3 Preferred Stocks for 6%+ Yields and Upside

Three great preferred stocks from three different industries to begin your income search.

Feb 4, 2014 at 7:00AM

Source: Matthew Field

In times of ultra-low interest rates, many investors are having a tough time finding income-producing investments that still have upside potential. But preferred stocks could be exactly what these investors are searching for. Here are three that fit this criteria to begin your income hunt.

A 7.2% yield from across the pond
As the financial services industry rushed to secure funding during the financial crisis, Royal Bank of Scotland Group (NYSE:RBS) sought help from the British government. In return the government took an 81% stake in the troubled bank, diluting common shareholders into oblivion.

Although the dividend on common stock remains suspended,  income investors can still collect decent yields from the preferred shares. Among the most attractive are RBS Preferred Series N (NYSE:RBS-N), which yield 7.2% and trade just above $22 per share. Not only can income investors collect relatively large dividends, but they also stand to benefit from capital appreciation if the market begins to regain confidence in RBS, whether through a government share sale or a broader recovery in European banking.

Store your money in this 6.6% yield


Source: Ed Chambliss

Public Storage (NYSE:PSA) is the place to go if you need to stash your stuff somewhere. Having interests in over 2,000 storage facilities, this $27 billion company is working to conquer the self-storage market through acquisitions and expansion. The common stock yields just over 3.5%, but investors in the preferred stock can collect even more.

Yielding 6.6%, Public Storage Preferred Stock Series T (NYSE: PSA-T) provides nearly twice the yield of the common stock while still trading under $22 per share. If Public Storage can continue growing earnings, greater investor confidence could push this preferred closer to its liquidation value of $25. One important thing to note is that this preferred is not eligible for the qualified dividend tax rate since it is issued by a real estate investment trust. As a result, investors should factor a greater tax liability into their calculations and consider holding this security in a tax-exempt account.

Protect your future with this 6.5% insurance yield
With shares of MetLife (NYSE:MET) yielding only 2.2%, income investors may want to look toward a different MetLife security for their investment. With MetLife Preferred Stock Series B (NYSE:MET-B), investors can collect a 6.5% yield on a security trading around a dime under liquidation. While this preferred does not have the same amount of upside as the others, buying on a dip could be an opportunistic way to begin collecting this dividend.

MetLife Preferred Stock Series B carries another advantage over many other income-based securities issued by insurance companies. Since this preferred is actually preferred stock and not a subordinated debenture or exchange traded debt, dividends are eligible for the qualified dividend tax rate. Investors should remember to factor this component in when comparing yields on various securities.

Finding yield
Preferred stocks can provide income hungry investors with the income they're looking for, but you need to know where to start. Preferred stocks from Royal Bank of Scotland Group, Public Storage, and MetLife are a great place to begin your search. Income investors should also check out the other preferred stock offerings by these companies-since all three have multiple series, investors can decide which one suits their investing strategy best.

Want even more upside potential?
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

Alexander MacLennan has no position in any stocks mentioned. This article is not an endorsement to buy or sell any security and does not constitute professional investment advice. Always do your own due diligence before buying or selling any security. Alexander MacLennan is not a tax professional and you should consult a reputable tax professional before making any investment decisions. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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