Wells Fargo Preferred Stock: Best Offering

Wells Fargo preferred stock is one of my favorite banks that has issued preferred stock because: (1) Wells Fargo preferred stock is backed by outstanding bank fundamentals; (2) Wells Fargo preferred stock continued to get paid during the financial crisis on all classifications of preferred stock; and (3) the value of the Wells Fargo preferred stock generally trades close to fair value of the listing.

That third element may surprise you, as you might intuitively think that Wells Fargo preferred stock might be subject to the same “flight to quality” overvaluation syndrome that hits the common stock equity markets. Usually, in the preferred stock markets, it is the junk yielding north of 10% that is the most subject to overvaluation.

Continue Reading!

Preferred Stock Dividends: An Introduction

Preferred stock dividends are an income source that I rarely discuss. I have a strong presumption against them because: (1) Preferred stock dividends present an unfortunate trade-off compared to common stock dividends because there is no dividend growth or substantial capital appreciation; (2) Preferred stock dividends usually come from the finance and energy sector, creating an incongruity between the stereotypical retired investor that wants safe preferred stock dividends compared to the relatively unstable sectors of the economy that fund them; and (3) the low interest rates available through traditional channels have led income seekers to consider preferred stock dividends at a time when the general valuation of publicly traded preferred stocks is unattractive.

Continue Reading!

Chevron Dividend: $37.22 in Cold, Hard Cash

The Chevron dividend has long caught my attention because it is usually higher than what you’d get from investing in the S&P 500, and the chronic undervaluation of Chevron shares permits those that reinvest the Chevron dividend to multiply their share count at a rate that is easy to underestimate. Although the price of Chevron stock has risen recently in response to expected global production cuts, the price of the stock is still in the $80s compared to a $50 price tag that was available in 2005.

Continue Reading!

3M Stock: A Short Lesson

3M stock provides a useful lesson into the sequence of how long-term investors sometimes generate their returns. It is interesting to me how there are certain stocks–particularly in the financial sector like Aflac, Morgan Stanley, and Bank of America–that keep growing earnings and pushing their intrinsic value higher each year, yet investors discard them because the price of the stock has not advanced in a manner consistent with the earnings growth.

Personally, those are the types of companies that I find to be the most straightforward candidates for investment because it is only a matter of “when” the investor community will recognize the improving fundamentals. Other value picks generally require improving business performance plus a recognition of that fact from investors that give it a higher stock price.

Continue Reading!

BP Dividend: Is It Safe?

The BP dividend has experienced a heck of a decade. Prior to the Gulf Oil spill in 2010, the history of the BP dividend was a thing of beauty. There had been no cuts to the BP dividend since the creation of American traded ADS shares in 1999, and even before that, the BP dividend had never been cut since the London shares switched to a quarterly dividend payment style in 1993. From 1964 through 1993, the BP dividend was paid out in two installments: a “final” BP dividend in July that generally increased each year, and a much lower interim BP dividend that was paid in January and experienced some ebbs and flows with the business cycle.

Continue Reading!