead of dividends which are of course distributed after-tax.
As a result, there will be a need to refinance these Tier-1 preferreds. In Europe, Basel-III is pursuing a similar but subtly different rule-set ... the fine-print isn't yet clear on this matter.
In general, this bodes well for preferreds, especially bank preferreds and the CEVs (closed end funds) that invested into these.
Funny, I never thought I would turn into a "coupon-clipper" but the meltdown and the abnormal spread on the underlying securitities vs. long-term treasuries literally forced me down this road.
Unleveraged preferred ETFs: PFF, PGF and a couple of others
Levered preferred CEVs: FFC, FLC, RNP and others
right now, FFC and FLC already pay around 9% distributions annually and yes - this is from capital gains and dividends, not a return of capital. FLC had even hiked its dividend payouts twice over the past 8 months, FFC followed suit recently with their first increase.
cohenandsteers.com
their RNP is a cross between a REIT fund and a Preferred fund. While distributing $0,20 per quarter, they are attempting to recover NAV. At the moment, RNP is still trading at a 20%+ discount to NAV (calculated daily). Once they have regained enought book value to offset their capital loss carryforwards completely (happened during the meltdown), at some point, they will have to raise their dividend again - like FLC or FFC did.
so with RNP the objective and opportunity is a material rising NAV. Once they hike their dividend, their discount to NAV should end. (happened all over again ... at NCV, NCZ, FFC, FLC etc.)
rgrds
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