Published Fri, 13 Sep 2019 08:35:00 -0400 on Seeking Alpha
Co-produced with Beyond Saving and PendragonY.
Back in March, we recommended investors consider investing in the preferred equity of Pennsylvania Real Estate Investment Trust (PEI). With a common dividend yielding over 16%, the common equities are certainly tempting, however sentiment remains strongly against the mall sector. We already have exposure to malls through the 30%+ yielding Washington Prime Group (WPG) and the 10.5% yielding Macerich (MAC).
While we love the huge discounts in mall REITs right now, we also seek to reduce volatility and dividend risk. To do that, we pair the super high-yield common equities, with lower-yielding (though still "high" yield) and more stable preferred equity investments.
PEI is a great example of how preferred shares can limit volatility. While PEI common has traded as high as $7.70 and as low as $4.34 since our article, PEI.PD has had a much tighter trading range of $19.50-$22.65.
By combining our common equity picks, with a 40% allocation to fixed-income like high-yielding preferred equities, fixed income funds, bonds, and baby bonds, we can achieve a high level of current income and smooth out the impact of market volatility.
While the price of preferred equity is not entirely immune to market swings, the swings are far less severe than common equity swings, and more importantly, the income is more secure.
This is especially true for preferred shares from regulated investment companies (RICs) like... Read more
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