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Here's How To Enhance A 9.6% Yield

Published Thu, 21 May 2020 17:45:25 -0400 on Seeking Alpha

Preferred shares are great for buy-and-hold investors.
They also can offer opportunity for investors willing to swap between two very similar shares.
By swapping between the preferred shares of Two Harbors, we turned 346 shares of TWO-B into 375 shares of TWO-B.
This opportunity is still actionable! The market hasn't corrected the error yet.
Are your preferred share positions giving you everything you want?
Preferred shares can be great for buy-and-hold investors. However, there also are a few opportunities to swap positions.
We're going to cover one of them which is still actionable.
We're publishing this article quickly to ensure it reaches readers while the relevant prices are still in play.
Two Harbors Preferred Shares
These are preferred shares from Two Harbors (TWO).
On Thursday, 5/21/2020, shares of TWO-A (TWO.PA) closed at $21.87 and shares of TWO-B closed at $20.25. That means investors can still swap from TWO-A into TWO-B at a ratio of 1.08 shares of TWO-B per share of TWO-A.
That ratio is pretty simple to follow:
Got 100 shares of TWO-A? Trade for 108 shares of TWO-B. Got 250 shares of TWO-A? Trade for 270 shares of TWO-B. If you can multiply a number by 1.08, you can do this math! As a reminder, investors should check the bid-ask spread and the size of the bid and ask (that's how many shares are available) when looking to execute these trades.
The Trade
On 5/18/2020 we closed out our position in TWO-A and used the proceeds to purchase shares of TWO-B:

Source: Schwab
We disclosed the trade in real-time:

Source: The REIT Forum
Why Trade
The chart below demonstrates the change in the value of our position:

Source: The REIT Forum
Our income on the position is up 1.42%. That’s not huge, but it sure isn’t bad. Meanwhile, our total call value increased by 8.07% and our upside to reach that call value increased by 56.18%. That means we have slightly more income, but we... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
TWO HARBORS INVESTMENT 13.28   0.0 -2.81 1.60 12.02


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