In the world of preferred stock investing, there is no objective fair value for a particular preferred stock. The spread between the 30-year treasury yield and preferred stock yields can vary greatly depending on investor psychology, current economic strength and the perception of credit risk. When investors/traders exam a preferred stock for investment, all they can do is see how it compares relatively to other comparable preferred stocks. This is primarily what I do in making my fixed income investment/trading choices. I plan to publish a series of articles on relatively mispriced (underpriced) preferred stocks, and I will start in this article with a relatively simple analysis of QTS-PA, a preferred stock recently issued by QTS Realty Trust.
QTS is a data center REIT. It recently IPO’d its first preferred stock, QTS-PA, which has a par (call) price of $25. There is another data center REIT, Digital Realty (symbol DLR), which has issued 5 preferred stocks with call prices of $25 which gives us an opportunity to do a comparison to see if we can find a preferred stock bargain among these preferred stocks. The data in this chart is as of March 24th, 2018.
Stock Symbol 3/24/2018 Price Dividend Current Yield Yield to Call Call Date
QTS-PA 25.25 $1.781 7.05% 7.1% 3/15/2023
DLR-PC 26.95 $1.656 6.12% 4.0% 5/15/2021
DLR-PG 24.94 $1.469 5.90% Not Useful 4/09/2018
DLR-PH 26.23 $1.844 7.04% 2.38% 3/26/2019
