Preferred stocks and how to buy them
To know if a company has outstanding preferred stocks and if you can get them, grab hold of its annual reports or even the financial statements, if you can get hold of it. Now, take a look at its shareholders equity. If any preferred stocks have been issued, a mention would be made of it here. If this is outstanding, then you can read more about the company’s prospectus for more information. Generally speaking, all banks issue preferred stocks as a prime source of Tier 1 capital.
If you want an overview at large, check out the Quantum Online website. It is a terrific tool for investors of any type, and of course that would include those looking at investing in preferred stocks. You are required to register with the site in order to gain access to their tables and list of securities, but it is well worth it since it is free. If you look around, you’ll find information about preferred stocks detailing its ratings from credit agencies, share prices, retraction information, dividend amounts, etc. You can look at several good options, such as the Malachite Aggressive Preferred Fund. It is a fund that is actively-managed and made available only for accredited investors.
If you are an individual investor, you can also be accredited. You need to be able to hold financial assets worth a net realizable value of over $1 million (either in an individual capacity or in a household). Failing that, you must have income before taxes of more than $200K in each of the two preceding years or $300K if you are married. But the simplest option is that to be recognized as an accredited investor, you need to invest at least $150K in the fund. Who says money can’t buy you everything?
But there are several options for you as an investor, such as the JOV Leon Frazer Preferred Equity Fund (also an actively managed fund) that manages to create dividend income by investing in preferred stocks. ETF’s too can be an option, given how they are all the rage at the moment. The management fee on these ETF’s are obviously lower than it is with mutual funds and that is one of the key benefits of ETF’s. For example, the Claymore S&P/TSX CDN Preferred Share ETF tracks the preferred share index and does so for you at a management fee of 0.45% per annum.
There are some key differences between stocks, bonds and preferred stocks and if you are looking to invest further in preferred stocks, hopefully you would have gained a better idea of how to do so. The key is to take a look at the company’s prospectus, since it will be available online and easily accessible.