preferred stock

photo credit: Rnout

There have been recent developments in the Preferred Stock segment of the markets. This is the latest research report prepared by my firm LPL Financial.

• Second quarter earnings season has included positive news from financial issuers, who on balance managed to increase key capital ratios.*
• Higher capital ratios helped minimize near-term risks for preferred stock holders, as the risks of dividend deferral or suspension, or of exchanges into common stock are greatly reduced.
• Despite the news, preferred stock performance has been muted following earnings announcements, while investors await greater clarity on the second half of 2009.
• The lingering risks are one reason why we emphasize corporate bonds and high yield bonds; however, we continue to find preferred stocks attractive and think they should be a part of portfolios for income focused investors.

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