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CIP Quips

Preferreds as Income Enhancers

Did you know…

While they are often referred to as “stocks”, preferred securities are a cross between stocks and bonds, possessing attributes of both. In general, preferreds lack the same potential for capital appreciation as common stocks. However, their relative price stability compared to common stocks, and their ability to generate higher yields than bonds of the same company, can make them an attractive investment.


Source: Barclays & Bloomberg as of 8/31/16

High Yield Corporate is represented by Barclays U.S. High Yield. Preferreds is represented by the BofA Merrill Lynch Fixed Rate Preferred Securities Index. Investment Grade Corporate is represented by the Barclays U.S. Corporate Bond Index. Agency Mortgaged-Backed is represented by the Barclays U.S. MBS Index. Treasuries is represented by the Barclays U.S. Treasury Bond Index.


What are we thinking?

We view preferred securities as a potentially valuable way to enhance income generation. Investment grade preferreds can often offer favorable yield levels without compromising credit quality. To the discerning investor, incorporating preferreds can play an important role in an income portfolio.

Generally speaking, we believe preferred securities tend to perform best when changes in interest rates are steady and at a measured pace - not entirely dissimilar to the current interest rate environment. In periods of persistently low interest rates, such as we have been in and expect to be in for quite some time, preferred securities can be appealing based on their ability to provide higher income. For investors seeking to balance income and capital preservation, a long-term allocation to preferred securities may be worth considering. 



This information is intended solely to report on investment strategies and opportunities identified by Roosevelt. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Please contact us at 646-452-6700 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions, or if you would like to request a copy of our Code of Ethics. Our current disclosure statement is set forth on our Form ADV Part II, available for your review upon request, and on our website, www.rooseveltinvestments.com.

Past performance is not a guarantee of future results. Indices are unmanaged and cannot accommodate direct investment. Themes assigned as per Roosevelt Investments’ evaluation. Risk tools may include cash or other securities that we believe possess a low or inverse correlation to the overall market.


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The Roosevelt Investment Group, Inc. is an independent investment management firm that is not affiliated with any parent organization. The Roosevelt Investment Group, Inc. manages equity, fixed income, and balanced assets for primarily U.S. clients. The Roosevelt Investment Group, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission and notice filed in all 50 states.

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